Ravens and Ravens
[2009] FMCAfam 350
•24 April 2009
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| RAVENS & RAVENS | [2009] FMCAfam 350 |
| FAMILY LAW – Property – long term marriage – add backs – asset by asset or global approach – monies reasonably disposed of – post separation assets – goodwill – contributions – just and equitable. |
| Family Law Act 1975, ss.79, 79(4), 79(2) |
| C v C [2005] FLC 93-220 Norbis & Norbis [1986] FLC 91-712 Re NHC & RCH [2004] FLC 93-204 AJO v GRO [2005] FLC 93-218 C & C [1998] FamCA 143 Gollings and Scott [2007] FamCA 397 In the Marriage of Kowaliw (1981) FLC91-092 |
| Applicant: | MS RAVENS |
| Respondent: | MR RAVENS |
| File Number: | HBC 1443 of 2007 |
| Judgment of: | Baker FM |
| Hearing dates: | 19 & 27 February, 19 March 2009 |
| Date of Last Submission: | 19 March 2009 |
| Delivered at: | Hobart |
| Delivered on: | 24 April 2009 |
REPRESENTATION
| Counsel for the Applicant: | Mr Turnbull |
| Solicitors for the Applicant: | Ogilvie Jennings |
| Counsel for the Respondent: | Mr Bugg |
| Solicitors for the Respondent: | Dobson Mitchell & Allport |
ORDERS
That the parties sell the property known as Property H in Tasmania contained in Certificate of Title Volume [6] Folio [3] (hereinafter referred to as “the former matrimonial home”).
(a)That prior to the listing of the former matrimonial home for sale and within 14 days of the date herein the Husband will:
(i)At his sole cost employ a professional gardening service to render the gardens and lawns at the former matrimonial home in tradesman-like manner to a fit state for sale, including but not limited to the removal of noxious weeds and grasses, pruning, mulching and mowing of lawns;
(ii)At the joint cost of the parties employ builders to carry out/complete in a tradesman-like manner to works marked with * in the Bound Builders report marked with the letter “A” and attached to the amended application filed 12 March 2009.
(b)The listing price of the former matrimonial home shall be as agreed between the wife and the husband and if there is no agreement value shall be as determined by a Valuer nominated by the President of the Real Estate Institute of Tasmania.
(c)The former matrimonial home shall be listed for sale by private treaty with an agent to be agreed and failing agreement as determined by the President of the Real Estate Institute of Tasmania.
(d)That the wife and the husband shall both forthwith do all acts and things and sign all necessary documents to effect the sale of the former matrimonial home.
That the proceeds of the sale of the property be distributed as follows:
(a)To discharge the mortgage and any other encumbrances affecting the property.
(b)To pay all Real Estate Agent’s costs, commissions and expenses of the sale of the property.
(c)To pay any Council and water rates outstanding in respect of the property.
(d)To pay the solicitor’s costs in relation to the sale of the property.
(e)The balance shall be paid to the wife.
That within 14 days of the date of the settlement of the sale of the former matrimonial home, the husband shall pay to the wife such sum which will result in the wife receiving 50% of the non-superannuation asset pool.
That pending completion of the sale of the former matrimonial home the husband shall be solely responsible for the payments of principal and interest to the Mortgagee in respect of Mortgage No: [B] and shall make all payments in relation to it.
That pending completion of the sale of the former matrimonial home the husband will be liable for and indemnify the wife against all payments and liabilities in respect of the former matrimonial home including but not limited to all rates, taxes and outgoings of whatsoever nature and kind and indemnify and keep indemnified the wife in relation to any claims, suit, action, demand or liability which may arise against her in relation thereto.
That the husband shall forthwith transfer and/or relinquish in favour of the wife any right, title and interest he may have in the following:
(a)Any monies, savings at bank or investments in the sole name of the wife;
(b)Any furniture or chattels in the possession of the wife;
(c)The Honda CRV motor vehicle in the possession of the wife;
(d)Any entitlement of the wife to superannuation whether by way of lump sum, pension or otherwise;
(e)The Amway licence in the wife’s possession; the Queen sized bed, 51cm TV, treadmill, Bunk x 1, book case, digital camera, dining table, dining chairs, shoe stand, ½ the books, ½ the camping gear, Engle fridge, plough, iron pots.
to the intent that the wife shall be the sole and absolute legal and beneficial owner thereof or beneficially entitled thereto as the case may be.
That the wife shall forthwith transfer and/or relinquish in favour of the husband any right, title and interest she may have in the following:
(a)Any monies, savings at bank or investments in the sole name of the husband;
(b)Any furniture or chattels in the possession of the husband with the exception of those items to be retained by the wife at order 6(e) herein;
(c)The Nissan Patrol motor vehicle in the possession of the husband;
(d)The trailer in the husband’s possession;
(e)The caravan in the husband’s possession;
(f)The tools in the husband’s possession;
(g)The boat in the husband’s possession;
(h)The Commonwealth Bank of Australia shares;
(i)The husband’s long service leave entitlements with [B] Pty Ltd;
(j)The husband’s shareholding in [C] Pty Ltd.
to the intent that the husband shall be the sole and absolute legal and beneficial owner thereof or beneficially entitled thereto as the case may be.
That the parties make such transfers as are necessary to ensure that the Carbon Energy CNX shares, the Arana Therapeutics AAH shares, the Virotec shares and the Dominion shares are divided equally.
That the wife be solely responsible for the payment of the GE Money loan number [2] and shall indemnify and keep indemnified the husband in respect of same.
That the wife be solely responsible for the payment of Centrelink debt and shall indemnify and keep indemnified the husband in respect of same.
That the wife be solely responsible for the payment of the ANZ Visa credit card number [4] and shall indemnify and keep indemnified the husband in respect of same.
That the husband be solely responsible for any tax liability he has and shall indemnify and keep the wife indemnified in respect of same.
That within 30 (thirty) days of the date of these orders the parties do all such things and execute all such documents to result in the A.S.G. account operated for the benefit of [Y] be redeemed and paid to [Y].
That within 30 (thirty) days of the date of these orders the parties do all such things and execute all such documents to result on the A.S.G account operated for the benefit of [X] be redeemed and paid to [X].
That each of the parties do all such acts and things and execute all such documents as they shall be required to do and execute to give effect to the terms of this order.
That the Court allocate, pursuant to s.90MT(4) of the Family Law Act 1975, a base amount of $34,481.00 to the wife out of the Husband’s interest in the Aviva Navigator Superplan.
That pursuant to paragraph 90MT(1)(a) of the Family Law Act 1975, whenever a splittable payment becomes payable in respect of the husband’s interest in the Aviva Navigator Superplan the wife shall be entitled to be paid an amount calculated in accordance with Part 6 of the Family Law (Superannuation) Regulations 2001 (“the Regulations”) using the base amount of $34,481.00 and there be a corresponding reduction in the entitlement that the husband would have had in the said Aviva Navigator Superplan but for this order.
That the Trustee of the Aviva Navigation Superplan and the husband shall do all such acts and things and sign all such documents as may be necessary so that, in accordance with the obligations set out under the Family Law Act 1975 and Family Law (Superannuation) Regulations 2001, the Trustees shall calculate the entitlement of and make payment to the wife in accordance with order 16 of these orders.
That pending service on the Trustee of the Aviva Navigation Superplan of the orders herein, the husband be restrained from withdrawing, encumbering or seeking to have vested in him, his superannuation entitlements with the Aviva Navigator Superplan.
That the wife do all such things necessary, including but not limited to exercising her request pursuant to Regulation 7A.06(01) of the Superannuation Industry (Supervision) Regulations 1994 for the rollover or transfer of the benefit out of the husband’s interest in the Aviva Navigator Superplan to a superannuation fund of the wife’s choosing in accordance with Regulation 7A.12 of the Superannuation Industry (Supervision) Regulations 1994.
That having been accorded procedural fairness, these orders bind the Trustee of the Aviva Navigation Superplan to observe the requirements of the Family Law Act 1975 and the Family Law (Superannuation) Regulations 2001.
IT IS NOTED that publication of this judgment under the pseudonym Ravens & Ravens is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT HOBART |
HBC 1443 of 2007
| MS RAVENS |
Applicant
And
| MR RAVENS |
Respondent
REASONS FOR JUDGMENT
Introduction
This is an application for a property settlement.
The husband is 47 years of age and is a [tradesman] employed by [C] Pty Ltd (“[C]”). He is a director and shareholder of the company. The wife is 45 years of age. She is employed full time [in the Healthcare Industry].
The husband and wife commenced cohabitation in 1982. They married in 1987. They separated on 1 October 2003 and remained living separately and apart under one roof until August 2006. They divorced on 4 December 2006.
There are two children of the marriage, [X] born in 1988 and [Y] born in 1990. [Y] lives with the husband in the former matrimonial home. She is in year 12 and plans to study in Melbourne in 2010. [X] is on a working holiday in Germany and is expected to return to Tasmania in September 2009 to commence university in Launceston in 2010.
The parties commenced a partnership, [MR & MS RAVENS] (“the partnership”), in 1993 which continued until July 2004. The wife was responsible for the administration of the partnership and the husband did the [trade] work.
The partnership ceased in July 2004.
The husband’s new company [C] was incorporated in May 2004 and commenced trading in August 2004.
In August 2006 the wife left the former matrimonial home. [X] went to Germany for an exchange in 2006. He returned to Tasmania to complete Year 12 in 2007 and lived with the wife until he left for Germany again in September 2008.
The father has a new partner, Ms C. The wife has a new partner, Ms O.
Background
The parties met in 1981 and commenced co-habitation in 1982.
The wife had $2,000 with which she purchased a Corolla motor vehicle, a television and a stereo. The husband owned a motor vehicle and some furniture.
The wife obtained employment as a [administrative officer] and the husband completed a Bachelor of [omitted] degree.
At the end of 1982, the parties started an Amway retail business. The husband worked full time in this business. The wife kept her job as a secretary and helped with the Amway work. The husband commenced working as a [tradesman] for [T] Pty Ltd in 1985.
In 1986 the wife worked at the Commonwealth Department of [omitted] for 6 months but developed RSI and received workers compensation payments until the partnership commenced.
The parties purchased the matrimonial home in about 1986 for $45,000.00. The husband’s parents lent the parties $3,000 to help with the purchase. The balance was paid by a mortgage loan from the Tasmanian Development Authority.
In 1991, the parties travelled around Australia for about 18 months. The husband did part time [trade] work.
When the parties returned to Tasmania in 1983, there was no work for the husband at [T] Pty Ltd. The parties then formed their partnership and started doing school maintenance for the Education Department. The husband did the maintenance and [trade] work and the wife did the book work and administrative work of the partnership.
The wife cared for the two children, [X] and [Y] during the marriage. She also did the domestic duties such as cooking, cleaning and washing.
The parties first separated in December 2001 and reconciled in May 2002. During this period of separation, the wife obtained Centrelink payments. The husband continued to receive income from the partnership. The partnership income was distributed equally between the parties, which meant that when they reconciled the wife was required to repay a Centrelink overpayment. At separation, the debt was $8,086.73. She has repaid this debt since separation at $25.00 per week.
The parties finally separated on 1 October 2003. The wife explained during cross-examination that they separated on that date but their financial affairs did not become separate until July 2004. They continued to live separately and apart at the matrimonial home until the wife left in August 2006.
Whilst living under the one roof, the husband looked after [Y] and her day to day needs and the wife looked after [X] and his day to day needs until he went to Germany at the beginning of 2006.
The husband, Mr K and Mr N incorporated [C] in May 2004 and commenced trading in August 2004.
Between May and August 2004 the husband completed work for the partnership.
The wife lived on family payment funds which she had saved for the children’s education costs. From July 2004 until May 2005, the wife did not receive an income. In May 2005, she commenced work at [omitted] of 25 hours per week, which increased to 40 hours per week in January 2006. The wife was made redundant in September 2006. She then commenced full time temporary work until January 2007 when she commenced work at the Department of [omitted].
Since separation, the husband has been residing in the former matrimonial home. He continued to pay interest only on the ANZ mortgage secured over the home, which the parties also did during the marriage. The husband’s partner and her son moved into the home on
8 July 2007and moved out in November 2008.
Issues in Dispute
(i) The wife is seeking 60% of the total non-superannuation and superannuation asset pool.
(ii) The husband is seeking that the assets existing at the date of separation be divided equally and that the wife receive 20% of the value of the post separation assets.
(i) The husband contends that the contributions towards assets, such as the parties’ respective superannuation entitlements, the husband’s long service leave entitlement and the assets he has acquired since the parties separated, including his interest in [C], should be assessed/considered separately from the other assets.
(ii) The wife contends that the contributions to the assets should be considered on a global basis, and not on an asset by asset basis.
The major issue is the nature and extent of the parties contributions to the post separation acquired assets.
The wife also contends that assets have been disposed of by the husband following separation and should be added back to the pool of assets. This is opposed by the husband.
Evidence
The wife relied on the following documents:
·Amended application for final orders filed 12 March 2009
·Her affidavit filed 23 January 2009.
·Affidavit of Mr T filed 22 January 2009.
·Her financial statement filed 27 January 2009.
The husband relied on the following documents:
·Amended response filed 19 February 2009.
·His affidavit filed 13 February 2009.
·His financial statement filed 12 February 2009.
·Affidavit of Ms R filed 6 February 2009.
·Affidavit of Mr K filed 6 February 2009.
·Affidavit of Mr M filed 12 Feb 2009.
·Affidavit of Mr E filed 14 February 2009.
The wife and her witness, Mr T were cross-examined.
The husband and his witness, Mr K were cross-examined.
Relevant Law
Section 79(2) of the Family Law Act 1975 requires that any order made under a s.79 application must be just and equitable. Section 79(4) provides the matters which are to be taken into account in considering what order should be made.
Section 79(4) involves a four step exercise namely:
(i) The identification of the property of the parties, their assets and financial resources.
(ii) The valuation of the contributions.
(iii) The valuation of the matters referred to in s.75(2).
(iv) A determination as to whether the result is just and equitable by considering the real impact in money terms of the orders.[1]
[1] Hickey & Hickey 2003 FLC 93-141 and Ferraro & Ferraro 1993 FLC 92-335
Asset by Asset or Global Approach?
The usual approach in property proceedings is for the court to consider the property of the parties as an overall pool. It is open to the court to undertake the asset by asset approach. In Norbis & Norbis[2] Mason and Dean JJ, with whom Brennan J agreed, said:
“…which of the two approaches is the more convenient would depend on the circumstances of the particular case. However, there is much to be said for the view that in most cases the global approach is more convenient. It follows that the Full Court is quite entitled to prescribe that approach as a guideline in order to promote uniformity of approach within the courts. In saying this we are not to be understood as denying the legitimacy of the trial judge’s ascertainment in the first instance of the financial contributions of the parties by reference to particular assets. It is difficult to conceive how the trial judge in many cases could otherwise take account of such contributions as is required by s.79(4) of the Act.
Again, it seems trite that it would depend on the circumstances of the particular case, although in the majority of cases the global approach would be the more convenient and for this reason the Full Court is entitled to describe its adoption as a guideline in the majority of cases. The Family Court is right to criticise the practice of giving over-zealous attention to the ascertainment to the parties’ contributions, and we take this opportunity in expressing our unqualified agreement with that criticism, noting at the same time that the ascertainment of the parties’ financial contributions necessarily entails reference to particular assets in the manner already indicated.” [3]
[2] [1986] FLC 91-712
[3] at page 75168
The parties’ marriage was over sixteen years and the parties cohabitated for five years prior to their marriage. During the marriage, both parties have made direct and indirect financial and non financial contributions to the acquisition, conservation and improvement of the property of the parties and contributions to the welfare of the family. After separation, both parties have made financial and non financial contributions and contributions to the welfare of the family.
For these reasons, I am of the view, that to determine the just and equitable alteration of the property interests of the parties, I should adopt a global and not an asset by asset approach to the assessment and valuation of contributions. All of the property of the parties must be considered regardless of when it was acquired.
Should there be a Separate Pool for Superannuation?
In this case the wife is seeking a splitting order. The husband is seeking that each party retain their respective entitlements to superannuation.
There is no agreement as to the approach. In my view, it is appropriate to adopt a two pool approach in accordance with the decision of C v C[4].
[4] [2005]FLC 93-220
Assets and Liabilities
The wife contends that the following assets should be added back to the pool:
1. Monies retained by the husband from the partnership of [Mr & Ms Ravens]
$21,224.00
2. Cash contribution by husband to partner’s property
$10,000.00
3. CBA sale proceeds
$6,383.00
4. Unaccounted funds by husband from dividends of [C]
$29,000.00
The wife also contended that the following monies be added to the pool. After the evidence was given, the wife did not pursue the add-backs referred to in this paragraph.
1. Joint tax refund retained by husband
$2,281.66
2. Monies received by the husband from the customer job with Mr M
$3,000.00
3. Monies received by the husband from Mr C
$100.00
4. Monies received by the husband from the Mr/Ms Ds
$15,557.00
5. Monies received by the husband from Mr & Mrs F
Amount unknown
6. Monies received by the husband from [P]
$6,340.00
$3,434.00
$8,503.00
7. Monies received by the husband from D
$2,790.00
8. Monies withdrawn from the ANZ Bank by the husband on 29 January 2002
$19,711.40
Relevant Law – Add Backs
Having regard to the decisions such as Re NHC & RCH[5], C & C[6] and Gollings & Scott[7], I shall assess whether the husband has made reasonable expenditure in respect of these sums. These decisions are authority for the principle, that monies reasonably disposed of by the parties in the conduct of their lives post-separation, should not usually be added back.
[5] [2004]FLC 93-204
[6] [1998]FamCA 143
[7] [2007]FamCA 397
The Full Court in C & C stated:
“Whilst not seeking to place a fetter upon the exercise of discretion of a trial judge in individual cases, it seems to us that the concept of adding monies reasonably disposed of back into the pool ought to be the exception rather than the rule. The parties are entitled to reasonably conduct their affairs post-separation in a manner that is consistent with properly getting on with their lives.”[8]
[8] op sit at para 46
Commonwealth Bank Share proceeds
The husband received $3,527.14 for the sale of Commonwealth Bank shares on 9 June 2005. He made a payment to the Australian Tax Office on 20 June 2005 of $3,336.70.
The second amount received by the husband from the sale of Commonwealth Bank shares was $3,007.21. On 20 December 2005 the husband paid $2,530.00 in accountant’s fees and other expenses.
In the 2004-2005 financial year the husband paid capital gains tax of $490.00 and in 2005-2006 financial year he paid $505.00 capital gains tax in respect of the sale of the shares.
I find that the husband has expended the sale proceeds on reasonable expenses. I do not intend to add the share proceeds back into the pool.
The Sum of $21,225.00
The wife contends that this money be added back. She implied that the husband used it for his own personal benefit. The wife said that the husband deposited cheques to a total of $21,067.33 of “[Mr & Ms Ravens]” partnership funds into his Commonwealth Bank of Australia account between 14 October 2004 and 1 December 2004[9]. She said that the husband depleted the ANZ equity manager loan account of $21,225.00, by forging her signature and fully drawing down the account to $100,000.00. In cross-examination she said that she had refused to sign cheques for creditors until she had the details of the jobs and was sure that progress payments had been made.
[9] para 29 – wife’s trial affidavit
The husband admitted that he had forged the wife’s signature on cheques so that he could pay partnership liabilities. He considered that he had no choice as the wife refused to sign cheques. The husband said he used any money collected to meet expenses of the partnership.
An examination of the husband’s Commonwealth Bank account statements indicate that as at 14 October 2004 the account balance was $8,591.36 after the deposit of the [P] account money of $8,503.03.
Between 20 October and 29 October 2004, a number of accounts were paid from the Commonwealth Bank account amounting to $5,145.55. The balance was down to $3,445.81 and on 5 November 2004 the next deposit was $2,790.35 for the Clifford work.
Further withdrawals were made including a payment to the Australian Tax Office of $5,080.00.
By 3 December 2004, after payment of further accounts, the Commonwealth Bank account balance was $2,304.99.
The husband paid accounts from the ANZ equity manager loan account totalling $27,163.97 between 29 September 2004 and 25 October 2004. At that date the balance of the account was $100,203.05. In cross-examination, the wife was asked whether she was saying that the husband did not use the money to pay partnership debts. She answered: “I don’t know, I have not seen the documentation to support it. I don’t know the full amount he received. I don’t know the profit.”
The husband paid accounts from both the Commonwealth Bank and ANZ accounts. There is no evidence that he used the money other than for partnership and household accounts.
I find that the husband has used the sum of $21,225.00 for reasonable expenses. He has paid accounts including mortgage, rates and partnership accounts. I will not add this sum back into the pool.
The sum of $29,000.00 received by the husband from dividends of [C]
The wife contends that because the dividends came from the super profits, which are partly derived from the working of the business goodwill, that they should be added back. They are also derived from the structural advantage and synergies of the company.
The husband in his affidavit said that he received dividends amounting to $160,000.00 being the dividends for the 2007-2008 financial year, three to four years after the incorporation of the company. He used the dividends to fund an overseas school exchange for [Y] at a cost of approximately $19,000.00, to purchase a boat for $45,000.00, to give $10,000.00 to his partner to help her purchase a unit in [N] and to make a donation of $22,000.00 to the Salvation Army. He retained $35,000.00 in his Commonwealth Bank account to use in part to pay a tax liability. He said that he had used the balance of the dividends for day to day living expenses.
In cross-examination the husband said “I had been on a tight budget. I had a splurge, went to Surfers Paradise and had costs for the boat and general living expenses.”
The Full Court in Edgehill & Edgehill[10] said, when discussing post separation expenditure:
“We accept some accounting by the wife of her expenditure of the assets acquired during the marriage was warranted, as was some examination of her expenditure by the trial judge. However, we do not consider it was incumbent on her, or realistic to expect, that the wife should provide a precise audit of every item of her expenditure post separation. Nor do we accept that the trial judge was required to conduct such an audit process.”[11]
[10] [2007]FamCA 1102
[11] para 60
An examination of the husband’s Commonwealth Mastercard statements and the husband’s undrawn profits, of $315,687.00 as at
30 June 2008[12] do not indicate that the husband has recklessly expended his income. It was not inappropriate for the husband to have a holiday. There is no evidence that he did not expend the funds reasonably. His financial statement filed on 12 February 2009 indicated that his weekly expenses amount to $1,727.00 per week. These expenses were not challenged. I will not add back the sum of $29,000.00 into the asset pool. I refer to what the Full Court said C & C[13].[12] exhibit “W6”
[13] op sit – paras 45 and 46
$22,000.00 Donation to Salvation Army
The parties agreed during their marriage to donate to charity 10% of their annual income. The wife said during cross-examination, that the payment of $22,000.00 reflects about a 10% payment of the husband’s income for the financial year, and that the donation is consistent with the understanding that the parties had from an early stage in their marriage up until the end of 2004. The wife agreed that the payment was not surprising. I will not add this sum back into the asset pool as it a donation consistent with what the parties agreed during the marriage and I find that it was reasonable to make it.
$10,000 gift to the husband’s partner
The husband’s partner purchased a unit at [N] approximately 12 months ago. The husband gave her $10,000 to assist with its purchase. There is no loan documentation and the husband has treated it as a gift. The husband’s partner paid $128,000.00 for the unit and borrowed the balance of the purchase price.
In my view this sum is a modest sum earned by the husband from post separation income. The Full Court said in C & C:
“Although it is not one of the Grounds of Appeal we would also like to make the observation that we were troubled by her Honour adding back into the pool of assets the sum of $15,000 provided by the wife to Andrea to enable her to place a deposit on a unit. The provision of modest amounts of capital by parents to their adult children to enable their children to get a start in life is a normal experience in our societies. In a case involving the magnitude of the assets in this case, in our view it is unreasonable to conduct a microscopic examination of each of the parties items of post separation expenditure with a view to determining whether or not it is appropriate that they be brought into account in dividing up the asset pool between them. The cases which deal with notional add-backs are generally examples of circumstances in which it would be clearly unjust and inequitable not to take those matters into account. (see Kowaliw (1981) 7 Fam LR 13; [1981] FLC 91-092, esp at FLC 76,645; Townsend (1994) 18 Fam LR 505; [1995] FLC 92-569; Farnell, (1995) 20 Fam LR 513 (expenditure on legal costs notionally added back because of s117).
Whilst not seeking to place a fetter upon the exercise of discretion of a trial judge in individual cases, it seems to us that the concept of adding monies reasonably disposed of back into the pool ought to be the exception rather than the rule. The parties are entitled to reasonably conduct their affairs post-separation in a manner that is consistent with properly getting on with their lives. Providing modest support for their adult children or taking not inappropriate holidays for themselves seems to fit comfortably within that description ” [14]
[14] [1998] FamCA 143 – paras 45 and 46
In Gollings and Scott[15] the trial judge added back $72,281.00 gifted by the husband to his new partner to acquire property. The Full Court found that the trial judge erred by not explaining fully her reasons why she added the sum back. The Full Court said:
“…it would not normally be appropriate some years after separation to require each of the parties to account for any monies they had spent post-separation so as to determine whether or not that expenditure was reasonably necessary for their own self-support, and to the extent that it was not, to determine whether it would be proper to add it back into the pool of assets available for division between the parties.”[16]
[15] [2007]FamCA 397
[16] at para 68
I will not add this sum back into the pool, given that it is a modest amount of the husband’s post separation income. It is not, in my view, unjust and inequitable not to take it into account.
Assets and Liabilities in Dispute
Mitsubishi Motor Vehicle
The wife is seeking to include the vehicle, valued at $10,000, in the asset pool. The wife’s criticism of the husband seemed to be that he had not purchased a motor vehicle for [X]. The husband’s evidence was that even though the car is registered in his name, he gave it to the parties’ daughter, [Y]. I find that it was reasonable for the husband to give his daughter a motor vehicle. I repeat what the Full Court said in C & C[17]. I will not include it in the asset pool.
[17] op sit – para 45
ANZ Visa Card Liability
The husband contends that the $2,000 ANZ Visa card liability of the wife should not be included in the pool as it is not a pre-separation liability. The trial date is the appropriate date upon which to ascertain the assets of the parties. This is also the appropriate date to ascertain the liabilities of the parties. There is no suggestion that the wife has incurred the liability unreasonably or in a deliberate or reckless disregard of the husband’s potential entitlement[18]. I will include the liability in the pool.
[18] In the Marriage of Kowaliw (1981)FLC91-092
The Husband’s Tax Liabilities
The wife does not include either of these liabilities in the pool, whereas the husband contends that they should be included in the pool.
In respect of the husband’s tax liability of $19,121.81, this has been assessed for the 2007-2008 financial year. It is a current outstanding liability. The assets acquired by the husband post separation are included in the pool and the liability has been incurred as a result of post separation income. In my view it should be included in the pool.
In respect of the sum of $103,173.00 payable on undrawn profits in [C], this is a potential liability. This sum is referred to in the financial statement of the husband. No submissions were made about this sum and there was no evidence as to a requirement to distribute profits or as to an intention to do so. The husband’s Counsel did not include it in the pool in his closing submissions. I will disregard this liability for the purpose of establishing the pool of assets to be divided.
Centrelink Debt
This debt was incurred by the wife during the parties’ first separation. The wife is paying the debt off at $25.00 per week. The husband contends that because the wife did not inform him of the liability, it should not be included in the pool. The husband did not dispute that the debt exists, nor did he dispute the amount. When the parties reconciled they completed their income tax returns and distributed the profit from the partnership equally, although the wife did not receive the income during the separation period. The debt was incurred to Centrelink as a result.
The wife needed the Centrelink pension during the period of separation to enable her to support herself. It was not unreasonably incurred by her. It will be included in the pool as a liability.
Conclusion as to Assets and Liabilities
After consideration of the add backs, I find that the assets and liabilities are as follows:
Non Superannuation Assets
1. Property H, former matrimonial home
$450,000.00.
2. Honda motor vehicle (W)
$14,000.00
3. Commonwealth Bank shares (H)
$2,730.00
4. Caravan
$10,000.00
5. Commonwealth Bank savings (H)
$37,383.00
6. Long service leave entitlements with [B] Pty Ltd (H)
$10,464.00
7. Tools (H)
$2,395.00
8. Additional tools (H)
$750.00
9. Trailer (H)
$750.00
10. Share portfolio (H and W)
E$50,000.00
11. 2008 Stacer Ocean Runner boat
$43,700.00
12. Value of husbands shareholding in [C] Pty Ltd
$290,611.00
__________
Total assets
$912,783.00
Liabilities
1. ANZ mortgage (H and W)
$100,000.00
2. GE car loan (W)
$10,700.00
3. Centrelink debt (W)
$2,545.00
4. ANZ Visa card (W)
$2,000
5. Income tax assessed and payable May 2009 (H)
$19,121.00
___________
Total liabilities
$134,366.00
___________
Net assets
$778,417.00
Superannuation
1. Aviva Navigator Personal retirement plan (H)
$ 69,376.00
2. ING (H)
$888.00
3. Astarra super plan (H)
$17,053.00
4. HESTA (W)
$44,772.00
__________
Total superannuation
$132,089.00
Contributions of the parties
Both parties have made contributions described in s.79(4)(a)-(c) during their relationship of over 21 years and since separation.
The Wife
There is no challenge to the wife’s affidavit evidence that her initial financial contributions included $2,000, used by her to purchase a Corolla motor vehicle, a television and a stereo.
During the period of co-habitation the wife earned income in her employment until 1993, when she and the husband operated the partnership. Her role in the business was book keeping and administration. The parties distributed the profits of the partnership equally.
Subsequent to the births of the two children, the wife became the primary carer and undertook the household domestic duties, including washing, ironing and cooking. She continued to work in the partnership and arranged her responsibilities for the care of the children around her role in the partnership. The wife used the income towards the family expenses and for the families benefit.
When the children commenced school the wife was responsible for taking the children to school, collecting them after school and taking them to their extracurricular activities and assisting them with their homework.
After separation, the wife paid the medical premiums for private health insurance for the family until January 2006. She paid $5,541.00 off the Centrelink debt. She paid an account for the children’s school insurance and other household accounts. She paid an Aurora account of $1,507.00 which was incurred up until May 2005.
After separation, the wife contributed to the welfare of the family in the role of homemaker and parent for [X].
The wife supported [X] since separation until May 2005 using the family payments accumulated during the marriage. From May 2005 she supported [X] from her own income. She paid him $500.00 per week for the twelve months he was in Germany. She had used $6,000.00 of the family payment monies accumulated during the marriage towards the $7,500.00 cost of travel for him.
The wife has contributed indirectly by allowing the husband to remain in the matrimonial home over the past two and half years since she left the home. The husband continued to pay interest only in respect of the ANZ mortgage loan, so the loan has remained at $100,000.00 outstanding. The husband and his partner have had the benefit of residing in the former matrimonial home.
The wife has made contributions to [C] and the husband’s post-separation acquired assets. I will refer these contributions in detail further in these reasons.
The Husband
The husband’s initial contributions were a motor vehicle and minimal furniture.
Prior to the commencement of the partnership, the husband attended university until he commenced full time employment with [T] as a labourer. He worked in the partnership during the marriage and used the income for family expenses and for the benefit of the family.
After separation, the husband paid household accounts including the ANZ mortgage and rates. He had the benefit of living in the matrimonial home, as has his partner and son, who lived there between July 2007 and July 2008.
After separation, the husband made a contribution to the partnership by completing building works and reducing the partnership debts.
The husband’s income from [C] has enabled him to acquire assets since separation, including a boat, and savings. He is now earning a substantial income of around $280,000.00 per annum. I will refer to the contributions made to [C] further in these reasons.
The husband has contributed to the welfare of the family in the role of homemaker and parent for [Y] since separation. He has supported her financially. He has also indirectly supported [X] up until May 2005, as the family payments used by the wife for [X]’s support, were accumulated during the marriage.
The husband’s long service leave has increased from $6,921.00 at separation to $10,464.00.
Discussion post separation contributions
The main issue in the proceedings is the contributions made by the parties to the post-separation acquired assets.
The husband’s interest in [C] is valued at $290,611.00. The husband is the owner of one C class share and 60 of 120 ordinary shares. Mr K is a joint business partner with the husband, however Mr K and his wife hold 100% of the A class shares and 100% of the B class shares. The B class shares are jointly owed by the [K] Family Trust and the husband. Although Mr K and the husband have 50% ownership and control of the company, the right to profits is based on an “hours worked” calculation.
The husband’s case is that the wife has made little or no contribution to the acquisition of the husband’s post separation assets, which includes his interest in [C], his boat, his savings of $37,383.00 and his long service leave of $3,542.
The wife’s case is that the partnership formed the cornerstone of [C] and because of that there has been a significant contribution by her to the acquisition of these assets.
When the parties separated, the partnership had no value. It had a negative value with trade creditors and other liabilities being $54,332.00 and assets including trade debts of $32,189.00.[19]
[19] affidavit of Mr M – filed 12.2.09 para 9
Mr T gave evidence on behalf of the wife. In respect of the partnership he said that whilst it had a negative equity, it still had goodwill. He was not able to put a value on the goodwill which the husband took from the partnership. The value under the appropriate valuation methodology is nil.
Mr T’s evidence was that the net value of the husband’s interest in [C] is $290,611.00. The husband’s expert, Mr M, agreed with this value.
A three page document prepared by Mr T provided further clarification on what influences the current value of the shares in [C].[20]
[20] exhibit W6
In the view of Mr T and Mr M, the appropriate valuation method for the partnership and [C] was the assets valuation method. The capitalisation of future maintainable earnings, dividends or cash flows was not seen to be appropriate because there is some volatility in the industry in relation to the retention of key employees. If either Mr K or the husband were to leave the company, they not only take their personal goodwill, but they also extract some of the business goodwill. A third party, considering whether to buy into the company, would not take the risk, unless Mr K or the husband could be retained to work for the company.
Mr T said that just because the methodology which attempts to identify goodwill is not appropriate, it does not mean that goodwill does not exist. Goodwill is connected to reputation and the capacity to produce the next job.
Mr T said that what the parties contributed to the company by coming together, in addition to the cash that was injected as paid up capital, was their own professional building skills and their personal reputations as persons who could perform those building skills efficiently and effectively. This is personal goodwill.
Mr T said that there is also business goodwill brought to the company, such as business contacts, relationships with sub-contractors, reputations associated with dealing with clients and contractors, administrative processes and procedures. He said that the husband contributed to [C] the business goodwill of the partnership.
He said that business goodwill gives a person a position in the marketplace, to attract further business by referrals from those existing people and by the advertising that has been done in the past. As such, the building of the goodwill within the company is partly connected to the business goodwill transferred from the partnership and partly a result of the business goodwill brought in by Mr K from his previous employer. He said that if the goodwill exists at a point in time, the flow of new business and profits that follow are the result of working that original business goodwill, rather than the creation of a separate goodwill asset.
I accept the submission of the wife’s Counsel that the husband took with him systems, business contacts with suppliers, architects, contractors and his accreditation as a [tradesman]. The husband took the partnership’s telephone number which he still uses for [C]. He also took the partnership assets, including a Nissan Patrol motor vehicle, trailer, and tools to use. I accept Mr T’s evidence that an unquantifiable benefit or value has been transferred from the partnership to [C].
Mr K, who gave evidence on behalf of the husband, included in his affidavit figures of the gross turnover and profit on trade of [C], which has increased from turnover of $965,516.00 and profit of $208,374.00 in 2004-2005 to $4,934,550.00 turnover and $1,122,505.00 profit in 2007-2008. In contrast, the partnership’s highest turnover and profit was in 2003-2004, of $494,289.00 turnover and $96,268.00 profit.
This increase of profit was explained by Mr T. He said that the difference in turnover could be partly due to the economic climate and partly due to the difference of the structure of the partnership and [C]. He said that the advantage the company has, is that the parties can join together in an entity and represent themselves in the market place as a united force with a label and they can market that label. The quantum of profits that can be produced by the company, the synergised unit, is far greater than the profits that could be generated by each of the individuals in the market place, “super profits are derived from the working of the business goodwill, the structural advantage and synergies of the company.”[21]
[21] exhibit “W6”
Mr K said that both he and the husband introduced contacts to [C]. The husband introduced school maintenance work which lasted between one to two years. He said that [C] now does work for only a few of the customers the husband introduced.[22]
[22] parra 11 – Mr K’s affidavit.
Mr K estimated that for the first six months of the operations of [C] his contributions to [C]’s earnings for his contacts were about the same as from the husband’s contacts.
Mr K said that his estimate that the work from his contacts is now more than 90% of [C]’s business. His figures included the pre-tax profit from work introduced by the husband for the financial years ending 2005-2008, which was minimal.
At the commencement of the operation of [C] Mr K could not solicit clients from [T] Pty Ltd, where he had worked for many years, however he said he was confident that clients would come over to [C].
It was submitted by the wife’s Counsel that Mr K’s figures were not reliable because Mr K did not know that [C]’s first client was a client of the partnership.
Mr K was not challenged about the current estimate nor the figures. He was a credible witness, who made appropriate concessions during his evidence. For example, he agreed in cross-examination that the husband’s clientele from the partnership was important for [C]. He said that the partnership’s telephone number was important to obtain work for [C]. In the first twelve months of operation, between August 2004 and June 2005, $148,209.00 in sales came from the partnership contacts. Mr K agreed that the partnership was “possibly a springboard to get things going”.
I accept Mr K’s evidence that the contacts which he and the husband brought into [C] in the first 6 months were approximately equal and that his contacts have now increased to about 90% of the current work. This evidence corroborates the husband’s evidence that his client numbers have reduced to two clients and that the majority of the clients are now Mr K’s contacts.
Whilst some of the figures of the pre-tax profit from the work introduced by the husband may not have included every client and contact, I accept that these figures are indicative of what has happened over the past four years.
In summary, an unquantifiable benefit or value has been transferred from the partnership to [C]. The profits of [C] are derived from the working or the business goodwill brought in by the husband from the partnership and the business goodwill brought in by Mr K. They are also a result of the structural advantage and synergies of the company. The work from Mr K’s contacts is now more than 90% of [C]’s business and the significance of the husband’s contacts has decreased over time.
Assessment of the Contributions of the Parties to Non-Superannuation Assets
Both parties concede that their contributions during the marriage were equal. In my view the evidence is consistent with this concession and I conclude that their contributions during the marriage were equal.
It is the wife’s case that she has made equal contributions to those of the husband subsequent to separation.
It is the husband’s case that his contributions made subsequent to separation should be assessed higher than the contributions of the wife to the extent of 80%. The assets which the husband has acquired post-separation amount to a value of 45% of the total pool.
The wife has contributed by paying debts post separation. She has contributed to [C] by the unquantifiable benefit or value of the partnership being transferred to it. She has also made a contribution by allowing the husband to live in the home, while she has had to pay rent since August 2006.
In my view, since separation the husband made greater financial and non-financial contributions than the wife to the acquisition of the property of the parties, due to his involvement in [C]. The husband has worked hard as a [tradesman] over the past four and a half years, he has had the benefit of Mr K’s business contacts, which now bring in most of the work, and together they have built up the profit of the company.
Whilst the husband’s contributions have been greater than that of
the wife’s, this must be seen in the context of a 21 year period of cohabitation. During that time both the husband and wife worked hard. They worked in the partnership for a period of about 11 years and built up the business goodwill together. The wife also cared for the children whilst assisting in the business by doing administrative work.
The husband has been required to support [Y] for a longer period than the wife was required to support [X]. The husband financially supported [Y] for a period of about 5 years since separation and the wife financially supported [X], with the indirect contribution of the husband, until May 2005. She financially supported [X] during 2006 whilst he was on an exchange in Germany and during his year 12 schooling in 2007.
Having regard to the parties contributions, during the marriage and post separation, I assess the contributions as 60% in favour of the husband and 40% in favour of the wife for the above reasons.
Relevant s.75(2) matters
The wife and husband are 45 and 47 years of age respectively. They are both in good health.
The wife’s gross annual income is $37,478.00. The husband’s taxable income increased from $36,855.00 in the 2005 financial year to $259,991.00 in the 2008 financial year.
Neither party has the care of control of a child of the marriage who has not attained the age of 18 years. [Y] is in year 12 and lives with the husband, who is supporting her during her final year of school. [X] is currently in Germany on a 12 month working visa.
Each of the parties have commitments for his or her own support in accordance with their respective financial statements. The husband has a gross weekly income of $4,096.00 and commitments of $1,727.00. The wife has a weekly gross income of $780.00 and commitments of $284.00 per week.
The wife is cohabitating with her partner Ms O, who owns her home. Her income is $55,000.00 gross per annum. The wife pays rent to her of $75.00 per week and contributes equally to daily living expenses. Her evidence was that the only shared bank account is a MasterCard account from which all the living expenses are paid. The wife said that at this stage it is her intention to live indefinitely with Ms O.
The husband has a new partner, Ms C (Ms C). The husband has known Ms C for approximately 2 years and they started living together in July 2007 at the former matrimonial home. Ms C’s son, [Z], also lived there. In July 2008 Ms C moved to a rented house at [omitted]. The husband spends the weekends and usually one to two nights per week with her. His evidence was that he will possibly live with her again. Ms C’s income is $70,000 per annum.
The effect of the findings as to contributions is that the husband and wife will receive assets of equal value.
Whilst I have declined to add back the husband’s post separation expenditure from the dividends he has received from [C], I take into account that this expenditure has reduced the asset pool and that wife should receive some allowance for it.
The wife has a limited borrowing capacity. The maximum amount she can borrow for the purchase of a house is $170,000.00.
Conclusion as to Section 75(2) matters
I have determined that there will be an adjustment of the wife’s contribution based entitlements in respect of the non-superannuation assets by a further 10% having regard to the relevant matters that arise pursuant to s.75(2). In monetary terms, this is an adjustment of $77,841.00, which I consider is appropriate having regard to the size of the asset pool.
The husband’s income and his capacity to earn income are far superior to that of the wife. Not only does he receive a substantial income, he receives the benefit of having his telephone and car expenses paid for by the company. Whilst the husband has the expense of supporting [Y], she finishes school at the end 2009.
As a result of the husband’s high income, he has been able to spend monies post separation as discussed. I have not added this money back, however I give the wife some allowance for this expenditure having reduced the asset pool.
The wife has the benefit of living in her partner’s home and sharing living expenses with her. The husband will have the indirect benefit of his partner’s income from her employment if she lives with him again.
Assessment of the Contributions of the Parties to Superannuation and s.75(2) factors
Both the husband and the wife contributed to their superannuation entitlements during the marriage. I find that the contributions of the parties to superannuation during the marriage were equal in accordance with the concession made by both parties.
Since separation the wife’s superannuation entitlement has increased from $16,371.00 to $44,772.00 as a result of the compulsory contributions arising out of her employment.
After separation the husband contributed to his superannuation entitlements and increased the balance $39,204.00 to $87,317.00.
Since separation the husband has made greater financial contributions to superannuation than that of the wife, by approximately $19,712.00, because of his superior income.
The wife has made an indirect contribution to the superannuation. She has made a contribution to [C] due to the business goodwill of the partnership being transferred to [C]. As a result, the husband has been able to increase his superannuation entitlements.
Having regard to the period of cohabitation, the contributions made by each party and the raising of two children, I am of the view that the contributions should be assessed as equal.
I am of the view that the appropriate adjustment for s.75(2) factors should be 10% in favour of the wife, so that she receives 60% of the superannuation and the husband 40%. In monetary terms this means an adjustment of $13,208.00 which I consider is appropriate given the amount of the superannuation pool.
The parties are of a similar age and have a similar work life expectancy. However, there is a large disparity of earning capacity of the parties. The wife will be unable to increase her superannuation in the same way the husband will be able to increase his superannuation in the future.
The order which I propose to make in respect of non superannuation and superannuation assets does not affect the earning capacity of either party.
Is the Order Just and Equitable?
To make an order under s.79 the court must be satisfied that in all the circumstances it is just and equitable to do so. I must stand back and look at the overall result to ensure that it is just and equitable.
My findings result in an equal division of the non-superannuation assets, which means that each party will retain assets to the value of $389,208.00.
Neither party wishes to retain the former matrimonial home and it will be placed on the market for sale. The parties agree on the division of the other property, save for any cash adjustment to be paid to the wife.
The wife will retain the following assets:
| 1. Honda motor vehicle | $14,000.00 |
| 2. One half of the Commonwealth Bank shares and share portfolio | $25,000.00 |
| 3. Estimated net proceeds of sale of home | $350,000.00 |
| ___________ | |
| Total | $389,000.00 |
Liabilities
| 1. Car loan | $10,700.00 |
| 2. Centrelink debt | $2,545.00 |
| 3. ANZ visa | $2,000.00 |
| _________ | |
| Total | $15,245.00 |
| _________ | |
| Net total | $373,755.00 |
Fifty percent of the net pool amounts to $389,208.00. There will be a cash adjustment of $15,453.00 to the wife from the husband. This will change according to the sale price of the home, the amount of agent’s fees and legal costs. The cash sum will need to be adjusted in order to ensure that the wife receives 50% of the net pool of non-superannuation assets. I am satisfied that the husband can afford to make any increase in the amount of a cash adjustment required, which could increase to over $50,000.00.
The husband will retain the following assets and liabilities:
1. Caravan
$10,000.00
2. Commonwealth Bank Shares
$2,730.00
3. Commonwealth Bank savings
$37,383.00
4. One half of the shares
$25,000.00
5. Long Service Leave
$10,464.00
6. Tools
$2,395.00
7. Additional tools
$750.00
8. Trailer
$750.00
9. Boat
$43,700.00
10. [C]
$290,611.00
__________
Total
$423,783.00
Income Tax
$19,121.00
Cash adjustment to wife
$15,453.00
__________
Net total
$389,209.00
As a result of my findings the parties will each have sufficient funds to purchase a home.
The superannuation will be divided 60% in favour of the wife and 40% in favour of the husband.
Sixty percent of the superannuation entitlements amounts to $79,253.00. The wife will retain her superannuation of $44,772.00 and will receive a splitting order of $34,481.00 from Aviva Navigator Superplan. The husband will retain superannuation to a value of $52,835.00.
The husband’s entitlement will therefore decrease by $34,481.00 however he will have the ability to increase this sum substantially over the period of his working life.
I am satisfied that this result is overall, a just and equitable one between the parties.
I certify that the preceding one hundred and fifty-seven (157) paragraphs are a true copy of the reasons for judgment of Baker FM
Associate: Sita Buick
Date: 24 April 2009
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