RAGLAND & BALLOCK
[2020] FCCA 1685
•17 July 2020
FEDERAL CIRCUIT COURT OF AUSTRALIA
| RAGLAND & BALLOCK | [2020] FCCA 1685 |
| Catchwords: FAMILY LAW – Property – de facto relationship of 10 years – significantly greater initial contributions by Applicant de facto Husband – very large number of disputes about the valuation of various property including a company used by the Applicant for tender-panel contracts – consistent lack of reference to authority by Respondent de facto Wife to support her multiple claims most of which were also unsupported by evidence – significant age difference between the parties but both with significant assets and income prospects notably the Respondent in the Employer R – the trial was unnecessarily protracted due to the conduct of the litigation by the Respondent – considerations regarding case and trial management. |
| Legislation: Family Law Act 1975 (Cth), ss.90SF(3), 90SM(4)(d) & (e) |
| Cases cited: Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175 Expense Reduction Analysts Group Pty Ltd v Armstrong Strategic Management and Marketing Pty Ltd (2013) 250 CLR 303 In the Marriage of Kowaliw (1981) FLC 91-092 Mallet v Mallet (1984) 156 CLR 605 In the Marriage of Turnbull (1990) 15 Fam LR 81 In the Marriage of Georgeson (1995) 19 Fam LR 302 Harrison & Harrison (1996) 129 FLR 74; (1996) 20 Fam LR 322; (1996) FLC 92-682 In the Marriage of Pierce (1998) 24 Fam LR 377 Hickey v Hickey (2003) 30 Fam LR 355 NHC & RCH (2004) 186 FLR 240; (2004) FLC 93-204 AJO v GRO (2005) 33 Fam LR 134 Gollings v Scott (2008) 37 Fam LR 428 Goddard & Patterson [2011] FamCAFC 14 Stanford v Stanford (2012) 247 CLR 108 Bevan v Bevan (2013) 279 FLR 1; (2013) 49 Fam LR 387 Marsh & Marsh (2014) FLC 93-576 Bevan & Bevan [No.2] (2015) 51 Fam LR 363 Chapman v Chapman (2015) 51 Fam LR 176 Watson v Ling (2015) 52 Fam LR 79 Fields v Smith (2015) FLC 93-638; (2016) 53 Fam LR 1 Elford & Elford (2016) FLC 93-695 Vass v Vass (2016) 53 Fam LR 373 Wender & Wender (2017) FLC 93-768 Grier v Malphas (2017) 55 Fam LR 107 Trask v Westlake (2017) 55 Fam LR 153 Trevi & Trevi (2018) FLC 93-858 Falcken & Weule [2019] FamCAFC 140 Jabour v Jabour (2019) 59 Fam LR 475 |
| Applicant: | MR RAGLAND |
| Respondent: | MS BALLOCK |
| File Number: | CAC 733 of 2017 |
| Judgment of: | Judge WJ Neville |
| Hearing dates: | 1 & 2 May 2019; 8 November 2019 |
| Date of Last Submission: | 14 February 2020 |
| Delivered at: | Canberra |
| Delivered on: | 17 July 2020 |
REPRESENTATION
| Counsel for the Applicant: | Mr G Howard |
| Solicitors for the Applicant: | Phelps Reid Foster Johnson |
| Counsel for the Respondent: | Mr J Masters |
| Solicitors for the Respondent: | Marjason & Marjason Solicitors |
ORDERS
Subject to any other agreement in writing between the parties:
The Applicant Husband and Respondent Wife do such things and sign such documents as are necessary to divide their assets and liabilities on the basis that the Applicant Husband receive 57% and the Respondent Wife receive 43% to the following effect.
Within 42 days of the date of these Orders, being by 28 August 2020, the Applicant Husband do all things and sign all documents as are necessary to transfer to the Respondent Wife all his interest in the B Street, Suburb C property known as B Street, Suburb C, in the Australian Capital Territory.
Within 42 days of the date of these Orders, being by 28 August 2020, the Respondent Wife do all such things and sign such documents as are necessary to transfer to the Applicant Husband her interest in D Street, Town E, New South Wales.
The Applicant Husband and the Respondent Wife do such things and sign such documents as are necessary to refinance and secure into their separate names any existing loans owing to Westpac Bank in respect of the Account Number ...12 in the proportion to their share of the value of assets being transferred to them. For avoidance of doubt the Wife shall be responsible for 58% of the loan owing to Westpac which is calculated as [value of B Street, Suburb C] divided by [value of unit B Street, Suburb C + value of D(1) & D(2) Street, Town E] and the Husband 42% which is calculated as [value of D(1) & D(2) Street, Town E] divided by [value of B Street, Suburb C+ value of D(1) & D(2) Street, Town E].
Within 42 days of the date of these Orders, being by 28 August 2020:
(a)The Applicant Husband do all things and sign all documents as are necessary to transfer to the Respondent Wife all his interest in the property known as F Street, Town G, New South Wales; and
(b)Concurrently with such transfer the Wife do such things and sign such documents and pay such money as are necessary to refinance into her sole name the mortgage secured over F Street, Town G, New South Wales.
Within 30 days of the date of these Orders, being by 16 August 2020, the Husband in his capacity as Director of H Pty Ltd do such things and sign such documents as necessary to transfer the interest of H Pty Ltd in the property situated at J Street, Suburb K in the Australian Capital Territory being Volume ... Folio ... to the Husband and thereafter the Husband be solely responsible for all outgoings and liabilities of the J Street, Suburb K property and refinance the Mortgage number ... to the Husband’s sole name.
Whereas:
(a)The self-managed super fund The H Pty Retirement Plan (“the self-managed super fund”) is a self-managed superannuation fund listed as a complying superannuation fund on the Australian Government Website “Super Fund Lookup”;
(b)The Husband is the only member of the self-managed super fund;
(c)The Husband is the only director and shareholder of H Pty Ltd as trustee for the self-managed super fund; and
(d)Pursuant to Section 90XT(4) of the Family Law Act 1975 the base amount of $159,000 (“the base amount”) is allocated to the Wife out of the Husband’s interest in the self-managed super fund.
(e)In accordance with Section 90XT(1)(a) of the Family Law Act 1975:
(i)The Wife is entitled to be paid, using the base amount allocated in the immediately preceding order, the amount calculated in accordance with Part 6 of the Family Law (Superannuation) Regulations 2001;
(ii)The entitlement of the Husband in the self-managed super fund is correspondingly reduced by force of this Order
(f)The self-managed super fund trustee (“the trustee”) must do all such acts and things and sign all such documents as may be necessary to:
(i)Calculate, in accordance with the requirements of the Family Law Act 1975, the entitlement awarded to the Wife in the immediately preceding clause of this Order;
(ii)Pay the entitlement whenever a splittable payment becomes payable out of the Husband’s interest in the self-managed super fund in the amount of $159,000 forthwith.
(g)This Order has effect from the operative time and the operative time is four days after service of the Order on a Trustee.
(h)After service by the trustee of the payment split notice pursuant to section r.7A.03 of the Superannuation Industry (Supervision) Regulation 1994 for the transfer of the transferable benefits from the self-managed superannuation fund to the Wife’s fund of her choice.
(i)The Husband, .after receipt of the Wife’s election contemplated in the immediately preceding order, convene a meeting of the trustee and do all such acts and things and sign all such documents as may be necessary to transfer the transferable benefit to the trustee of the Wife’s new super fund by way of transferring the base amount $159,000 from the cash account of the self-managed superannuation fund.
Within 42 days of the date of these Orders, being by 28 August 2020, the Respondent Wife do such things and sign such pay the Applicant Husband a sum of $100,840.30 as a cash adjustment.
Thereafter the Husband shall be entitled to be the sole legal and beneficial owner of:
(a)The property situated at J Street, Suburb K, in the Australian Capital Territory;
(b)The property situated at L Street, Town M in the state of New South Wales;
(c)His interest in the H Pty Ltd Trust;
(d)His interest in his business N Pty Ltd;
(e)His interest in H Pty Ltd;
(f)His interest in the H Pty Ltd Retirement Plan;
(g)Any money in any bank account in his name;
(h)Any contents and personal effects in his name or possession;
and he shall be solely responsible for all debts in his name or attaching to any item of property that he retains under these Orders.
Thereafter the Wife shall be entitled to be the sole legal and beneficial owner of:
(a)The property known as F Street, Town G, in the State of New South Wales;
(b)Any money in any bank accounts in her name;
(c)Her share portfolio;
(d)Her motor vehicle;
(e)The horse float in her possession;
(f)Her horse collection of ponies;
(g)Her horse gear;
(h)Her Super Fund O entitlements
(i)Her Super Fund P;
(j)Any contents and personal effects in her name or possession;
and she shall be solely responsible for all debts in her sole name or attaching to any item of property that she retains under these Orders.
Absent any other Application within 21 days of the date of these Orders, being by 7 August 2020, each party is to pay their own costs.
IT IS NOTED that publication of this judgment under the pseudonym Ragland & Ballock is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT CANBERRA |
CAC 733 of 2017
| MR RAGLAND |
Applicant
And
| MS BALLOCK |
Respondent
REASONS FOR JUDGMENT
Introduction
Before getting to the usual matters of evidence and other things, there is one important prefatory or cautionary comment that needs to be made at the outset.
By its nature, litigation is regularly if not inevitably a very difficult process for the parties involved. Time and resources that would more usually be used for other, more pleasant, enterprises, are consumed in an adversarial contest that can be pitiless and often emotionally and financially injurious to one or both parties.
Sometimes, litigation can become even more difficult than it would otherwise be because of some fault or failing either on the part of one or other of the parties, and/or even on the part of one or other of the lawyers involved. Such is hugely unfortunate, not least because it usually leads to the consumption of more personal and Court resources, and especially to delays in the conduct, and finalisation, of the litigation.
Regrettably in these reasons, there is regular criticism of the conduct of the Respondent Wife’s case. Much of it stems from her frequent change of lawyers (approximately six different lawyers were involved on her behalf throughout the course of the litigation). Moreover, she changed highly experienced lawyers very shortly before the commencement of the trial. This had the effect of those lawyers (including counsel) regularly seeking, and usually being granted, indulgences as they sought to come to grips with trying to get up to speed with the large amount of evidence filed, and to which they sought to add. With this brief caution I move on.
Given the turgid history of this protracted property proceeding, and the no less turgid, lengthy reasons that follow, it is as well to note briefly some basic factual matters that are mercifully not in dispute. I say this because nearly everything else was in contest, very often needlessly so.
The parties were in a de facto relationship between 2006 and September 2016.[1] The Applicant Husband is aged 59 years; the Wife is aged 43 years. There is one child of the relationship, X, who will turn 11 in 2020. Final parenting Orders were made by consent on 2nd May 2019. X lives nine nights per fortnight with the Mother and five nights per fortnight with the Father. Those Orders also provide for shared, equal time in the school holidays.
[1] Simply for ease of reference, and for no other reason, although the parties were in a de facto relationship, in this judgment I will simply refer to them respectively as “Wife” and “Husband”. Also, whenever there is any reference to provisions of the Family Law Act 1975 (Cth) (“the Act”) that deal with marital relationships, it should be understood, unless otherwise specified, that the principles set out are to apply, mutatis mutandis, to those sections of the Act that deal with persons who were in a de facto relationship.
After a long career with Employer Q (including as a partner of that firm), since 2007 the Applicant Husband has worked, using his own company, as a consultant. The Wife is a professional who works part-time within the Employer R. No medical issues, supported by medical evidence, were raised at the trial. The Wife referred to some difficulties with the use of her fingers, and a scoliosis of her back, but early in the hearing her Counsel confirmed that there was no medical evidence filed on behalf of his client relating to these conditions.[2]
[2] See Transcript (1st – 2nd May 2019) p.50-51. Hereafter, such references will simply be “T” followed by the relevant page number.
According to their respective Financial Statements, the Husband’s income is significant, and significantly more than the Wife. From his Financial Statement filed 21st March 2018, the Husband’s average weekly income was $2,676.09. The value of his property at the time was $3,052,006. His self-managed superannuation was $613,055.
According to the Wife’s Financial Statement filed 6th April 2018, her average weekly income was $1,755.00. The value of her property at that time was $1,620,637. Her employer superannuation was $294,656.
At the commencement of the trial, in general terms, the Husband sought Orders for there to be a percentage split of the net asset pool 65% to him and 35% to the Wife. Through her Counsel, the Wife indicated that she was seeking “something closer to a 50%:50% split” of the net assets. In her final submissions, the Wife’s position changed very significantly from what was advised to the Court at the commencement of the hearing. There were a number of changes to the Wife’s position along the way, which, like much with this matter, did not assist to get any degree of certainty with basic details.
Thus, at the commencement of the second day of the trial on 2nd May 2019, the Wife’s Counsel advised the Court that his client was “now” seeking something that was closer to a 60% split to the Wife and 40% to the Husband.
At the commencement of the third day of the hearing on 8th November 2019, Counsel for the Wife said that she was seeking Orders whereby she would obtain 60% of the net asset pool. However, this was not the end of the change in position of the Wife.
As noted below, and apparently without any prior notice given, in her final submissions, the Wife significantly changed her position again and ultimately sought a distribution that would see her receive 75% of the net asset pool and 25% to the Husband.
In accordance with principles confirmed by Full Court authorities of long-standing such as Pierce, Hickey, AJO & GRO, and more recently Bevan and Chapman, the following matters strongly militate against the extraordinary Orders sought by the Wife.[3] Relevant matters considered at length later in these reasons are: (a) the length of the relationship (10 years), (b) the significant initial financial contributions by the Husband, (c) the contributions during the relationship which were approximately equal, (d) perhaps a modest allowance in the Wife’s favour for the extra parental care of X, but also taking into account (e) the Husband’s significantly greater income but older age, (f) the younger age of the Wife and her secure employment in the Employer R superannuation with many more years of her working life ahead of her compared to the Husband. In my view, the matters noted lead inexorably to the conclusion that the Wife’s Orders are so far outside what might be described as a generally acceptable “range” as to be untenable. They reflect, for reasons set out below, an unrealistic assessment of all the evidence, and do not clearly or properly consider and/or apply basic principle of family law property litigation and its component parts – on which much more later.
[3] In the Marriage of Pierce (1998) 24 Fam LR 377; Hickey v Hickey (2003) 30 Fam LR 355; AJO v GRO (2005) 33 Fam LR 134; Bevan v Bevan (2013) 279 FLR 1; Chapman v Chapman (2015) 51 Fam LR 176.
For the reasons set out below, in my view a just and equitable resolution of this property dispute will see the Applicant Husband receive 57% of the net asset pool and the Respondent Wife 43%. Absent any other Application within 21 days of the date of the Court’s Orders today, each party should pay his or her own costs.
Procedural and other matters: preliminary comments
By reference to and application of standard principles regarding (a) the conduct of family law property proceedings involving the just and equitable division of property, and (b) specific issues invariably addressed in such proceedings, the current property matter should have been relatively straight-forward. Regrettably, for the reasons that follow, this was not so.
A number of briefly-stated examples – considered in detail later – highlight the needless, time-consuming (and therefore cost-incurring) procedural and other issues that required attention.[4]
[4] Nothing particularly turns on it but I note that early in the litigation I suggested the parties attend arbitration. The Husband agreed and even offered to pay the cost of such a course, with cost being resolved in the course of that external proceeding. The Wife refused this suggested course to have the matter determined, external to the Court and ever-so much more quickly, perhaps two years earlier and all the costs that flowed thereafter.
First, the Respondent Wife’s conduct of the trial, and her detailed written submissions, consistently misunderstood (or relevantly failed to take account of) basal principles in family law property proceedings, for example with respect to “add backs.” In her final written submissions, there is extremely limited authority cited. This is notable for the considerable number of quite novel propositions for which she contended. Unfortunately, I have not been able to locate one of the two authorities she relied on (discussed later in these reasons).[5] In any event, apart from this “authority” there is no other case cited to support the extremely broad range of funds that the Respondent seeks to have added back to the property pool. There are, of course, multiple decisions of the Full Court that discuss at length the principles, and the wide discretion, which apply to such claims. Although discussed later in these reasons in detail, it is sufficient for current purposes to note the following briefly.
[5] G and G [2001] FamCa 1138. This is the case cited in the Wife’s submissions but which could not be located. I discuss this later in these reasons.
In AJO v GRO, the Full Court said, at [30], that there were, “to date, three clear categories of cases” where it was determined to be appropriate to notionally add back to the pool of assets.[6] Those categories were: (i) where parties have expended money on legal fees: (ii) where there has been a premature distribution of matrimonial assets; and (iii) in the circumstances outlined by Baker J in Kowaliw, those circumstances are generally referred to as situations where “waste” has been established.
[6] AJO v GRO (2005) 33 FamLR 134, which internally referred to the well-known case of In the Marriage of Kowaliw (1981) FLC 91-092.
Many other recent Full Court decisions have expanded on what would usually be taken into account regarding “add backs.” At this juncture, it is sufficient to note that these cases all highlight that (a) the categories of add backs are not necessarily closed but that the most common and usually accepted areas are those identified in AJO v GRO; (b) reasonable living expenses will not be added back; (c) to some degree, it is becoming somewhat more common to deal with issues relating to add backs under s.75(2)(o) (or the de facto equivalent, s.90SF(r)); and (d) it remains generally true that add backs are usually treated by Courts as exceptions rather than the rule.[7]
[7] See NHC & RCH (2004) FLC 93-204; Vass v Vass (2016) 53 Fam LR 373; Grier v Malphas (2017) 55 FamLR 107; Trevi & Trevi (2018) FLC 93-858; Falcken & Weule [2019] FamCAFC 140; Jabour v Jabour (2019) 59 FamLR 475. At first instance, see also Murphy J’s comments in Watson v Ling (2015) 52 FamLR 79. After referring, at [34], to the importance of the exercise of judicial discretion, in Watson v Ling at [35], Murphy J said: “… not every dissipation [of funds] by a party can be seen to involve an affront to justice and equity; again the circumstances of the individual relationship must be assessed.”
Subject to what is said later in these reasons, in my view, many of the Wife’s claims in relation to add backs were significantly outside any of the more usually recognised categories. The claims were of a piece with her other arguments that sought to expand the nature and range of her claims significantly beyond the usual ambit permitted by long-standing authority.
A second area of procedural and substantive concern, both at trial and in her written submissions, was the Wife’s approach to the valuation of the parties’ assets.[8] It was not uncommon for there to be a dispute about a valuation provided by one or other party, usually the Husband. The challenge most regularly came from the Wife simply on the basis that she did not agree with the figure provided by the relevant independent valuation/appraisal, but often with no countervailing valuation or appraisal provided by her. Regrettably again, there was consistently no relevant authority provided to support the Wife’s contentions. Moreover, the Wife’s position changed regularly over the duration of the long-running litigation. One reason for this may be because of her regular change in legal representation, discussed below.
[8] The principal and foundational case in relation to valuation generally remains the High Court discussion in Mallet v Mallet (1984) 156 CLR 605.
For present purposes, it is simply sufficient to note that (a) usually, the relevant date of valuation is the date of the hearing, or other formally agreed date; (b) there is no required or prescribed “method of valuation”; rather it is for the Court to determine what kind of valuation is most apposite in all the circumstances; and (c) the valuation of real estate will usually be given by a licensed valuer, or real estate agent, and will take the form of comparable sales of similar real estate, or relevantly by rental values.[9]
[9] See for example In the Marriage of Georgeson (1995) 19 FamLR 302.
In relation to valuations concerning a proprietary company, which is the case here, various Full Court decisions have made it plain that (a) there is no prescribed method of valuation for such a company, (b) treating a “family” company in family law proceedings as it would be treated in more strictly commercial proceedings, is not appropriate, and (c) the valuation of shares in such a company must be a realistic one and may be based on the worth of the shares to the relevant party, which is to the Husband in this matter.[10]
[10] In the Marriage of Turnbull (1990) 15 Fam LR 81. In that case, after reviewing a significant number of authorities, Baker J said (at p.94; emphasis added): “… when a judge is determining the value of shares held by a party in a family company, he must look at the reality of the situation and value the shares on the basis of their worth to the shareholder.” Earlier in the same place his Honour said that it was inappropriate in family law litigation to use as a valuation method regarding shares in a family company of “what a hypothetical purchaser may pay for them.” See further the detailed comments by the Full Court in Harrison & Harrison (1996) FLC 92-682 at p.83,087, where it was again emphasised, among other things, that “revenue and taxation cases … have little relevance to the value which a Court, exercising jurisdiction under the Family Law Act, places upon such interests.” Harrison was more recently considered approvingly in the Full Court decision in Wender & Wender (2017) FLC 93-768.
A third area of concern, again regrettably arising from the Wife’s conduct of the proceedings, relates to her relatively frequent change of lawyers. By reference only to the Court file, she retained three different firms of lawyers since the proceedings commenced. In the course of her oral evidence, by reference to par.26 of her Affidavit of 26th March 2018, the Wife confirmed that she had in fact retained, at different times, seven different legal firms to represent her. Not all of these firms ultimately filed a Notice of Address for Service and became actively engaged in the litigation.
In her written submissions (par.160), the Wife referred to her two most recent lawyers to whom she was indebted for legal fees of $255,000 of which, it was said, she continued to owe $175,000. It is not clear whether the figures in the submissions are the only amounts outstanding because, in her oral evidence, the Wife said that (a) she could not continue, as she had hoped, to fund her legal fees out of her income, and (b) she identified two additional firms to which she owed a combined sum in excess of $30,000.
How and why the Wife changed lawyers the number of times that she did was not explained. What happened as a result of such changes, especially to her final lawyers who came onto the record only relatively shortly before the final hearing, and followed a short period of time where the Wife was self-represented, meant that the Court regularly was asked to make extra allowances in time for the new lawyers to “catch up” so to speak. In turn this slowed discussions between lawyers, thereby ultimately delaying everyone. It also meant that the Court’s resources were not as efficiently employed as they should have been. In short, this conduct, which, in the absence of evidence to the contrary, was all a result of the Wife’s actions, significantly slowed the conduct of the proceedings. Very significant allowances were regularly granted to her and her last retained lawyers leading up to and during the trial. In the early stages of the hearing the Court was regularly reminded that the Wife’s lawyers, including her Counsel, were still “getting across all the material”.
In my view, such allowances regularly stepped over the mark, and well beyond what is reasonably permitted pursuant to the principles set out by the High Court in Aon Risk Services Australia Ltd v Australian National University (“Aon v ANU”).[11] It is one thing, occasionally, to grant an allowance or indulgence to lawyers and/or parties in the course of litigation, including during a hearing. Regrettably, it became almost common-place in this matter. At the very least, it made for a very significantly more drawn out and needlessly prolix and protracted case. Doubtless, this resulted in more costs to everyone involved, including the Wife, who had effectively to “start from scratch” each time she changed legal representation. Presumably the converse was true, namely that the effort and all costs associated with it by the former lawyers were thrown away. In short, the cost to everyone, including to the Court, was unfortunate, needless, and preventable.
[11] Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175.
Given the level, and the nature, of the contest, for more abundant caution, I set out here part of many similar engagements between the Bench and Counsel for the Wife. These engagements related to the difficulties encountered due to the Wife’s further change in legal representation, which occurred so very close to the final hearing.
The issues arose firstly in the context of the Wife making an oral Application that the final hearing be adjourned. This was also in circumstances where the matter had been listed for hearing in 2018 on an overlist basis but not reached, thus (emphasis added):[12]
[12] T 5 – 6.
HIS HONOUR: Well, I don’t want to presume as to what your application is, Mr Masters, so why don’t you at least put everyone out of their misery and make the application, whatever it is.
MR MASTERS: Okay. Well, first of all, let me respond to my friend’s concern, his pet peeve as indicated ..... to the court. I’m the one to fall on the sword for that one, your Honour, because my simply instruction to the solicitor, and it wasn’t in depth enough, was please write to the court and communicate in the fashion that we did. My instructing solicitor is quite newly admitted and I should have made it clear to her that it was required to get the permission from the other side first. That was my fault. I’m not prepared to let the solicitor take the blame for that. I should have made the instructions clearer and I ask the court and the other party to accept my sincerest apology for that.
In light of the application I’m going to make now, perhaps some forgiveness can be given when one considers the circumstance the whole legal team on this side of the table had to face. We had to juggle a lot of things. And the application I make today is in similar terms to the correspondence yesterday. I just want to make it on record, if that’s okay, your Honour, as our application is for an adjournment. We – I realise there has been a number of lawyers already on record in relation to this matter who are no longer on record. It doesn’t change the fact, though, your Honour, that we received instructions very recently on the basis that the court had vacated today’s and tomorrow’s hearing date. I can tell you that I would not have taken the brief if it was going to go today because my other court commitments wouldn’t allow me to give the time this needed in preparation. I’m told that a later date a week – a date a week later was inconvenient for the husband’s legal team. I don’t cavil with that. All indications are that it was going to be sometime later. That would have given us more time.
HIS HONOUR: I’m sorry. I’m not sure where that latter indication came from, not least because at the prehearing directions on 18 April where respectfully a more senior person from your instructors’ firm attended, and there wasn’t the slightest hint then that any such application would be made.
MR MASTERS: Your Honour, I can’ explain that. I think it was by that time, your Honour, I think there was an email from the court that had already said we are moving it back to 1 and 2 May.
HIS HONOUR: Which was on 12 April ‑ ‑ ‑
MR MASTERS: Yes, your Honour.
HIS HONOUR: ‑ ‑ ‑ so that it was approximately a week before the directions hearing.
MR MASTERS: And, your Honour ‑ ‑ ‑
HIS HONOUR: I accept that everyone is running to catch a bus, but the bus left a long time ago and the court is also in the most extremely difficult position where we’ve gone from three judges to two so we’re trying to run three different dockets between two judges and some visitors. And further as pointed out in the email of 12 April, your client – and, again, it’s a matter for her. It’s not a criticism. I’m just simply stating it as a fact. Solicitors had been in the matter on her behalf for a very long time and that it was a much more recent change of solicitors for reasons that I’m not aware of, but it’s a matter for your client, everyone has been waiting and waiting for this matter for a very, very long time, Mr Masters.
MR MASTERS: I appreciate all that, your Honour, and I don’t argue with the fact that if it was simply a case of changing solicitors. I’m saying it’s more along the lines of I’m duty bound to prepare the best possible case that I can for my client and I’m having much – a lot of difficulty. I’m still learning as I’m going along in relation to this brief and I did it, I took it on on the basis that it was not going ahead today. And someone may have had a lot more time to do the work if I was advised from the outset because ..... a lot in sending a brief across. All I do is make the application, your Honour. As an alternative I was going to suggest this, if it could be an in between option, we deal with the child matter today. There’s no reason that can’t be determined, your Honour. And, secondly, we resolve the children’s side of the issue. And, your Honour, if you want to hear from the expert because – in relation to the valuation of the business…
Ultimately, after further argument, the oral adjournment Application was refused.
One final matter should be noted here because it regularly featured, in my view, sometimes directly, sometimes indirectly, throughout the trial. During the Wife’s cross examination I cautioned her about taking a meticulous, mathematical or accounting approach to every issue between the parties. I noted that this was not how family law property cases worked. Moreover, many aspects of a relationship cannot and do not lend themselves to precise, mathematical calculation.[13] The Wife acknowledged this information and confirmed that she had received it from some of her earlier legal representatives.[14] Regrettably, certainly on its face, she continued to take the most mathematically precise calculation in relation to all matters, at least in relation to the Husband’s financial affairs, seeking always to maximise her position even if such a position was contrary to established authority. Regrettably, her lawyers often did likewise on the basis that they were operating “on instructions.” This should not have occurred. And as noted below, she did not apply the same strict and exacting standard to her own evidence.
[13] Various cases in this regard are noted later in these reasons, including the Full Court decision in Chapman v Chapman 51 Fam LR 176 at [39] (emphasis added): “The consideration of the relevant matters referred to in s.75(2) of the Act, pursuant to s.79(4), like the assessment of contributions, is holistic. Also, like the assessment of contributions, it is not an accounting exercise.”
[14] See the general discussion on these matters at Transcript (8th November 2019) p.54. The Wife’s acknowledgement was at p.57-58. Because the page references for the third day of the trial do not follow consecutively from the earlier transcript, references to this transcript will simply be “NovT” followed by the page number.
Orders sought on behalf of the Applicant
The Applicant’s Orders sought were last expounded in his Case Outline filed on 11th April 2018, when the matter was initially listed for Hearing on an ‘overlist’ basis but was not reached. No further case outline was filed for the revised trial in May 2019. The Orders sought relating to property matters as contained in the Case Outline filed in April 2018 were as follows:
Property Orders
1. That the Husband and Wife do such things and sign such documents as are necessary to divide their assets and liabilities on the basis that the Husband receive 65% and the Wife receive 35% to the following effect:
2. That within 42 days of the date of these Orders, the Husband do all things and sign all documents as are necessary to transfer to the Wife all his interest in the B Street, Suburb C property known as B Street, Suburb C, in the Australian Capital Territory.
3. That within 42 days of the date of these Orders, the Wife do all such things and sign such documents as are necessary to transfer to the Husband her interest in D(1) & D(2) Street, Town E, in the State of New South Wales.
4. That the Husband and the Wife do such things and sign such documents as are necessary to refinance and secure into their separate names the existing loan owing to Westpac Bank in respect of the Loan Account Number ...12 in proportion to their share of the value of assets being transferred to them. For the avoidance of doubt the Wife shall be responsible for 58% of the loan owing to Westpac which is calculated as [value of B Street, Suburb C] divided by [Value of B Street, Suburb C + Value of D(1) & D(2) Street, Town E] and the Husband 42% which is calculated as [value of D(1) & D(2) Street, Town E] divided by [Value of Unit B Street, Suburb C + Value of D(1) & D(2) Street, Town E].
5. Concurrently with such transfer the Wife do such things and sign such documents and pay such money as are necessary to refinance into her sole name the mortgage secured over F Street, Town G.
6. At the same time as Orders 2-5 the Wife pay to the Husband such amount as is necessary to effect the payment required to effect a 65% :35% adjustment to the Husband in respect of the net asset pool
7. That within 30 days the Husband in his capacity as Director of H Pty Ltd do such things and sign such documents as necessary to transfer the interest of H Pty Ltd Pty Limited in the property situated at J Street, Suburb K in the Australian Capital Territory being Volume ... Folio ... to the Husband and thereafter the Husband be solely responsible for all outgoings and liabilities of the J Street, Suburb K property and refinance the Mortgage number ...25 to the Husband’s sole name.
8. Whereas:
8.1. The self-managed super fund The H Pty Ltd Retirement Plan (“the self-managed super fund”) is a self-managed superannuation fund listed as a complying superannuation fund on the Australian Government Website “Super Fund Lookup”;
8.2. The Husband is the only member of the self-managed super fund;
8.3. The Husband is the only director and shareholder of INSERT as trustee for the self-managed super fund; and
8.4. Pursuant to Section 90MT(4) of the Family Law Act 1975 the base amount of $159,000 (“the base amount”) is allocated to the Wife out of the Husband’s interest in the self-managed super fund.
8.5. In accordance with Section 90MT(1)(a) of the Family Law Act 1975:
8.5.1 The Wife is entitled to be paid, using the base amount allocated in the immediately preceding order, the amount calculated in accordance with Part 6 of the Family Law (Superannuation) Regulations 2001;
8.5.2 The entitlement of the Husband in the self-managed super fund is correspondingly reduced by force of this Order
8.6. The self-managed super fund trustee (“the trustee”) must do all such acts and things and sign all such documents as may be necessary to:
8.6.1. Calculate, in accordance with the requirements of the Family Law Act 1975, the entitlement awarded to the Wife in the immediately preceding clause of this Order;
8.6.2. Pay the entitlement whenever a splittable payment becomes payable out of the Husband’s interest in the self-managed super fund in the amount of $159,000 forthwith.
8.7. This Order has effect from the operative time and the operative time is four days after service of the Order on a Trustee.
8.8. After service by the trustee of the payment split notice pursuant to section r.7A.03 of the Superannuation Industry (Supervision) Regulations 1994, the Husband is to do all such acts and things and sign all such documents as may be necessary, including but not limited to exercising his request pursuant to r.7A.06 of the Superannuation Industry (Supervision) Regulations 1994 for the transfer of the transferable benefits from the self-managed superannuation fund to the Wife’s fund of her choice.
8.9. The Husband, after receipt of the Wife’s election contemplated in the immediately preceding order, convene a meeting of the trustee and do all such acts and things and sign all such documents as may be necessary to transfer the transferable benefit to the trustee of the Wife’s new super fund by way of transferring the base amount $159,000 from the cash account of the self-managed superannuation fund.
9. Thereafter the Husband shall be entitled to be the sole legal and beneficial owner of:
9.1. The property situated at J Street, Suburb K, in the Australian Capital Territory;
9.2. The property situated at L Street, Town M in the state of New South Wales;
9.3. His interest in the H Pty Ltd Trust;
9.4. His interest in his business N Pty Ltd;
9.5. His interest in H Pty Ltd;
9.6. His interest in the H Pty Ltd Retirement Plan;
9.7. Any money in any bank account in his name;
9.8. Any contents and personal effects in his name or possession;
and he shall be solely responsible for all debts in his name or attaching to any item of property that he retains under these Orders.
10. Thereafter the Wife shall be entitled to be the sole legal and beneficial owner of:
10.1. The property known as F Street, Town G, in the State of New South Wales;
10.2. Any money in any bank accounts in her name;
10.3. Her share portfolio;
10.4. Her motor vehicle;
10.5. The horse float in her possession;
10.6. Her horse collection of ponies;
10.7. Her horse gear;
10.8. Her Super Fund O entitlements
10.9. Her Super Fund P;
10.10. Any contents and personal effects in her name or possession;
and she shall be solely responsible for all debts in her sole name or attaching to any item of property that she retains under these Orders.
Orders sought on behalf of the Respondent
The Respondent’s Orders sought were contained in her Case Outline filed on 30th April 2019. They were as follows:
Property
a. That the de facto Husband retain his interest in N Pty Ltd;
b. That the de facto Husband retain his interest in H Pty Ltd and his beneficial entitlements, actual or prospective owner of the J Street, Suburb K property;
c. That the de facto Husband be declared the beneficial owner of all of that right title and interest in L Street, Town M Property and shall be responsible for all mortgage debts secured against this property;
d. That the de facto Husband transfer to the de facto Wife all of his right title and interest in the F Street, Town G Property;
e. That the de facto Husband transfer to the de facto Wife all of his right title and interest in the two blocks of land known as D(1) & D(2) Street, Town E;
f. That the de facto Husband transfer to the de facto Wife all of his right title and interest in the B Street, Suburb C apartment in Suburb C;
g. That the de facto Husband pay all monies to discharge the “largest” Loan Mortgage secured over the F Street, Town G Property;
h. That the de facto Husband pay all monies to discharge the “smaller” Loan Mortgage secured over the F Street, Town G Property;
i. That the Superannuation entitlements be added together and divided such that the de facto Wife receives 50%. Her 50% interest is represented by receiving her superannuation and any unpaid balance be adjusted through property distribution.
j. That the de facto Husband cause the company to forgive or write off all joint loans and indemnify the de facto Wife in relation to any outstanding Division 7A Loans from N Pty Ltd where she is a joint borrower of such loans. In this event the de facto Husband do all things necessary to secure a release of her liability from N Pty Ltd; and
k. That each party otherwise retain all other property in their own name or in their possession and any liability attaching to this property. Such property includes savings, motor vehicles, furniture and furnishings, antiques and collectibles.
In an effort to bring some order to the management of the proceedings, given their somewhat chequered procedural history, I directed the parties to provide a joint list of issues for the Court to determine. Of course, this is a standard, regularly used direction in trial management.[15] Like almost everything to do with the matter, this proper and reasonable direction was unable to be complied with. It proved to be a forlorn hope of, and direction by, the Court.
[15] In this regard, see the High Court’s endorsement/instruction regarding “robust and proactive approach on the part of the Courts” in Expense Reduction Analysts Group Pty Ltd v Armstrong Strategic Management and Marketing Pty Ltd (2013) 250 CLR 303 at [56] and [57].
In my view, this was again because of the Wife’s unfortunate difficulty to refer to, and to apply, basic principles in family law property litigation. For example, it will be readily seen that quite a number of the “issues” set out in the Wife’s list are simply a recitation of matters that are set out in s.90SF and s.90SM of the Act. It was, therefore, completely otiose to set them out again in the list of “issues” identified by the Wife for the Court to determine. But such, regrettably, was the regular superfluity of documents and issues raised, pre-eminently by the Wife.
Accordingly, both parties ended up filing separate lists of issues to be determined. It will be readily seen that there are some areas of commonality in the respective lists. In the result, as with almost everything the Court tried to do to facilitate a more expeditious and smooth-running hearing, all such attempts regrettably fell in a heap.
I simply set out below the respective lists of issues from each of the parties. For my part, I will deal with the matters in accordance with the usual authorities and statutory provisions. Only to the degree necessary will I have regard to either of the respective lists. To do otherwise will needlessly expand these already long reasons.
For completeness, in the Wife’s original Case Outline, filed 11th April 2018 by her then solicitors, there were only five issues identified (with a few more sub-issues). It was prepared by a very experienced family law practitioner. One can only speculate (perhaps some might even rue) what might have been if all of the energy and resources that were ultimately expended on so many unnecessary matters had been used to determine the much more limited issues identified in 2018!
Applicant’s outline of issues
The Applicant emailed to Chambers on 29th November 2019 a list of issues in dispute.
LIST OF ISSUES IN DISPUTE
Pool of Assets/Liabilities
1. Value of N Pty Ltd
2. Value of property at L Street, Town M, NSW
3. Value of furniture & chattels in Applicant’s possession
4. Value of furniture, chattels, motor vehicle, horse float and horse gear in Respondent’s possession
5. Value of horses in respondent’s possession
6. Whether the Shares S portfolio previously owned by the Respondent should be added back to the pool
7. The value of antiques and collectibles in the possession of the Applicant
8. Whether the applicant has a wine collection and, if so, the value of that collection
9. The current balances of liabilities
10. The value of the applicant’s interest in the H Pty Ltd Retirement Plan
11. Addbacks sought by the respondent relating to his expenditure post-separation.
CONTRIBUTIONS
12. Whether or not any CGT was paid by the applicant in relation to the sale of the property at T Street, Town U, NSW (known as “T Street, Town U”).
13. A slight difference between the parties as to the value of the respondent’s initial contributions in particular as to CGT and sales costs
14. The appropriate treatment for the lump sum payment to the applicant from Employer Q at the commencement of the relationship.
SECTION 90SF(3) FACTORS
15. Whether or not the respondent has the capacity to work full time
16. Alleged waste by the applicant in relation to his expenditure post-separation
Respondent’s outline of issues
The Respondent emailed to Chambers on 29th November 2019 a list of issues in dispute, thus.
RESPONDENT OUTLINE OF ISSUES
1. Assets
a) Assets at Commencement of the Relationship.
b) Value of N Pty Ltd.
c) Value of property at L Street, Town M NSW.
d) Value of assets in applicant’s possession.
e) Value of assets in respondent’s possession.
f) Value of horses in respondent’s possession.
g) Value of antiques and collectibles in the possession of the applicant.
h) The current balances of liabilities.
i) Addbacks in relation to the parties.
j) The value of the applicant’s interests in the H Pty Ltd Retirement Plan.
k) Whether Capital Gains Tax was paid by the applicant in relation to the sale of the property at T Street, Town U.
l) Liabilities of the parties.
2. Contributions
a) At the commencement of cohabitation.
b) Whether the applicant’s termination payment from Employer Q is treated as income and whether it should be excluded from the initial contribution.
c) During the relationship.
d) Contributions:
i) Financial;
ii) As a parent;
iii) As a homemaker;
iv) Non-financial contributions.
e) Waste by the applicant.
f) Applicant’s capacity to earn an income and build assets during the term of the relationship and ongoing.
g) Respondent’s capacity to earn an income and build assets.
90SF(3) factors
h) including the respondent’s ongoing care of the child of the relationship and the income differential.
3. The needs of each party
a) Each party’s current and future needs.
b) Age of parties.
c) State of Health.
d) Income – current and future potential earning capacity.
e) Superannuation entitlements.
f) Financial resources available to each party.
g) Parental responsibility of the Child of the relationship.
h) Commitments necessary to ensue that each party can provide for themselves and the Child.
i) What each party needs to have a reasonable standard of living.
j) The duration of the de facto relationship.
k) The extent
l) The financial circumstances in relation to the applicant’s wife.
m) Child Support provided.
4. Just and Equitable Considerations
a) No issue between the parties that, pursuant to sub-section 93SM(3), the court should be satisfied, in all the circumstances, it is just and equitable to make an order.
b) The percentage that each party should receive of the assets in the context of being just and equitable.
c) Distributing or adjusting the property accordingly.
For comparative purposes only, I note the Respondent’s succinct original list of issues in dispute as per her original Case Outline, filed 11th April 2018, which was (a) in more conventional terms, (b) in accordance with basal practice and procedure, and (c) in accordance with long-standing principle. It actually covers all of the substantive “issues” set out over two pages in the Wife’s most recent “list of issues”:
a) The value of property held by the parties at the commencement of cohabitation;
b) The assessment and weight to be given to each parties [sic] contribution;
c) Value of the parties [sic] current assets including:
i.The Husband’s interest in N Pty Ltd Consulting Pty Ltd
ii.The properties known as F Street, Town G, J Street, Suburb K, L Street, Town M, AA Building;
iii.Horses and antiques;
iv.House contents and trailer;
d) Financial and non-financial contributions during the period of co-habitation and since cohabitation ceased;
e) Effect of s.90SF(3) factors, including de facto Wife’s ongoing care of the child of the relationship and the income differential and capacities of the parties.
Oral evidence of the Applicant
The oral evidence of the Applicant, summarised to a significant degree but with occasional comment or annotation, was as follows.
The Husband’s cross examination commenced with some qualification of a few matters in the Wife’s Case Outline, such as the value she ascribed to the AA Building apartment. He disagreed with the Wife’s valuation of it at $580,000, noting that KK Valuers had done a recent valuation, which had come in at $520,000.
The Husband also confirmed that everything in relation to the details of the H Pty Ltd Retirement Plan Fund was set out in a schedule to the financial statement of that Fund, as at 30th June 2017. The 2018 financial returns for the Fund had not been completed as at the date of the final hearing. It was confirmed that those accounts would be provided to the Wife as soon as they became available.
There ensued a detailed (and in my view needless) series of questions and ongoing discussion about the value of the AA Building apartment. The Husband confirmed that (a) it was purchased in 2014 for somewhere between $500,000 and $520,000 (he could not recall the precise date of purchase but said that he could find it if required – which he was not); (b) in 2017, the same property was valued at $440,000; and (c) the Husband’s Counsel confirmed that he was relying upon the most recent valuation by KK Valuers of $520,000. There was a suggestion by the Wife’s Counsel that there was something awry with the valuations, but which was never clearly detailed. The valuations of this property occurred annually for the purposes of the H Pty Ltd Retirement Plan accounts.
The Husband was asked whether he was “concerned” about the 2017 valuation. Such a question was not relevant to any issue the Court had to determine. This was put to Counsel for the Wife. It was later explained after an inordinate amount of time that the reasons for the fixation on the 2017 valuation meant, in the Wife’s view, it skewed the value of the H Pty Ltd Retirement Plan. To this, the Husband’s Counsel confirmed, more than once, that the updated “financials” for this fund, would include the updated valuation of the AA Building apartment of $520,000, but which would also relevantly take account of the audit and other costs. Further, as Counsel for the Husband confirmed, details would be provided as soon as the material came to hand of the updated value of the Husband’s interest in the Fund, on the one hand, and its value as an asset. As already intimated, all of this took an inordinate amount of time. It should not have done so.[16]
[16] This “discussion” is at T 63 – 70.
Indeed, after indicating that the Wife’s Counsel should examine overnight the relevant documents they had received early in the trial, so concerned was I about the nature of the cross examination of the Husband, that it led to the following comment by me:[17]
HIS HONOUR: ‑ ‑ ‑ I just formally warn everybody I am likely to reserve the legal costs of this matter if at any stage, in my view, the matter goes so far off the rails and this matter goes on for infinitely longer – infinitely longer than the matter was originally set. I am not going to allow, whatever the circumstances, on either side, this matter just to wander off into the stratosphere. This is outrageous that people should be spending money on matters that, in my view, do not warrant such analysis, in circumstances where there is an expert report about the valuation of the property in question before the court, with more to come.
[17] T 69.
The Husband confirmed that when the parties started to co-habit, his company, now known as “N Pty Ltd”, was known as “N Pty Ltd”. The change in company name occurred when the Husband commenced business on 1st July 2007, after having left the partnership of Employer Q in June 2007.
There followed another lengthy discussion about the value of the Husband’s company. It was regularly and consistently the case that the Husband rejected, and explained why he rejected, the various propositions put to him by the Wife’s Counsel.
For example, it was initially put to the Husband that N Pty Ltd was worth “nothing” as at 1st July 2006. The Husband rejected this proposition. He said that it was worth $50,000. It was suggested by the Wife’s Counsel that this was based on the company’s “retained earnings.” Again, the Husband rejected this proposition. He explained how the figure of $50,000 was arrived at (the Husband is also a professional, not just experienced in management). He said:[18]
[18] T 71.
Tell me, how did you reach the value of $50000?‑‑‑Prior to commencing as a management consulting business it was, effectively, an investment vehicle. It received a distribution of trust profit from the H Pty Ltd Trust because it’s a corporate beneficiary of that trust. The distribution was in the order of $50000 and that $50000, effectively, was the working capital that was eventually used to kick off the operations of N Pty Ltd.
So what were the retained earnings in ‑ ‑ ‑?‑‑‑Look, from memory it was about 50000, but I would need to check the financials ‑ ‑ ‑
And ‑ ‑ ‑?‑‑‑ ‑ ‑ ‑ just to confirm that.
So I’m understanding – and I do apologise, it’s just me not understanding – $50000 was in retained earnings and $50000 was what in ‑ ‑ ‑?‑‑‑No. No. The $50000 was in retained earnings. The trust receives a distribution. It reflects that as being income. Sorry, the company receives a distribution. It reflects that as being income, and that increases its retained earnings.
The Husband repeatedly explained how and why he uses a corporate vehicle for his management consultancy business. In his words (emphasis added):[19]
And over the years it accumulated a lot of wealth?‑‑‑Well, I earn a good income. I perform a lot of contracts and over the years I get paid for those contracts and I established the vehicle because – to, you know, get on company panels I need to have a corporate structure. I need to pay workers’ comp. I need to have public liability insurance. I need to have a, you know – a corporate vehicle to do those things in order to be able to tender to get on those panels, and I use those panels to generate income.
[19] T 71.
He rejected the subsequent proposition that the “corporate vehicle accumulated wealth, primarily through retained earnings.” Upon checking his records, the Husband said that the “retained earnings” of the company at the commencement of co-habitation were $1.3 million.[20] The Husband also confirmed that N Pty Ltd has never made a loss because, he said, he has never been without an income. He confirmed that most of his clients were “companies.” The Husband said that he basically sells his time [as a consultant].
[20] T 72.
He also confirmed that the retained earnings of the company as at June 2018 were $1.21 million. He said that the current financial year had been a good one, not his best, but a “good one.” He had received something in the order of $600,000 in fees.[21] He confirmed too that there would need to be tax paid on these fees which would affect what the retained earnings might be.
[21] T 74.
The Wife’s Counsel said that he would (and did) come back to issues relating to N Pty Ltd, and moved on to other matters.
The Husband confirmed that he had been an equity partner in Employer Q. There was brief discussion about the financial arrangement for the Husband with that partnership. The primary issue here was not that he received an amount upon leaving the partnership, but the amount that was received and how to treat it for the purposes of these proceedings.
The Husband confirmed that, upon his cessation with the partnership of Employer Q, once he paid out a partnership loan he received a payment of $255,000 upon his termination. He said that once tax was paid on this sum, and other expenses allowed, he actually received $147,000.[22] As with all of his answers, the Husband was firm and clear in his evidence.
[22] T 75.
At the commencement of the relationship with the Respondent, the Husband confirmed that he had a property in J Street, Suburb K. At that time, it was valued at $750,000 and had a mortgage of $437,223. Thus the equity brought into the relationship in relation to this property was $312,777.
The next property considered was at T Street, Town U. It was owned 50% by the Husband and 50% by the H Pty Ltd Trust. The Husband said that after improvements, it was worth close to $400,000. There was no mortgage over this property. He explained further that H Pty Ltd Trust is a discretionary trust, which has a corporate trustee called the H Pty Ltd . The Husband is the appointor of the trust, and its sole beneficiary. He confirmed that, pursuant to these arrangements, he could have distributed any income derived through the trust to himself.
The T Street, Town U property was sold for $355,000. This excluded fences and yards, which amounted to approximately $35,000, which he kept and used them on another property – F Street, Town G. He said that the sale of the T Street, Town U property was something of a “fire sale” to get out of it. The proceeds of sale were distributed in part back to the trust, and in part to himself. He said that he used the funds he received to pay down the mortgage on the F Street, Town G property. It was conceded that the trust and the property both belong to the Husband and therefore the funds went back to him by one means or another.[23]
[23] T 76 – 77.
The Husband’s superannuation is managed through the H Pty Ltd Retirement Plan. He confirmed that at the commencement of the relationship with the Wife his superannuation in this fund was $94,555. He accepted that at the same time, the Wife’s superannuation through the Super Fund O and Super Fund P was $81,102. No mention was made here, or anywhere, that the Wife’s superannuation is funded by her employer, while the Husband’s superannuation is self-generated. This is nothing more than an observation.
The Husband confirmed that, according to the last available audited figure, his superannuation was approximately $688,000. He confirmed that it increased considerably because he made contributions, via his company, N Pty Ltd. Thus these were employer contributions. He said that the contributions varied between $35,000 to $25,000, to $50,000, depending on the year.[24]
[24] T 78.
Next he confirmed that at the commencement of the relationship both parties worked full-time. He said that he assisted the Wife in her [successful] application to move to the senior level of Employer R, where the Wife still works at the Employer R.
There followed a discussion regarding the two Victorian properties (both at Y Street, Suburb Z) that the Wife brought into the relationship. One of them sold some months into the relationship for $375,000 or thereabouts, and the other for $135,000.
In January, the parties purchased the F Street, Town G property for $820,000 (also known as F Street, Town G, or alternatively referred to as the F Street, Town G property). He said that not all of the proceeds from the Y Street, Suburb Z properties were put into the F Street, Town G purchase because the Wife held back “a substantial amount” which was invested in “quite a large share portfolio.”[25] The Husband said that, from memory, he might have arranged for the deposit to be paid out of his earnings. He offered to check but was not asked to do so. The mortgage on this property was about $600,000.[26]
[25] T 80.
[26] T 81.
The Husband confirmed that the Wife took maternity leave in 2009. Later, she took annual and long service leave, on full pay, to look after the parties’ child, X. Later still, she took unpaid leave. She went back to work in 2011. He said that 2009 was the worst year financially for N Pty Ltd. In fact, he thought that he did not earn an income in that year. Indeed, he said that he thought that the family lived off his company dividends during 2009.[27] No dividends were paid that year to his adult sons from a previous relationship. The sum received as a dividend was $80,000. He confirmed that it was used to fund the living expenses of that family that year. He confirmed that these funds were a distribution of accumulated profit, not from retained earnings as suggested by the Wife’s Counsel. As at the end of the 2010 financial year, the retained earnings were about $300,000.
[27] T 82 – 83.
The Husband confirmed that the consulting fees he earned depended on the number of contracts he was awarded. In turn, this affected the salary he drew, which varied between $100,000 and $150,000. On top of the salary was his superannuation contributions and two motor vehicles. He confirmed too that he was earning this sort of money immediately when he started his business in 2007. He said that his salary package from 2007 to 2016 (the year of the parties’ separation) was closer to $200,000. He commented:[28]
[28] T 84.
… there’s an important point of clarification. That allowed funds to be accumulated in N Pty Ltd and profits to be accumulated in N Pty Ltd, which were taxed at a much lower marginal rate, which made sense to accumulate funds in the company ‑ ‑ ‑
Yes?‑‑‑ ‑ ‑ ‑ rather than, you know, draw them out as a higher individual salary.
This led to a discussion over two of the many other areas of contention, namely (i) the use of Division 7A loans by the company (N Pty Ltd) and (ii) the use made by the Husband of his corporate vehicle to enter into contracts, particularly with “various companies”, and thereby to generate income. This latter aspect was regularly visited by the Wife in an effort to ensure that, as far as possible, there was a clear distinction between the Husband’s labour and the role of the company. Both on the evidence, and according to long-standing principle, this attempt by the Wife was ill-conceived. Regrettably, the way the matter was conducted in many respects by the Wife regarding N Pty Ltd was more akin to a matter in the corporations list rather than in accordance with longstanding authority from the Full Court regarding the conduct of family law property matters. So much was in fact highlighted by Counsel for the Husband during the following exchanges. But this is to pre-empt somewhat a later discussion. The Husband pointedly said (emphasis added):[29]
[29] T 86.
So what you were saying is the reason there were retained earnings at all was a tax – a lawful tax minimisation exercise?‑‑‑Yes.
And, in fact, as we will touch upon a little bit later, it was also part of that tax minimisation logic to give yourself a division 7A loan or give 7A loans ..... corporation, as opposed to just taking out a dividend or income. Is that fair to say?‑‑‑Yes. Well, to the extent that N Pty Ltd accumulated surplus cash, that was used to, you know, pay off other debts, recognising that they attract a commercial rate of interest. And all the div 7A loans have always received interest which has come back to the company.
And because of that structure, that tax minimise structure, it worked on the premise that the owner of the retained earnings was N Pty Ltd?‑‑‑No. The owner of the retained – well, effectively, I’m the sole director and the sole shareholder, so I could equally say that, you know, the ‑ ‑ ‑
You’re a professional‑ ‑ ‑?‑‑‑Sorry. Apart from my two sons’ third interest. But, you know ‑ ‑ ‑
You’re a professional , sir, a professional. That’s pretty high up on the pecking order as far as guns go. You would agree with that? That’s right?‑‑‑Absolutely. I think most professionals would say we’re the Spartan babies of professionals.
That the reason you set up a corporation – finish your laugh and then tell me when you’re ready. Okay. You set up the corporate structure to set up a separate entity known as N Pty Ltd. That’s why you could pay less tax, because they’re two separate entities, you and the corporate .....?‑‑‑No. No. That’s not true at all. Your assertion is incorrect.
All right. Well, let’s go through the assertions. Are you – am I wrong in saying that N Pty Ltd and yourself ‑ ‑ ‑
…
‑ ‑ ‑ N Pty Ltd. N Pty Ltd is a separate entity to yourself?‑‑‑It’s a corporate vehicle that I need to win contracts.
Discussion of the role of N Pty Ltd continued, particularly in relation to ownership of retained earnings, among other things. The Husband said (emphasis added):[30]
[30] T 86.
… it signs a contract, it’s the corporation that enters into the contract, not you personally?‑‑‑That’s true.
And you sign the contractor as director for N Pty Ltd?‑‑‑Yes.
Right. So ‑ ‑ ‑?‑‑‑Could I say, when I established N Pty Ltd, it was as much, also, about protecting assets, because as a partner of Employer Q I have unlimited liability. And holding myself out as a management consultant, it’s also helpful to have a vehicle that gives you a corporate shell to protect your liability. And it’s also necessary ‑ ‑ ‑
And that’s because it’s a separate entity?‑‑‑And – sorry. And it’s also necessary to enable me to secure professional indemnity insurance.
So now this separate entity, N Pty Ltd, let’s deal with it on the basis of property owned by N Pty Ltd, property owned by you, because the property is not owned by you from N Pty Ltd until their pay a dividend. You would agree with that?‑‑‑No.
Or an income. You’re saying that the property owned by N Pty Ltd is property owned by you?‑‑‑No, I’m not saying that.
All right. Well, I’m putting a proposition to you that – don’t look at your lawyer; look at me if you need guidance. N Pty Ltd owns property as a corporation. Are you saying that that suggestion is right or wrong?‑‑‑But N Pty Ltd doesn’t own any property.
Well, what about the retained earnings?‑‑‑That’s not property.
All right. Does it own capital?‑‑‑No, it doesn’t own capital.
Who owns the retained earnings in N Pty Ltd?‑‑‑The capital is owned by the shareholders of the company, which is myself and my two sons.
See, I’m suggesting to you that in fact it’s the corporation that owns the retained earnings; that’s why you set it up that way, so that you didn’t own it and so you didn’t have to pay tax on it?‑‑‑With respect, a company can’t own itself.
No. No. I’m not talking – a company can own property, though. Look at me, sir. The company can own property?‑‑‑It can, but N Pty Ltd doesn’t own any.
The retained earnings, I suggest to you, in N Pty Ltd is owned by N Pty Ltd?‑‑‑No. The retained earnings are owned by the shareholders, which is myself as two-thirds, and my two sons, which are the other third. And there’s different categories of shares. And those different shares have different rights and entitlements. But it’s a fundamental principle of corporations law that a company is owned by its shareholders.
In response to the Husband’s answers, Counsel for the Wife said immediately after the above exchange (emphasis added):[31]
[31] T 87.
Yes. You’re mixing principles up. I don’t need to go down that – your Honour, do you – I don’t propose to go down the path any further of this witness’s interpretation of what a corporation is, but unless you want me to clarify it, it will be my submission that in fact company owns property, and retained earnings within a corporation is owned by the corporation.
HIS HONOUR: They’re all matters for submissions, Mr Masters.
After a few more questions to the witness, the Husband’s Counsel intervened, thus:[32]
[32] T 87 – 88.
MR HOWARD: Your Honour, I’m going to object at this stage, because I don’t understand the issue that it goes to. N Pty Ltd exists. It has, within the corporate structure, the retained earnings. They are already in the material. The material has already got about all of this. It’s clear that this court, when dealing with family law matters – I’m not talking about the Supreme Court dealing with corporate law matters and the Federal Court dealing with corporate law matters. This court, dealing with family law matters, when there’s a sole director and, if a trust, a sole appointor, or as we talked about with the other trust, with the trust, they treat them as the same even if they aren’t legally the same. Whether or not there is this legal difference and a difference in point of view between my learned friend and the witness is wholly irrelevant to your Honour’s determination and, with respect, it’s wasting that precious time that we’ve got.
MR MASTERS: Your Honour, if my friend is prepared to make the concession that the ..... earned by the company, I don’t need to make any ‑ ‑ ‑
MR HOWARD: As long as my friend isn’t saying that I am then conceding that the company is worth the amount of the retained earnings because that has been taken into account in the valuations. It’s not up to my client to give that ‑ ‑ ‑
MR MASTERS: I am prepared to accept that concession on the basis ..... it’s owned by the corporation, the retained earnings and ‑ ‑ ‑
…
MR HOWARD: It can’t be anything else.
The issue of “retained earnings” was re-visited by some of the experts in the matter, notably Mr EE, later in the hearing.
The cross examination continued with further questions to the Husband about the shareholding of his adult sons in N Pty Ltd. He confirmed that one of his sons had received a modest dividend in recent years of $20,000. He confirmed that he was not required to distribute funds equally to his sons who, combined, held a one-third share in the company. He also confirmed that both of his sons have worked for N Pty Ltd from time to time as contractors.[33]
[33] T 89.
During the time that the Wife was at home for the two-plus years looking after X (recalling that X was born in 2009 and the Wife returned to work in 2012), the Husband said that his recollection was that the Wife was still contributing to her superannuation. Obviously, as a professional, it was the Employer R that was doing the actual contributing. The Husband also confirmed, without specifying detailed dollar amounts, that the Wife received some income from N Pty Ltd for performing various duties during her time caring for X.[34]
[34] T 90.
I inquired of the Wife’s Counsel whether her superannuation statements would be tendered, particularly given that they would presumably answer a number of matters that were being put to the Husband. From this relatively straight-forward question came the following reply (emphasis added):
MR MASTERS: Okay. Okay, your Honour. If he doesn’t have to. You look wherever you like, sir. In relation to superannuation when she worked part-time, you accept she would have received a lesser contribution from the Employer R than if she was working full-time?‑‑‑I really don’t know.
Okay?‑‑‑I really don’t know.
Okay. Now, at that time, you were receiving your full superannuation, that’s correct, from N Pty Ltd?‑‑‑Yes, but remember ‑ ‑ ‑
Is that – that’s a yes or no?‑‑‑Yes.
Okay. Thank you.
HIS HONOUR: And, sorry, Mr Masters, will you, if it’s not already before the court, be tendering your client’s superannuation statements?
MR MASTERS: Can – I can’t tell you now, your Honour.
HIS HONOUR: Just that I would assume, as I’ve said, that if they were available, that they would at least, one would assume, answer conclusively the questions that you are – now that you are putting to this witness.
MR MASTERS: And, your Honour, we will look for them. I’m not going to repeat what I said before. I can’t tell you right now. I can’t tell you the – your Honour knows the reasons why. I won’t bore you with that. All right. Now, needless to say, though, whilst your aim of $13,000 apart when you commenced cohabitation as far as contributing superannuation into the relationship, the matrimonial – or the combined pot, you would agree that by the time you separated in 2016, that you had substantially more in superannuation than she did?‑‑‑I would say more, but I don’t know about substantially.
Unfortunately, these basic documents – the Wife’s superannuation statements – were never tendered. It is unclear if they were ever produced.
Fairly, the Husband pointed out that the comparison between the superannuation held by each of the parties at separation was readily found in their respective Financial Statements. In a discussion a little later, there was a sort of agreement that in June 2016, the Husband’s superannuation was about $650,000, while the Wife’s superannuation was $285,000. The Husband also noted that, during the period the Wife was looking after X full time, (a) he was earning a significant income, and (b) the Wife earned between $40,000 and $60,000 per year from N Pty Ltd.[35] This evidence was never challenged. Nor was it relevantly referred to by the Wife in her submissions.
[35] T 92.
In 2012, the parties purchased a property at D(1) & D(2) Street, Town E, for $102,000. A loan for this purchase was taken out with Westpac. According to the Husband, the transaction developed and was paid for as follows:[36]
[36] T 93.
… at the time, we took out the loan with the Westpac bank. So from my recollection, we had – the surplus money from N Pty Ltd and the like had been used to pay down the F Street, Town G mortgage and we went to ‑ ‑ ‑
Sorry, what was used to pay down the F Street, Town G?‑‑‑Basically, the spare cash that we had and also my salary income and the like was used to pay off and pay down the mortgage, as well as there would have been some division 7A loans that would have washed around and, from memory, to buy the Town E land, we went to the bank and basically got a new loan that still secured over by F Street, Town G, which is effectively the Westpac loan, and that was used as a loan for investment purposes, and we needed to have a separate loan so we could get, like, the tax-deductibility of the interest and ensure that it was appropriate for tax purposes.
So if I’ve understood your answer that you’ve just given, F Street, Town G – the F Street, Town G property had a mortgage that, over time, was paid off through your savings and contributions ‑ ‑ ‑
HIS HONOUR: Well, it was paid down, I think is the evidence?‑‑‑Yes. It was paid down.
Rather than being paid off, it was paid down?‑‑‑Paid down.
MR MASTERS: Yes. Well, I’m seeing how far down. Was it paid off?‑‑‑Look, I can go to the bank statements and we can get you ‑ ‑ ‑
It’s possible that it was paid off, though, wasn’t it?‑‑‑Get you – well, it was – it was reduced but, by the same token, once again, we wanted to have a loan and then gradually as more money came in from N Pty Ltd, we then – when we had enough cash which built up, that’s when I went to the accountants and we got a Division 7A loan and we swapped, you know, accumulated cash in N Pty Ltd from – to – to effectively pay down the Westpac loan and reduce interest.
As explained by the Husband, what ensued was that the parties ultimately purchased two properties in Town E (both at D(1) & D(2) Street, Town E), one of which cost $102,000, and the other $104,000. He further confirmed that a Division 7A loan was made jointly to the parties in 2012 of $212,000 by N Pty Ltd. It was, he said, a joint asset and therefore there was a joint loan. Repayments were made to the company pursuant to the loan agreement between the company and the parties.[37]
[37] T 95.
The Husband confirmed that on 29th June 2013, an agreement was made between N Pty Ltd and the trustee, H Pty Ltd Pty Ltd, for a loan from the company of $322,572. He said that the funds were placed into the trust and used to pay down the Westpac mortgage over F Street, Town G. He also confirmed that the Wife had no interest in this second loan or in the trust.
Somewhat in passing, at the beginning of the second day of the hearing, again I asked the parties to provide me with a list of issues and the evidence relevant to each of them.[38] Regrettably, like every other attempt to bring much needed focus and order to the litigation, and although promised earnestly by Counsel for the Wife, this requested list never eventuated.
[38] T 108.
Also on a procedural note, at the same time as this discussion on day two of the hearing was taking place, the Wife’s Counsel, seemingly for the first time and without prior notice, indicated that the Wife sought to rely upon a 2018 valuation for a property known as the “AA Property”. This was in circumstances where there was an updated valuation from Mr BB of this property, which was attached to his Affidavit, filed 29th April 2019. The Wife contended that the valuer in the updated valuation had committed some errors. I simply note that no relevant errors were identified in his cross examination. Regrettably, this inapt and inappropriate course happened a number of times during the hearing, with the result that the hearing was unnecessarily and needlessly prolonged. It is one thing to test evidence; it is quite another for there to be a proper basis for questions to be put, particularly to experts.
The unsatisfactory state of the evidence from the Wife’s side is captured well in the following exchange regarding the lack of updated valuation for the AA Building apartment and her reliance upon a 2018 valuation, which course had not been notified to the Applicant or to the Court. Thus (emphasis added):
MR HOWARD: And I wasn’t suggesting you couldn’t cross-examine. I’m say that you should not be able to adduce further evidence at this late stage in the circumstances where we’ve done what we were required to do.
MR MASTERS: Your Honour, we can, I would respectfully submit, tender that evidence from the expert. It becomes a question of weight. There is no such thing as a stale valuation in the sense that it’s inadmissible. You can put a valuation in from any time but the longer time goes, the less valuable it becomes. Well, if my friend wants to object, of course I will oppose the objection.
HIS HONOUR: But again why, why, why was that valuation not updated?
MR MASTERS: I can’t answer that, your Honour. I don’t want to go through what I said yesterday.
HIS HONOUR: The defence of late entry?
MR MASTERS: Sorry, Your Honour?
HIS HONOUR: The defence of late entry?
MR MASTERS: Yes. I’m not saying it’s a great situation, your Honour. I’m not defending that there’s not an updated valuation. I’m not saying that at all. What I’m saying is I’m the messenger in this case. It’s not a situation where we’ve had the opportunity to learn the brief and see all the issues and get an updated valuation. And it may well impact at the end of the day, in the sense of the finding of valuation, in a negative way against the client. But I would like to test the evidence. But it would be nice if the valuer that the husband has provided says “Yes, I didn’t take that into account, maybe I should make an adjustment.”
In addition to these comments, in Marsh & Marsh, the Full Court commented on the assessment of contributions. For current purposes it is sufficient to record the comments of Murphy J (with whom Le Poer Trench J agreed), at [104] and [107] (emphasis added):[298]
[298] Marsh & Marsh (2014) FLC 93-576. See also the observations of Ainslie-Wallace J at [60] and [64], in the latter reference her Honour referred to the importance of the Court to assess the parties’ contributions by “weighing the quality and extent of each contribution.” She also noted that the “nature and character of contributions may change …”
[104] The question to be addressed was what did an analysis and weighing of all contributions of all types prescribed by s.79(4) made by both parties [across the duration of the relationship]…
…
[107] The expression “post-separation contributions” has, of course, been used widely in many authorities within the context of discussions about the assessment of contributions. But, importantly, it is not the fact of separation or when contributions are made that is the delineator. It remains crucial to analyse and weigh the nature, form and characteristics of all contributions across the whole of the period under consideration.
It should also be recorded that, in Elford & Elford, by reference to earlier authority, the Full Court reminded trial judges, at [31], that the task of evaluating contributions under s.79 (and obviously its cognates) (internal citations omitted):[299]
… “inevitably involves value judgments and matters of impression”, and accordingly it cannot be treated as “a mathematical exercise”.
[299] Elford & Elford (2016) FLC 93-695.
The Husband’s submissions, and those of the Wife, regarding contributions have been set out earlier. I need only note the following.
First, unfortunately, the Wife proposes different times to value various properties for the purposes of assessing contributions. This inconsistent approach was unhelpful and suggested, not for the first time, the Wife taking a course that would maximise her position and minimise the Husband’s. There is nothing wrong with seeking to maximise one’s position in family law litigation, indeed in litigation more generally. It is the inconsistent approach as to the time of valuation, attribution and assessment that was and is unhelpful.
Secondly, for reasons not explained, the Wife ignored the Husband’s payout from Employer Q for the purposes of the assessment of contributions. The Husband’s evidence, supported by his tax return, showed the net payment to be $147,900. When this was referred to in her submissions (pars.28(a) – (d)), there were a number of self-serving and otherwise unhelpful comments, which were contradicted by the Husband’s evidence. For example, the Wife’s calculation of the amount of tax payable on the lump sum payout of $255,000 resulted in a net figure of $133,875, some $14,000 or thereabouts less than the figure accepted by the ATO. The sum of $147,900 received by the Husband should be part of the assessment of contributions.
Thirdly, the actual differences between the parties regarding initial contributions ultimately concerned three assets, all of them from the Husband’s side of the ledger: the value of the J Street, Suburb K property, the value of the T Street, Town U property (formerly held by the Husband but sold in 2007), and the Employer Q payout to the Husband. Having already dealt with the Employer Q payout, I need only address the J Street, Suburb K and T Street, Town U properties.
Fourthly, also in her submissions (pars.28(a) – (b)), there were the following wrong and misleading statements, namely that: (i) upon taking his payout from Employer Q, he was “unemployed”, and (ii) N Pty Ltd had not yet commenced business. Both of these statements were incorrect or at least wrongly stated, and/or disregarded the Husband’s evidence, which I have accepted. In summary, that evidence was that, through N Pty Ltd, he had a consultancy contract as soon as he finished at Employer Q. While nothing formally turns on it, it was never put to the Husband that he was ever “unemployed.”
The Husband being “unemployed” was repeated in the Wife’s submission (par.152), in the context of also stating that “the Respondent [Wife] was working full time and was even the primary income earner whilst the Applicant was unemployed after working at Employer Q.” This was an even more outrageous statement than the earlier submission. It bordered on being deliberately misleading. The Husband’s unchallenged evidence was that he finished in the partnership at Employer Q at the end of 2006 and commenced his business with N Pty Ltd on 1st July the same year. He said – also unchallenged – that he had a consultancy immediately.
Respectfully, these contentions by the Wife were extraordinary and should not have been made in the light of all the evidence. Given how many references there are in the Wife’s submissions to her Affidavit material, and to the Transcript of the hearing, such serious claims should have been referenced, checked or otherwise supported by relevant evidence. They were not. Although the Husband did not respond to these submissions, in my view he would have been entitled to find them insulting. These submissions were at least over-reach. At worst, they were (a) unsupported by evidence, (b) contradicted by evidence, (c) bordering on misleading, and (d) bordering on being improper and in breach of standard practice rules and guidelines. They should never have been made.
Regarding the T Street, Town U property, it was agreed that it was purchased by the Husband in 2005 (prior to the relationship) for $405,000. It was sold in 2007 for $355,000. In accordance with standard principle, the sale price in 2007 of $355,000 should be accepted for the purposes of assessing contributions.
Regarding the J Street, Suburb K property, the Husband seeks to have its current value taken as the relevant amount. This is broadly consistent with the approach to the T Street, Town U property and with general principle. Inconsistent approaches, especially in the absence of relevant authority is unhelpful and should be avoided. Its current value is agreed to be $1.36 million. Certainly, if the property was sold, or had been sold prior to the present time, its sale price would [simply] be the relevant amount. The Wife however, seeks to have its value as at the date of the commencement of the relationship, at $750,000. Indeed, the valuation of this amount was conducted in 2006, prior to the commencement of the relationship. The property is formally owned by the H Pty Ltd Trust.
If the lower price is taken, then there is no attribution/consideration of anything from the Wife. If the more recent value of $1.36 million is taken as the relevant figure, then there would be some consideration of contribution during the relationship.
Because it is consistent with the approach taken regarding the T Street, Town U property, and because it will benefit the Wife to some degree, taking a holistic approach to contributions, the relevant value will be $1,360,000 for this property.
Overall, regarding initial contributions, this would mean that the Husband’s contributions in this regard would be, in general, rounded terms $1,612,049. This takes account of the mortgage owed by the H Pty Ltd Trust.
The Wife’s initial contributions, generally stated, were: the sale of her two properties at Y(1) & Y(2) Street, Suburb Z (respectively $228,791 and $120,579). Question marks remain, however, over the lack of information regarding capital gains tax over one of the properties (which was estimated to have been approximately $10,000), and in relation to agent’s commission. The Wife’s superannuation at the commencement of the relationship was $81,102. She had some other general assets that totalled about $14,000. This gives a total of $444,472.
It will be readily seen that the Husband’s initial contribution of $1,612,049 very significantly outweighs that of the Wife at $444,472. Even if the J Street, Suburb K property was taken into account as proposed by the Wife at the value of $750,000, thereby reducing his initial contributions by some $600,000 or thereabouts, there would still remain a sizeable difference in the Husband’s favour regarding initial contributions. Indeed, on the Husband’s submissions, his initial contributions were approximately four times greater than those of the Wife.
On her submissions, the Husband’s initial contributions were still approximately two and a half times greater than those of the Wife. If a percentage was to be attributed to these contributions, in my view it would result in an initial contribution by the Husband of between 12 – 14% in his favour. I will take the latter figure.
In accordance with long-standing authority, there is no doubt that the greater assets of the Husband at the commencement of the relationship gave the parties both a foundation and springboard for the current substantial pool of assets.[300] This is in circumstances where the relationship, while not short, was not long either.
[300] Among many authorities, see the Full Court decision in Pierce v Pierce (1999) FLC 92-844. It will be recalled that Pierce involved a relationship of the same length as in the current matter. In that case, on appeal, among other things, the Full Court said that the Husband was entitled to 70% of the assets on the basis of his greater initial contributions. It was ultimately a question of what “weight” to attribute, in all the circumstances, to the initial contribution. Likewise, the use made by the parties of the initial contributions was relevant.
During the relationship, both parties were employed full-time, except for the period when the Wife was on leave following the birth of X. Save for what is said below, on the surprisingly limited evidence of both parties, in such circumstances, the Court would usually and will in this instance, assess the parties’ contributions during the relationship as generally equal.
The Wife’s evidence, about which there is little contest, was that upon X’s birth she took maternity leave, annual leave and long service leave on full pay, and one year of unpaid leave. All of this took place, according to her, between 2009 and March 2012.[301]
[301] See the Wife’s Affidavit, filed 6th April 2018, pars.63-64.
The Husband’s oral evidence was that during this time of the Wife’s leave from paid employment, she received funds directly from N Pty Ltd. This was not challenged. The Wife took little or no account of it.
Clearly, during the period of the Wife’s leave, and while the Husband remained in paid employment (self-employed), which relevantly provided for the family, the Wife was engaged in ongoing primary care of X.
The Respondent Wife submitted (par.32) that she contributed to the care of the Husband’s two children from an earlier relationship. She provided an arithmetical calculation in her Affidavit of 17th April 2019, repeated in her submissions, regarding what this “care contribution” amounted to in dollar terms. The Husband was not asked anything about such alleged care. Nor do the submissions refer to the fact that the Husband’s sons are now in their mid-20s, and at the relevant time would have been approximately in their teenage years. A one paragraph submission, and an untested mathematical calculation, and again no reference to authority, does not assist the Court at all. In my view, this was another instance among many where there was at least over-reach bordering on desperation.
There was no challenge to the Husband’s evidence that he pays child support.
The likely impact of the Orders proposed by either party upon their respective earning capacities (s.90SM(4)(d)) was not addressed by either party. Given that there was no challenge to (a) the Husband’s evidence regarding his income through N Pty Ltd, but also that he intends to retire in the relatively near future, and (b) the Wife’s concession that it is her life-style choice to work only four days per week, I do not see the Orders made today impacting adversely upon either party in this regard. Indeed, upon the Orders being made and given effect, both parties will be financially relatively comfortable. This will remain the case once the Wife pays all of her outstanding legal fees to lawyers past and present.
In the light of the very limited evidence provided by both parties, having particular regard to the Wife’s care of X during the relationship and post separation, a modest assessment in her favour should be made in this regard. If a percentage was to be attributed to it, something around 3% should be allowed.
Section 90SF(3) factors
In the light of the detailed submissions of the parties set out earlier in these reasons, I note the following considerations quite summarily.[302]
[302] To the degree relevant, what follows here should be taken also to inform the considerations under s.90SM(4)(e).
There was no real dispute over the fact that even since separation, X has been spending regular and significant time with her Father, while being in her Mother’s primary care. The consent Orders made in May 2019 for the child to spend time with her Father five nights per fortnight, and half of school holidays, confirm the significant and substantial time that X spends with her Father. Primary care of X remains with the Mother.
The Husband’s income is demonstrably greater than that of the Wife. At 58 years of age, he is much closer to retirement than the Wife, who is 16 years or so his junior. She remains employed in Employer R and enjoys all the benefits of it, including superannuation.[303] By choice, she works part-time, but still enjoys a significant salary. As X (who will be 11 years old in 2020) grows into her teenage years, and subject to any other life-style choices regarding, for example, the property and the horses and other animals, there is no reason supported by any evidence that would preclude the Wife working full-time. The Wife conceded that she provided no medical evidence regarding her contention that she had some medical issues in relation to inflamed fingers from the use of a computer mouse.
[303] In her Financial Statement, filed 6th April 2018, the Wife confirmed that, as of that date, she had $281,870 in “Super Fund O”, which is obviously a reference to the Super Fund O scheme. She also had a much smaller amount – $12,786 – in a different superannuation fund, Super Fund P.
Nor is there evidence, contrary to her submission (par.31(e)), that she will not be able to advance further in her employment, noting that she entered this senior level of employment some time ago. Indeed, the Husband’s evidence, which was not challenged, was that the Wife was a talented professional.
The Wife submitted (par.152) that her career was effectively “put on hold for over 10 years to allow the Applicant [Husband] to further his career and the foundation for the family”, which led, in the Wife’s view, that only the Husband benefited from this “plan”. Again, these were extraordinary submissions, unsupported by any (a) evidence, or (b) authority. Perhaps it was just another instance of hyperbole. I fear it was worse, accepting that it was not intended either to mislead or significantly distort the reality. In effect, it presents a picture of a relationship where the Husband was the utilitarian overlord, and that no “benefits” flowed to the Wife either during the relationship – suggestive almost of one simply of “convenience” – or at any time since. The logical conclusions of such submissions were that the Wife was somehow coerced into her role of “Mother” during the relationship, and that she was thereby without any say during the relationship, which was effectively solely to benefit the Husband. It follows further from such submissions that the Husband was simply unable to earn a successful living until he met and formed a relationship with the Wife. All such submissions are implausible and unsupported by the evidence. The relationship clearly was a good and generally happy one for both parties from which each of them benefited.
Further, and without intending to be either distasteful, crude or worse, there was no suggestion that X was not (or is not) a welcome addition to the family unit and to the lives of each parent now. There was no suggestion that there was some sort of coercion about the Wife being a full-time, primary carer for the child for her early years, or that the Husband was somehow negligent or dilatory in his support during or after the relationship in these respects.
Nor has it been challenged that the Wife’s evidence confirmed that it is her life-style choice not to work full-time. Such a choice, and the remainder of the evidence, hardly indicates some hard-done-by de facto partner who will, as a result of the relationship with the Husband be on the “bread-line” so to speak. On her evidence, she came into the relationship with assets of over one million dollars. Under the Orders of the Court, in general terms, she is likely to have assets in excess of approximately two million dollars. The ultimate financial result for the Wife will, of course, depend upon how she goes about paying out the large sums owing for legal fees she has incurred with so many different lawyers over the years.
The evidence of Ms DD confirmed that she was to resume paid employment early in 2020. Details of this, at trial, were still being worked out. There was no challenge (other than in later submissions) to her general evidence regarding her self-managed superannuation fund.
In her submission (par.167), the Wife simply referred to the financial assets of Ms DD with little comment, save for a somewhat furtive reference (at par.173) to an amount of “cash”.
I remind myself of the general range of matters to be considered under s.90SF(3): e.g. age of the parties, health, care of a child, financial support and commitments, standard of living, duration of the relationship, impact upon income earning capacity.
Having regard to the evidence and submissions canvassed, particularly the delicate balance between
(a)the significant difference in ages of the parties,
(b)the primary care of the child with the Mother (and significant time with the Father),
(c)the significantly greater income of the Husband but still sizeable income of the Wife,
(d)the Husband’s now significantly shorter working life, and the Wife’s much longer working life with the possibility of further advancement in her career,
(e)however speculative but nonetheless raised in the course of the trial, the possibility of the Wife re-partnering,
I would allow a small adjustment in the Wife’s favour of perhaps 4% under s.90SF(3).
Conclusion
On the basis of the evidence, submissions and findings of the Court, the result, in percentage terms, would be that the Husband receives 57% of the net asset pool and the Wife 43%. In my view, this result is just and equitable. This would result in the Wife receiving assets in the order of $1,920,160.70. This would likely require a cash adjustment to be made by the Wife to the Husband of $100,840.30. According to the schedule of assets provided by the Husband (and also used to some degree by the Wife), the assets she would acquire/retain under such a distribution would be as follows:
| RESPONDENT TO RECEIVE PURSUANT TO APPLICANT'S PROPOSED ORDERS | |
| B Street, Suburb C ACT | $580,000 |
| Super split from H Pty Ltd Retirement Plan | $159,000 |
| F Street, Town G NSW | $1,140,000 |
| Ponies | $30,975.00 |
| Furniture, Horse Gear, Horse Float and Motor Vehicle 4, F Street, Town G - 664 DDD Valuation | $43,020.00 |
| Add back legal fees | $80,000.00 |
| Bank Accounts/Cash | $104,785.00 |
| 58% of first mortgage secured over F Street, Town G property | -$470,848.64 |
| Second mortgage secured over F Street, Town G property | -$54,986.00 |
| Credit cards | -$2,013.00 |
| Super Fund O as at March 2019 | $352,489.39 |
| Super Fund P | $14,287.98 |
| Shares GGG | $3,000.00 |
| Add back - monies withdrawn by Resp on 7/10/16 | $41,335.00 |
| SUBTOTAL | $2,021,045 |
| Percentage of net total | 45.3% |
Absent any other application within 21 days of the date of these Orders, each party is to pay his or her own costs. Otherwise, the Orders sought by the Husband should be made, obviously with due account of the percentage distribution directed by the Court.
One final matter, however, should be observed in the light of the multiple critical comments made throughout these reasons.
It will be recalled that, earlier in these reasons, I referred to the High Court decision in Aon v ANU and the concern about the Court’s proper and efficient use of public resources in the light of the conduct of the matter by the Wife, and her employment of so many different lawyers over a significant period of time. In a similar vein in Wender, Strickland J (sitting alone as the Full Court) noted the following from Aon v ANU. At [48] his Honour said (emphasis added):[304]
Then of course there is the seminal decision of the High Court in Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175, a decision which resonates with what occurred here. Heydon J cited (at [133]) with enthusiastic approval, the following colourful passage from the judgment of Bryson J in Maronis Holdings Ltd v Nippon Credit Australia Ltd [2000] NSWSC 753 at [15]:
In view of the state of the law governing allowance of amendments, amendment applications brought forward before the trial began were treated with uncomplaining supine liberality, notwithstanding that they sometimes showed that problems had been addressed years after they should have been. I do not think that the law requires the discretion to allow amendments to be exercised in entire innocence of understanding the obvious impact of forbearance and liberality on the behaviour of litigants, who have diminished incentive to do their thinking in due time and to tell the court and their opponents their full and true positions. When forbearance and liberality are extended to a delinquent the burden of inconvenience and lost opportunities for preparation tends to fall heavily and without adequate repair on parties who have not been delinquent. A relative disadvantage is imposed on those who proceed methodically and in due time; their interest in procedural justice should claim at least as much consideration as the interests of the applicant for a late amendment who does not have to look far for the creator of his difficulty. It is even conceivable that a litigant might deliberately pursue a course which will impose disadvantage on an opponent who has to reconsider his ground and change course in the midst of a contest.
[304] Wender & Wender (2017) FLC 93-768.
I mention this here to highlight that (a) the High Court’s comments in Aon v ANU (considered and explored further in later cases) in relation to efficient case and trial management were not confined to commercial disputes but were intended to be of wider application that included, or extended to, family law litigation, and (b) my regular comments throughout these reasons were not an aberration or series of novel propositions. In the context of family law proceedings, clearly Strickland J in Wender was no less concerned to bring to the attention of the parties and practitioners – and beyond – the importance of the High Court’s statements of principle.
I certify that the preceding three hundred and sixteen (316) paragraphs are a true copy of the reasons for judgment of Judge WJ Neville
Associate:
Date: 17 July 2020
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