REID & REID

FAMILY COURT OF AUSTRALIA

REID & REID

[2011] FamCA 654

FAMILY LAW - PROPERTY – determination of matrimonial pool – parties did not distinguish between contributions they made to assets and superannuation contributions - superannuation interests treated as property

FAMILY LAW - PROPERTY – farming property – share farming agreement between parties – assessment of contributions – just and equitable orders – both parties agree for farm to be sold to permit division of property – husband’s superior future earning capacity – wife’s continuing sole care of parties’ daughters – parties entitled to equal share of matrimonial property and resources

FAMILY LAW - COSTS – previous court orders for husband to pay equivalent legal costs to his solicitors and wife’s solicitors – husband breaches order – statutory heads of power under which the court may make orders to facilitate funding of litigation – no imbalance of financial strength between the parties – appropriate for wife to be paid for difference in legal costs paid to her solicitors and husband’s solicitors – orders made

Family Law Act 1975 (Cth) ss 72,74, 75, 79, 80, 114, 117

Coghlan v Coghlan (2005) FLC 93-220
Hickey & Hickey & Attorney-General for the Commonwealth of Australia (Intervener) (2003) FLC 93-143
Marriage of Clauson (1995) FLC 92-595
Ogilvie v Adams [1981] VR 1041
Pierce v Pierce (1998) FLC 92-844
Robb v Robb (1995) FLC 92-555
Strahan v Strahan (Interim Property Orders) [2011] FLC 93-466

Young v Queensland Trustees Ltd (1958) 99 CLR 560

APPLICANT:

Ms Reid

RESPONDENT:

Mr Reid

FILE NUMBER:

NCC

1467

2010

DATE DELIVERED:

22 August 2011

PLACE DELIVERED:

Newcastle

PLACE HEARD:

Newcastle

JUDGMENT OF:

Austin J

HEARING DATE:

11, 12, & 13 July 2011

REPRESENTATION

COUNSEL FOR THE APPLICANT:

Mr Johnston

SOLICITOR FOR THE APPLICANT:

Brazel Moore Lawyers

COUNSEL FOR THE RESPONDENT:

Mr Durston

SOLICITOR FOR THE RESPONDENT:

Peninsula Law

Orders

The husband shall forthwith do all such acts and things as may be necessary to draw down on National Australia Bank account number … the sum of $7,824 and pay that sum to the wife’s solicitors on behalf of the wife.

The parties shall forthwith do all such acts and things and sign all such documents as may be necessary to list for sale by public auction the real property and improvements comprising Folio Identifier …, formerly Lot … DP …, being the property more commonly known as … G Street, Town 1, NSW, (“the property”).

For the purposes of implementation of Order 2 hereof:

a)The solicitors acting for the wife shall be the solicitors acting on the sale of the property for the parties.

b)The property shall be listed by the parties for auction sale within 6 weeks of the date of these orders.

c)The auctioneer, in the event of disagreement between the parties, shall be the auctioneer chosen by ballot from the respective choices of the parties.

d)The initial reserve price shall be $2,100,000.

e)In the event that the property is not sold by auction, or private negotiation within a further 7 days, then the property shall be submitted to successive auctions within further 6 weeks periods until sold, otherwise on the same terms and conditions as applied to the first auction, subject to Order 3(f) hereof.

f)The reserve price for the second and subsequent auctions shall be as agreed between the parties, and in the event of disagreement between the parties, the reserve price nominated by the auctioneer.

g)Apart from withdrawals made from National Australia Bank account number …, the parties are restrained from charging, mortgaging, or otherwise encumbering the property to any extent greater than already exists.

h)The husband may exclusively occupy the property pending its sale pursuant to these orders, provided that he maintains the property in a reasonable state of repair, facilitates inspection of the property by prospective purchasers, and meets all expenses incurred in respect of the property as and when those expenses fall due, which expenses include Council rates, water rates, insurances, and loan and interest repayments due on National Australia Bank account numbers … and ….

Upon completion of the sale of the property pursuant to Orders 2 and 3 hereof, the solicitors acting for the parties on the sale shall disburse the proceeds of sale as follows:

a)Firstly, to pay all costs, commissions, and expenses of the sale and to pay any Council and water rates outstanding in respect of the property.

b)Secondly, to pay to the National Australia Bank:

i)The sum of $144,667 against account number …, or the sum necessary to discharge that loan account, whichever is the lesser; and

ii)The sum of $400,000 against account number …, or the sum necessary to discharge that loan account, whichever is the lesser.

c)Thirdly, from one-half of the balance then remaining:

i)To pay to National Australia Bank any further sums as may be necessary to discharge any mortgage, loan or other encumbrance affecting the property, including but not limited to account numbers … and …; and

ii)To pay the balance of that one-half share to the husband.

d)Fourthly, to pay to the wife the other one-half share.

The husband is declared the sole legal and beneficial owner (as between the parties) of his shareholding in C Pty Ltd (ACN …).

The parties shall do all such acts and things and sign all such documents as may be necessary to list for sale by public auction all plant and machinery described in the report dated 24 March 2011 forming Annexure A to the affidavit of Mr B filed in these proceedings on 8 July 2011 (“the personalty”).

For the purposes of implementation of Order 6 hereof:

a)The personalty shall be listed by the parties for auction sale within 6 weeks of the completion of sale of the property pursuant to Orders 2 and 3 hereof.

b)The auctioneer shall be agreed between the parties and, in the event of disagreement, the auctioneer shall be chosen by ballot from the respective choices of the parties.

c)The reserve price of the personalty, or individual items of it, shall be as agreed between the parties, and in the event of disagreement, the reserve price nominated by the auctioneer.

d)In the event that the personalty is not sold by auction, or private negotiation within a further 7 days, then the personalty shall be submitted to successive auctions within further 6 weeks periods until sold, otherwise on the same terms and conditions as applied to the first auction.

Upon completion of the sale of the personalty pursuant to Orders 6 and 7 hereof, the proceeds of sale shall be applied by the parties as follows:

a)Firstly, to pay all costs, commissions, and expenses of the sale.

b)Secondly, to pay to the wife one-half of the balance.

c)Thirdly, to pay the other one-half of the balance to the husband.

The wife is declared the sole legal and beneficial owner (as between the parties) of:

a)Mazda motor vehicle registration ….

b)The funds in Greater Building Society account number ….

c)All furniture and personal effects in her current possession.

d)The following items of personal property which are in the possession of the husband, and which the husband shall cause to be delivered to the wife within 28 days:

i)Antique storage unit;
ii)Matching table; and
iii)All personal photographs relating to the wife’s family.

The husband is declared the sole legal and beneficial owner (as between the parties) of:

a)The funds in National Australia Bank account number ….

b)All furniture and personal effects in his current possession, apart from those items of personal property nominated in Order 9(d) hereof.

The wife shall indemnify the husband, and keep him indemnified, against any and all future liability arising in respect of the liability to Esanda Finance.

The husband shall indemnify the wife, and keep her indemnified, against any and all liability arising in respect of:

a)National Australia Bank account number …, for any amount exceeding $144,667.

b)National Australia Bank account number …, for any amount exceeding $400,000.

c)National Australia Bank mastercard account number ….

Unless otherwise provided:

a)Each party shall be the sole legal and beneficial owner (as between the parties) of all other assets in their respective possession as at the date of these orders, and for that purpose bank accounts are deemed to be in the possession of the person named as the account holder, investment accounts are deemed in the possession of the named investor, and superannuation entitlements are deemed in the possession of the superannuant.

b)Each party shall be solely liable for and shall indemnify the other against any and all debts attaching or relating to the property in their respective possession and any debts in their respective sole names.

In the event of either party refusing or neglecting to sign within 7 days of a written request to do so any document necessary to implement the terms of these orders the Registrar of the Family Court of Australia at Newcastle is empowered to execute such documents on behalf of the parties pursuant to s 106A of the Family Law Act 1975 (Cth).

Costs are reserved for 28 days.

All outstanding applications are dismissed.

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

FAMILY COURT OF AUSTRALIA AT NEWCASTLE

FILE NUMBER: NCC 1467 of 2010

Ms Reid

Applicant

And

Mr Reid

Respondent

REASONS FOR JUDGMENT

Introduction

These proceedings concern the division of property and resources between the applicant wife and respondent husband following the irretrievable breakdown of their lengthy marriage.
Both parties worked extremely hard during the marriage to improve their financial circumstances for the benefit of themselves and their children, and they can be justifiably proud of their achievements. The farming business they conducted was a resounding success. Unfortunately, their dispute necessitates sale of the property upon which the farm is situated and significant changes in their lives.

Background

The parties formed a relationship in 1992 and began their cohabitation in 1993 when the wife and her two young sons moved into the husband’s rural property at Town 1 (“the farm”).[1] The farm supported the husband’s business as a self-employed farmer.
[1] Wife’s affidavit, par 4; Husband’s affidavit, pars 4-5
The parties married in 1995.[2]
[2] Wife’s affidavit, par 5; Husband’s affidavit, par 6
The parties disputed the time at which their final separation occurred. The wife alleged it occurred in October 2009,[3] but the husband alleged it happened in or about January 2010.[4] The dispute was arid because the parties agree that the wife remained living and working at the farm until 26 February 2010[5] and that, despite the wife living elsewhere from that time, the parties continued to jointly conduct the farming business upon the farm until 5 May 2010.[6]
[3] Wife’s affidavit, par 6
[4] Husband’s affidavit, par 9
[5] Wife’s affidavit, pars 7, 142
[6] Wife’s affidavit, par 58
When the parties began their cohabitation, the assets introduced to the relationship by the husband were superior in value to those introduced by the wife.
At that point in time the husband contributed:
a)The farm, which was then worth $500,000.[7]
b)The farm machinery, plant and equipment by which the husband conducted his farming business.[8] There was no admissible evidence of the value of that property at cohabitation.
c)Leasehold rights to a mine, which rights were later sold for $8,000.[9]
d)A boat, which was later sold for $8,000.[10]
e)A car and some personal effects, the collective value of which the wife conceded to have been $7,000.[11] The husband did not adduce admissible evidence of the value of those items and so the only probative evidence was the wife’s admissions.
f)Some superannuation entitlements, the value of which was not proven with admissible evidence.[12]
[7] Wife’s affidavit, par 24; Husband’s affidavit, par 18(a)
[8] Husband’s affidavit, par 18(c)
[9] Husband’s affidavit, par 18(d)
[10] Husband’s affidavit, par 18(f)
[11] Wife’s affidavit, par 25; Husband’s affidavit, par 18(e), 18(g)
[12] Husband’s affidavit, par 18(h)
The husband did not contribute “a business” to the relationship, as he alleged.[13] His self-employment as a farmer was only possible by reason of his ownership of the farm. His farming business was not separately alienable from the land upon which it was conducted. The value attributed to the farm necessarily encompassed its improvement by the established infrastructure upon it.
[13] Husband’s affidavit, pars 17, 18(b)
The husband also introduced a liability to the relationship. It was an overdraft account that he used to operate the farming business. The husband did not remember the debit balance at the time but said the overdraft limit was $75,000,[14] whereas the wife alleged the husband’s debts then stood at about $100,000.[15] Both parties were unable to adduce corroborative evidence of their recollections and so that conflict remains unresolved.
[14] Husband’s affidavit, par 19(b)
[15] Wife’s affidavit, par 26
The husband also alleged that he then owed a debt to his parents of $97,458.60,[16] which sum was used by him to purchase the farm. The wife conceded that such a sum had been advanced to the husband by his parents for that purpose. During the trial the husband abandoned his contention that he still remained liable to his parents for that amount, admitting that any loan had long since become statute-barred (see Young v Queensland Trustees Ltd (1958) 99 CLR 560 at 566; Ogilvie v Adams [1981] VR 1041 at 1043, 1045). The corollary of that concession is the husband’s entitlement to credit for the unencumbered value of the farm he contributed at the commencement of cohabitation. It was not diminished by the value of the alleged debt then owed to the husband’s parents. The wife accepted the veracity of that conclusion.
[16] Husband’s affidavit, pars 14, 19(a)
By comparison, the wife was free of debt and introduced to the relationship:[17]
a)Savings of approximately $80,000.
b)Furniture and personal effects worth about $5,000.
c)A Mazda car, which the parties estimated to have been worth between $5,000 and $10,000.
d)Superannuation entitlements worth about $3,000. Although the husband did not depose to the existence of the wife’s superannuation entitlements, he admitted in cross-examination that she did have some accumulated superannuation at cohabitation.
[17] Wife’s affidavit, pars 22-23; Husband’s affidavit, par 20
At the time of cohabitation, the wife’s two sons from a previous relationship were aged only 2 years and 7 months respectively.[18] Those boys grew up within the parties’ relationship and have continued to live with the husband rather than the wife, their mother, since the parties’ separation.[19] The boys are now adults.
[18] Wife’s affidavit, par 9
[19] Wife’s affidavit, par 18; Husband’s affidavit, par 11
During the parties’ relationship, two daughters were born in 1995 and 1997. Those daughters are now aged 16 and 14 years respectively. They have lived with the wife since the parties’ separation and have not seen the husband for about a year. The evidence is confused as to whether they last saw the husband in May 2010,[20] July 2010,[21] or August 2010.[22]
[20] Wife’s affidavit, par 15
[21] Wife’s affidavit, par 152
[22] Husband’s affidavit, par 12
After commencing cohabitation, the husband continued to pursue his business as a farmer. The wife left her employment and began full-time work on the farm with the husband. The husband’s income from the business was split between the parties up until 2000.[23]
[23] Wife’s affidavit, pars 33-43, 53, 56-57
That arrangement was formalised on 30 June 2000 when the parties executed a Share Farming Agreement, which provided for an equal distribution between them of profits realised from operation of the farming business, on condition that the wife worked full-time in the business.[24]
[24] Wife’s affidavit, par 54
Despite the formal agreement for division of profits between them, the existing arrangements prevailed, whereby business profits were deposited to the parties’ joint banking account and used collectively for the support of the family.[25] In the last two financial years completed before their separation, the parties declared relatively equal taxable income.[26] The business was then yielding annual combined taxable income of approximately $250,000.
[25] Wife’s affidavit, par 55
[26] Wife’s affidavit, par 59
Following the wife’s exclusion from the farm by the husband in May 2010, the husband seized sole control of the farming business and the banking accounts. The husband closed the joint account, opened new accounts in his own name, and precluded the wife from operating the credit card.[27]
[27] Wife’s affidavit, pars 61-70
The husband also terminated the Share Farming Agreement,[28] and registered the corporation C Pty Ltd to operate the farming business. The husband was, and remains, the sole shareholder and director of that corporation.[29] A new banking account was established in the name of that corporation.[30] The parties agreed the corporation has no value.[31]
[28] Husband’s affidavit, par 54; Wife’s affidavit, par 200
[29] Husband’s affidavit, par 76; Wife’s affidavit, par 20
[30] Wife’s affidavit, par 66
[31] Husband’s affidavit, par 92(a)
The proceedings were commenced by the wife on 7 June 2010, only weeks after she was locked out of the farm by the husband.
In her Initiating Application the wife sought a raft of interim orders, which were considered by the Court on 15 June 2010. At that time a series of interim orders were made with the consent of the parties. Relevantly, those orders included provision for:
a)Payment by the husband to the wife of $20,000 by way of interim property adjustment (Order 1);
b)The husband’s sale of a boat for not less than $40,000 and payment of the sale proceeds into a joint controlled monies account (Order 4);
c)The wife’s sale of a Nissan car for not less than $25,000 and payment of the sale proceeds into a joint controlled monies account (Order 5).
The husband complied with Order 1, but not Order 4.
The wife did not comply with Order 5.
The husband sold the boat for a net amount of $36,000 and banked the sale proceeds into a farming account he controlled, because he perceived he needed the money for business purposes.[32] The husband said in cross-examination “it costs a lot to grow a crop”. It seems he was right. Even allowing for the deposit of $36,000 to the business account in August 2010, by September 2010 the overdraft was at its limit, and did not recover until income from the harvested crop started to flow back into the account in December 2010. The wife abandoned any argument about a notional add-back of those sale proceeds because she accepted they were banked into an account already included in the balance sheet and the funds were not used by the husband inappropriately.
[32] Husband’s affidavit, pars 86-90; Wife’s affidavit, par 156
The wife did not sell the Nissan car for the stipulated sum because she was unable to do so.[33]
[33] Wife’s affidavit, par 162
The husband later filed his Response on 23 June 2010, in which he also sought interim orders.
The matter came back before the Court for interim hearing on 15 November 2010 at which time Ryan J made further interim orders with the consent of the parties. Those orders relevantly provided for:
a)The husband’s payment of sums to the parties’ solicitors to ensure equivalence in the amount of legal fees paid by the parties to their lawyers (Orders 2-3, 12);
b)The husband’s payment to the wife of spousal maintenance in the sum of $850 per week (Orders 4, 11);
c)The wife’s sale of the Nissan car for the lesser sum of $18,500 (Order 9) and her retention of those sale proceeds as interim property adjustment (Order 10).

The husband failed to comply with the orders requiring equivalent payments to the parties’ respective solicitors. He admitted that, since the orders were made in November 2010, $500 more has been paid in costs to his solicitors than to the wife’s solicitors, and that overall, some $6,000 more has been paid to his own solicitors for costs during the litigation.
The wife failed to comply with the order requiring her sale of the Nissan for no less than $18,500. She sold it for only $9,000.[34] Nevertheless, the parties agreed on the inclusion in the balance sheet of a notional add-back of $12,972, comprising the sale proceeds together with some insurance monies received by the wife in respect of the car.[35]
[34] Wife’s affidavit, par 165
[35] Husband’s affidavit, par 85(f)
The matter was listed for trial on 11 July 2011 and judgment was reserved following the completion of the evidence and submissions on 13 July 2011.
The husband subsequently filed an Application in a Case, which came before the Court on 1 August 2011, seeking permission to re-open his case to adduce further evidence on an issue which arose during final submissions. The application was dismissed as being unnecessary, consequent upon the wife making concessions on the record, which the husband found satisfactory.

Proposals and primary evidence of the parties

The wife pressed for the orders set out within her Further Amended Initiating Application filed on 12 April 2011, in support of which she relied upon:
a)Her affidavit filed on 25 May 2011;
b)Her Financial Statement filed on 25 May 2011;
c)The affidavit of Ms C filed on 25 May 2011; and
d)The affidavit of Mr D filed on 27 May 2011.
The husband pressed for the orders set out within his Amended Response filed on 27 April 2011, in support of which he relied upon:
a)His affidavit filed on 1 June 2011;
b)His Financial Statement filed on 1 June 2011; and
c)The affidavit of Mr R filed on 1 June 2011.
The husband additionally sought to rely upon an affidavit sworn by him on 8 July 2011, or parts of it, which had not yet even been filed or served. His application to do so was refused in the face of objection by the wife. The husband conceded that his projections as to future business income and expenses set out within the affidavit could have been set out within his earlier affidavit filed on 1 June 2011, and he could offer no satisfactory explanation for why he ought to be permitted to rely upon such belated evidence.
The principal asset of the parties was the farm. Both parties proposed its sale, although each proposed division of the sale proceeds in different proportions. The parties agreed there will be no CGT liability incurred on the sale.[36]
[36] Husband’s affidavit, pars 119-120

Procedure

In determining the property adjustment orders that should be made between spouses, the Court follows a recognised four-step process (see Hickey & Hickey & Attorney-General for the Commonwealth of Australia (Intervener) (2003) FLC 93-143 at [39]):
a)Firstly, the Court should identify and value the matrimonial pool of property, composed of assets, liabilities and financial resources at the date of the hearing.
b)Secondly, the Court should identify and assess the contributions of the parties within the meaning of ss 79(4)(a)-(c) of the Act, and determine the contribution based entitlements of each party as a percentage of the matrimonial pool of assets.
c)Thirdly, the Court should identify and assess the relevant matters referred to in ss 79(4)(d), (e), (f) and (g), and s 75(2), and determine the adjustment, if any, that should be made to the contribution based entitlements of the parties.
d)Finally, the Court should consider the effect of those findings and resolve what order is just and equitable in all the circumstances of the case.

Pool of property and resources

At the commencement of the trial the parties tendered a collaboratively prepared balance sheet setting out the matrimonial pool of property and resources, which document identified areas of agreement and dispute between them.[37]
[37] Exhibit E
As the evidence unfolded the disputed items fell away and the ultimate constitution of the balance sheet was the subject of agreement. Pursuant to that agreement the matrimonial assets and resources comprise the following, with figures rounded to the nearest dollar:

No.	Assets	Party	Value	Total
1	Town 1 realty (the farm)	H	2,100,000
2	Farm machinery, plant, equipment	H	40,580
3	Mazda car (reg. …)	W	27,550
4	NAB acc. (…)	H	6,814
5	GBS acc. (…)	W	28
6	Furniture and chattels	H	15,000
7	Furniture and chattels	W	7,615
7A	Shareholding in C Pty Ltd	H	nil
Sub-total	2,197,587	2,197,587
Add-backs
8	Interim property adjustment	W	20,000
9	Wife’s paid legal fees (14/1/11)	W	15,030
10	Wife’s paid legal fees (25/2/11)	W	7,500
10A	Husband’s paid legal fees	H	28,688
11	Payment of valuer’s fees	H	3,300
12	Payment of boat fees	W	999
13	Payment of private school fees	W	3,505
14	Payment of Esanda (4/2/11)	W	3,389
15	Payment of Esanda (13/5/11)	W	2,114
16	Proceeds of sale of Nissan	W	12,972
17	Proceeds of sale of boat	H	nil
18	Funds expended by husband	H	nil
19	Funds expended by wife	W	nil
Sub-total	97,497	2,295,084
Liabilities
20	NAB acc. (…)	H	136,843
21	NAB credit card (…)	H	369
22	NAB market rate facility (…)	joint	400,000
23	Esanda Finance	W	27,365
24	Debt to husband’s parents	H	nil
24A	Prospective CGT on sale of farm	H	nil
Sub-total	564,577	1,730,507
Superannuation
25	AXA	H	36,729
26	AXA	W	9,001
Sub-total	45,730	1,776,237
Financial resources
27	Not applicable	nil	1,776,237
Net property and resources	1,776,237

The Court is generally exhorted to treat the parties’ superannuation entitlements separately from assets, but that need not necessarily be the case (see Coghlan v Coghlan (2005) FLC 93-220 at [57]–[68]). Neither the wife nor the husband directly addressed the issue in submissions, but inferentially, they both treated superannuation entitlements as matrimonial assets. No distinction was drawn between superannuation and assets during submissions. It is appropriate in the circumstances of this case to treat the superannuation entitlements of the parties as property because they represent only a small proportion of the pool, all but a fraction of the superannuation entitlements were accrued following the parties’ cohabitation, and the parties did not distinguish between contributions they made to assets and superannuation contributions.

Assessment of contributions

The value of the parties’ financial contributions at the commencement of their cohabitation in 1993 was considerable. There is no doubt that the husband’s contribution of assets and resources at that time was superior to the wife’s contribution. It was roughly five times greater. That disparity should be accorded appropriate weight in the property adjustment process (see Pierce v Pierce (1998) FLC 92-844 at [23-30], [40]).
The husband did not submit that there was any basis to differentiate the parties’ contributions, as relevant under ss 79(4)(a)-(c) of the Act, other than for their disparate initial financial contributions.
The husband conceded in cross-examination that the parties each worked very hard, albeit that the wife was primarily responsible for domestic duties and the care and supervision of the children and he was more involved with the conduct of the farming business. In reference to the wife’s activity in the business, the husband said “[the wife] did a lot”. The husband even went so far as to concede that the wife’s work on the farm was “pretty extraordinary for a woman”. For a man of relatively few words, that was high praise. Although the husband deposed in his affidavit to the wife being a “first-rate worker” until certain events occurred some years ago,[38] he did not see fit to limit his concessions about the impressive extent of the wife’s contributions either in the home or on the farm when he was cross-examined.
[38] Husband’s affidavit, pars 37-39
Although the husband introduced the farm to the relationship, the farm as it stands now is not as it was at the commencement of cohabitation. In 1997 the husband purchased an extra 37 acres of land. Although the land cost $225,000, a larger amount of $275,000 was borrowed and secured by mortgage over the new land.[39] Although the purchase and loan were contracted by the husband as the sole legal proprietor of the farm, he thereby exposed matrimonial assets to the potentiality of liquidation to meet the liabilities owed to the bank. The wife’s endeavour in the conduct of the farming business assisted in the discharge or maintenance of the increased business liabilities, including mortgages secured over all or part of the farm.
[39] Husband’s affidavit, pars 26-27
I accept as a fact that the parties both diligently devoted the entirety of their available time to business pursuits upon the farm and to domestic affairs within the home for the mutual benefit of one another and their children.
The wife submitted that she indirectly made contributions to the farm and the business through labour provided by members of her extended family. I do not accept that submission. The wife’s brother was paid for work he did on the farm.[40] Although his payment may have been modest, the payments were intended as consideration for his labour and no complaint was made about the quantum at the time. Other members of the wife’s family were also paid modestly for work they did in the farming business.[41]
[40] Wife’s affidavit, par 99
[41] Wife’s affidavit, pars 91-96, 100-102
As already recited, the nature of the parties’ circumstances irreversibly changed in May 2010. Although they had separated some time before, until then the parties continued to jointly work the farm as before.[42] Since then, the husband has had total control of the farm and the banking accounts associated with it.
[42] Wife’s affidavit, pars 69-70
The wife’s personal financial circumstances from that point have been difficult. The husband assisted her to furnish her alternate rental accommodation in February 2010,[43] but after May 2010 her income was restricted. The husband paid amounts to the wife by way of child support[44] and spousal maintenance,[45] but otherwise the wife relied upon monies borrowed from family and friends.[46]
[43] Wife’s affidavit, pars 171-172
[44] Wife’s affidavit, par 203; Exhibits W4, H2
[45] Wife’s affidavit, par 199
[46] Wife’s affidavit, par 194
Other payments made by the husband to or for the benefit of the wife included lump sum interim property adjustments,[47] repair costs,[48] private school fees for the children,[49] and loan repayments on the wife’s car.[50] But those amounts were consensually added back to the balance sheet as notional assets, so the husband is not entitled to additionally claim them as post-separation financial contributions.
[47] Wife’s affidavit, pars 195, 198; Husband’s affidavit, pars 85(a), 85(d), 85(g)
[48] Husband’s affidavit, pars 85(b), 85(c)
[49] Husband’s affidavit, par 84(b)
[50] Husband’s affidavit, pars 84(c), 84(d)
I accept that the only material basis for differentiation of the parties’ contributions is the disparity in their financial contributions at the time of commencement of cohabitation. Although proper weight must still be accorded to those disparate contributions, they must be weighed in the context of the contributions that were made by the parties over the following 18 years. The financial contributions by the parties of their farming business income were very substantial, and those contributions occurred annually. The parties enjoyed a handsome standard of living and the matrimonial property and resources are now worth about treble the value of the parties’ collective initial financial contributions.
The parties acknowledged the husband had a greater contribution-based entitlement to matrimonial property than the wife, but they disagreed over the extent of the differential.
The wife contended the contribution-based entitlements favoured the husband by a percentage amount in the range of 5-10 per cent by reason only of his larger initial financial contribution.
The husband, however, contended his contribution-based entitlement should be fixed at between 60-65 per cent. That represented some amelioration of his earlier views. When the trial started he contended his entitlement was 70 per cent.
I am satisfied on the evidence that the appropriate contribution-based entitlements of the parties are 57.5 per cent to the husband and 42.5 per cent to the wife. A differential of 15 per cent is a proper measure of the parties’ overall contributions.

Adjustment

The principal issue addressed by the parties in respect of the need for any adjustment of their interests pursuant to the factors stipulated by ss 79(4)(d)-(g) of the Act was their future income earning capacities.
The wife consults a psychologist in relation to her current psychological condition. That psychologist was cross-examined on the contents of her affidavit relating to the wife.[51] Her involvement with the wife is therapeutic, not forensic. The wife was diagnosed by her general practitioner with “depression, anxiety, panic attacks, and acute stress reaction” for which she is prescribed medication.[52] The general practitioner referred the wife to the psychologist for therapy. The opinion of the psychologist was that, although the wife was highly stressed, much of that was related to the unresolved litigation and once the uncertainty of her financial future was clarified her symptoms would be largely alleviated. There was, however, no evidence that the wife’s symptoms would be immediately and completely alleviated.
[51] Affidavit of Ms D, Annexure C
[52] Wife’s affidavit, par 185
The psychologist confirmed she had spoken with the wife about her future employment plans. The wife told her she was eager to re-enter the workforce as soon as possible. It was the wife’s intention to seek out work as in a clerical role, but then re-train for work in the hospitality industry.
The psychologist agreed that the wife was making realistic plans and setting goals, which she also agreed was itself an indication her condition would cause little impingement upon her capacity for gainful employment.
Although the wife may need some re-training with computer skills to assist her find clerical work, she has extensive experience in a clerical role. She did all of the clerical work for the farming business she conducted with the husband and believes she has aptitude for that work.[53]
[53] Wife’s affidavit, pars 31, 57, 69, 71, 72, 76
I am satisfied on the evidence that the wife has the capacity to work and earn income in a clerical role, even though she is currently unemployed,[54] and has not yet sought paid work as in a clerical role. The wife also has the ability to earn income labouring in some capacity within the farming industry. Her skills in that industry were acquired over the last 17 years.[55] However, her efforts to obtain farm labouring work in the local area have so far failed.[56]
[54] Wife’s affidavit, par 187
[55] Wife’s affidavit, pars 209-210
[56] Wife’s affidavit, pars 213-214
Re-training to obtain work in the hospitality industry may be the wife’s desire,[57] but it is unnecessary in view of her existing capacity for employment of a different type. In any event, there was no evidence that her acquisition of skills to secure work in the hospitality industry would afford the wife greater income earning capacity or opportunities.
[57] Wife’s affidavit, pars 211-212
As the husband observed, without the farm he cannot pursue his business as a farmer and is therefore deprived of the only source of income he has known during his working life.[58]
[58] Husband’s affidavit, par 99
The husband was therefore interrogated about his intentions for future income. He was non-committal, although he said he expected that he could not acquire a substitute farm to re-commence business as a farmer for less than $1,500,000. It was his hope to buy another farm, but he doubted his share of the matrimonial property would permit that, and he was unaware of his borrowing capacity. Otherwise, the husband expected to be left to rely upon casual seasonal work as a farm labourer.[59]
[59] Husband’s affidavit, par 99
The husband said his parents own their own farm “down the road”, upon which they also conduct their own business as farmers. It is situated in the same district as the husband’s farm. The husband’s father gave evidence and confirmed during cross-examination that his farm comprises 86 acres. He is nearly 83 years of age and is unwell. He said he is “pretty sick at the moment” and suffers from “Parkinson’s Disease, dementia and sugar diabetes”. His wife is 81 years of age. He has actively considered the need to “go into a home [aged care facility]”. He is unsure whether he would need to sell his farm to fund such a move, as that would depend upon the extent of his savings. He anticipated that, if the farm need not be sold, then upon the decease of both he and his wife the farm would be devised in equal shares to their three children. The husband was clearly on good terms with his parents.
The evidence proved numerous salient facts. There is another farm of similar size in the same locality, presently being farmed, which the husband’s father is really too frail to work. The husband’s parents would be assisted by their receipt of either a capital sum or an income stream to financially support them and to cover the potential cost of their accommodation in an aged care facility. They have actually considered disposal of the farm as a possible solution to the problem. The husband will have a capital sum available to him following the conclusion of these proceedings and he still retains his expertise as a farmer. In reliance upon the income from his current farming business, the husband presently services significant liabilities, including a loan of $400,000 and an overdraft account with a $250,000 limit. Following receipt of his share of matrimonial property the husband will likely have borrowing capacity to acquire funds for use in another farming venture.
The idea of the husband purchasing his parents’ farm, or leasing the whole or part of it from them, in order to continue his business as a farmer upon that farm, was not explored in evidence with any of the witnesses. Nor was the prospect of a share farming venture between the husband and his parents canvassed in the evidence.
The husband submitted the existence of such possibilities could not be inferred from the evidence as it stood, but when pressed was unable to explain why such inferences were not available. The wife conversely submitted that it would not be appealable error to draw such inferences, which she contended were legitimately open on the evidence, meaning the husband could continue his income stream as a farmer with relatively little interruption.
When the husband’s application for leave to re-open his case and to adduce further evidence on that issue later came before the Court, the wife reversed her position. The wife conceded that no inference should be drawn that the husband could buy his parents’ farm, lease it from them, or share-farm it with them. By reason of those concessions it became unnecessary to address the issue of whether the husband ought to be permitted to adduce further evidence on the issue and the Court’s findings should now reflect the concessions made.

Notwithstanding, the husband has proven his ability to generate a handsome income from self-employment as a farmer. It is likely he could generate a similar income on a farm of similar size in the same district, provided he receives sufficient funds after the completion of these proceedings to permit his purchase, lease, or share of such a farm.
The husband makes a good living and currently services debt of up to $650,000 by operating a farm which is worth $2,100,000. It is possible, but unlikely, the husband will be able to use the monies realised from his share of the matrimonial pool of assets to purchase another farm, using borrowed funds secured by mortgage over the replacement farm he purchases. In the face of the wife’s express concession that the husband will be unable to buy or lease his parents’ farm, the only other direct evidence about the husband’s future self-employment is his somewhat pessimistic hope to buy a suitable replacement farm from some other vendor. The prospect also remains of him leasing another farm from, or entering into a share-farming agreement with, a third party.
I am not satisfied that the sale of the farm will diminish the earning capacity of the husband. Rather, sale of the farm will diminish the opportunity for the husband to exercise his unaltered income earning capacity. However, there may be no distinction in a pragmatic sense.
Even if the husband’s desire to acquire a substitute farm does not come to fruition, he possesses skill as a farmer which would likely be attractive to many other farmers, opening up the prospect of his paid employment in those fields of work. I do not accept that the husband’s future earning capacity is simply limited to menial work as a farm labourer. He has a wealth of past farming experience upon which to rely.
On the balance of probabilities, I find that the husband’s future income earning capacity in farming work is superior to that of the wife in a clerical role or farm labourer.
The wife is currently 46 years of age and the husband 51 years of age. They each have a considerable period of their working life ahead of them, and the differential in their income earning capacity will likely prevail for another decade or so until the husband attains a reasonable retirement age. It could be considerably longer if the working longevity of the husband’s father is any measure of the husband’s future capacity.
I accept the husband’s submission that the circumstances of the husband’s expected inheritance from his elderly parents are too uncertain to be satisfied that his potential interest in their deceased estates presently represents a financial resource to him. Although the husband’s father is unwell, there is no evidence at all about the health of his mother.
The husband undeniably contributed to the care and support of the wife’s two sons for the whole of the parties’ cohabitation. That contribution is recognised under s 75(2)(o), pursuant to s 79(4)(e) of the Act (see Robb v Robb (1995) FLC 92-555 at 81,542, 81,546, 81,547). The biological father of the wife’s sons barely contributed to their financial support, paying only paltry child support for a very short time before such payments stopped.[60] Thereafter, the boys were financially supported by the joint efforts of the parties in the conduct of the farming business. The boys lived with the parties and continued to live with the husband after the wife vacated the farm with the parties’ two daughters. The choice of the wife’s sons to remain with the husband is a testament to the strength of the relationships they formed with him over the years.
[60] Wife’s affidavit, par 119; Husband’s affidavit, par 44
Since some time around mid 2010 the wife has been solely responsible for the care and supervision of the parties’ two daughters. That will likely continue for a few more years until the children attain their majority. The husband has paid child support to the wife for those children, although the amounts have fluctuated. The wife was recently receiving only $180 per month,[61] but the most recent assessment retrospectively requires the husband’s payment of $1,083.50 per month.[62]
[61] Wife’s affidavit, par 203; Husband’s affidavit, par 101
[62] Exhibits W4, H2
No other aspects of the evidence were addressed by the parties as materially relevant to the exercise of discretion under ss 79(4)(d)-(g) of the Act.
At the start of the trial the wife contended that the adjustment to which she was entitled was “at least” 15 per cent. In final submissions she moderated that submission by proposing 15 per cent as the appropriate adjustment. The wife did not deviate from her initial contention that the overall division should be 60/40 in her favour.
The husband’s idea about any adjustment was far removed from that of the wife. At the start of the trial he submitted that the wife was entitled to an adjustment not exceeding 5 per cent. However, in final submissions, the husband contended that there should either be no adjustment at all, or alternatively, a small unquantified adjustment in his favour.
The husband’s ultimate submission was that the property should be justly and equitably divided on a 60/40 basis in his favour, which was difficult to reconcile with his preceding submissions about contributions and adjustment. That is because a 60/40 division necessarily means he either conceded his contributions warranted entitlement to only 60 per cent with no adjustment, or his contributions warranted entitlement to more than 60 per cent subject to a corrective adjustment in the wife’s favour.
In my view, the circumstances justify an adjustment in the wife’s favour, which is properly quantified at 7.5 per cent. That determination is reached by weighing, in descending order of significance, the husband’s superior future earning capacity, the husband’s contributions to the welfare of the wife’s sons whilst minors, and the wife’s continuing sole care of the parties’ daughters.
Having regard to the net value of the matrimonial pool of assets and resources, an adjustment of 7.5 per cent equates to $133,218. It is as well to recall that such an amount is approximately one-half of the annual taxable income recently realised by operation of the farm,[63] although the husband deposed to his present derivation of much less income.[64] Even so, in simplistic terms, the husband will likely generate taxable income of $133,218 within a period of little more than a year at most. But, of course, the farm may be sold sooner than expected, depriving the husband of that regular income stream.
[63] Wife’s affidavit, par 59
[64] Husband’s financial statement, par 11
As was pointed out by the Full Court in Marriage of Clauson (1995) FLC 92-595 at 81,911, and endorsed many times since, when referring to an adjustment warranted by factors under s 75(2) of the Act:
…it is the real impact in money terms which is ultimately the critical issue.
Those conclusions necessarily mean that the parties are entitled to an equal share of matrimonial property and resources. The wife’s contribution-based entitlement of 42.5 per cent, together with an adjustment of 7.5 per cent in her favour, equates to an overall entitlement of 50 per cent.

Just and equitable orders

Both parties acknowledged that the farm must be sold in order to permit division of matrimonial property and resources, but the orders posited by the parties proposed that the sale of the property be achieved in different ways. Although the husband conceded he had contemplated the alternatives of borrowing funds against the security of the farm or sub-dividing the farm and selling off a portion of it to fund a buy-out of the wife’s interest, he conceded both in his affidavit[65] and in cross-examination that was beyond him.
[65] Husband’s affidavit, par 98
The husband has actively marketed the farm for sale since February 2010 without success.[66] In cross-examination it was revealed the listing price was $3,150,000, and that price had not been revised, despite an absence of any offers at all since February 2010, and despite agreement between the parties that the farm is really worth $2,100,000.
[66] Husband’s affidavit, par 116
I accept the wife’s submission that the orders should require sale of the farm by public auction with an undisclosed reserve price of $2,100,000. It would likely be a waste of time continuing to market the property by private treaty at any price higher than $2,100,000, as the husband proposed. However, I do accept the husband’s submission that marketing the farm by private treaty at an advertised price of $2,100,000 will likely only induce offers of sums less than that amount. A public auction with an undisclosed reserve price will likely achieve a swifter sale of the property at a realistic price.
There remains some residual confusion about the title description of the farm, which was not explored in evidence. The wife asserted the title description is Folio Identifier …,[67] whereas the husband asserted the title description is Folio Identifier … .[68] The husband is more probably correct, as he is corroborated by the contents of the valuation report obtained in relation to the farm.[69] Confusingly, that report also ascribes a different street address to the farm than the parties. The orders adopt the title details set out within the valuation report.
[67] Further Amended Application filed 12 April 2011, Order 1
[68] Amended Response filed 27 April 2011, Order 1.1
[69] Husband’s affidavit, Annexure H
I accept that, whilst ever the farm remains unsold, the husband should be able to continue operating his farming business to ensure an income stream. Consequently, the sale of the machinery, plant, and equipment used by the husband in his business should be delayed until after the farm is sold. The parties agreed on that issue.
It was the parties’ mutual position that the wife should have the benefit of assets (balance sheet items 3, 5, 7, 8, 9, 10, 12, 13, 14, 15, 16, 19), liabilities (item 23), and resources (item 26), the net value of which are $82,338.
It was also the parties’ mutual position that the husband should have the benefit of assets (balance sheet items 4, 6, 7A, 10A, 11, 17, 18), liabilities (items 21, 24, 24A), and resources (item 25), the net value of which are $90,162.
That accounts for all property and liabilities, except for the farm (balance sheet item 1), the equipment used in the conduct of the farming business (item 2), and the liabilities associated with the farm and the business (items 20, 22). Since the parties agreed the husband should have the use of the farm and equipment until the sales of that real and personal property can be achieved, pending completion of those sales, the husband should also bear responsibility for the liabilities associated with the farm and the conduct of the business.
The wife made an oral application at the conclusion of the trial for the immediate payment to her of $50,000 which she wished designated as “partial property settlement”. The need for such urgency, it was contended, was the expected delay in completion of the sale of the farm and the division of the proceeds of sale therefrom.
It was intended that the husband cause that amount to be paid from the farm overdraft account (balance sheet item 20). Although that account is currently in overdraft to the extent of $136,843, it is common ground that the overdraft limit is $250,000.
The application arose out of evidence adduced in the trial to the effect that the husband’s lawyers had been paid greater costs than the wife’s lawyers over the course of the litigation. The wife was, or perhaps more particularly her lawyers were, aggrieved about that predicament, particularly given the terms of Order 2 made on 15 November 2010. That order sought to ensure equivalence in the payment of costs to the parties’ lawyers.
It is uncontroversial that over the course of the litigation the total sum of $28,688 was paid to the husband’s lawyers and $22,530 was paid to the wife’s lawyers, with those payments made from matrimonial funds. The parties would not otherwise have agreed upon inclusion of those add-backs to the balance sheet (balance sheet items 9, 10, 10A). The difference is $6,158 (= $28,688 - $22,530).
It is also apparent from the agreed proposed division of matrimonial personal property, adverted to above, that the husband will retain assets and resources with a net value that exceeds the assets and resources retained by the wife by a margin of $7,824 (= $90,162 - $82,338). That figure incorporates the costs differential of $6,158 explained in the preceding paragraph.
The wife desires the payment to her of funds from the overdraft account to meet legal costs she has incurred in the conduct of these proceedings. The law on that issue is now the subject of authoritative statement.
There are a number of statutory heads of power under which the court may make orders to facilitate funding of litigation. The orders may be made in the guise of spousal maintenance orders (ss 72, 74) or costs orders (s 117), and provided there are pending proceedings for adjustment of property interests, the orders may also be made as interim property settlement orders (ss 79, 80(1)(h)). It may even be possible to make such orders pursuant to the injunctive power (s 114) (see Strahan v Strahan (Interim Property Orders) (2009) 42 Fam LR 203 at 220-221). But the overall purpose of the orders must be to meet past or future costs of pursuing the litigation (see Strahan at 224).
It is important, when contemplating an order for interim provision for litigation expenses, to identify the relevant source of power because it is the source of power that determines the necessary preconditions and relevant considerations for making the order (see Strahan at 221, 247).
Three matters are always relevant, irrespective of the head of power relied upon in application for the order, even though none of the three matters can be referenced directly to the statutory provisions of the Act (see Strahan at 222, 248) and they are:
a)A position of relative financial strength on the part of the respondent,
b)A capacity on the part of the respondent to meet his or her own litigation costs, and
c)An inability on the part of the applicant to meet his or her litigation costs.
If an order is made under s 79, the order must be just and equitable by reference to the matters set out in ss 79(4) and 75(2), and it must be likely that the applicant will receive by way of property settlement a sum sufficient to cover the advance (see Strahan at 221, 225, 236-237). There is also a preliminary adjectival or procedural step, requiring consideration of whether such an application will even be entertained, because it is clearly preferential for there to be only one exercise of power under s 79 (see Strahan at 230-231, 250). The overarching consideration at the first procedural step is the interests of justice. It is not necessary for the applicant to establish the existence of compelling circumstances (see Strahan at 231-236, 241, 249).
In order to establish an appropriate case for an interim property settlement order, more is required than the mere fact that upon a final hearing the applicant would receive the property being sought, or an amount in excess of the funds being sought, from the other party (see Strahan at 237, 249-250).
There is really no imbalance of financial strength between the parties. Although the husband is in control of the overdraft account, the balance is in debit not credit. The husband was cross-examined about the absence of impediment to his further withdrawals from that account. When asked if he could draw down on the account immediately he said words to the effect “I’d be in trouble”. The clear imputation was that the husband could withdraw funds to the account limit of $250,000, but he would not be able to service debt of that magnitude, nor could he continue to conduct the farming business without access to those funds to meet business overhead expenses.
In re-examination the husband explained that the residue credit in the overdraft account, being the differential between the existing debit balance and the overdraft limit, was needed to meet his living expenses and business expenses and to also cover unforeseen misfortune like crop failure. He estimated making further expenditure in the vicinity of $70,000 over the next few months before the current crop is harvested in November, and also said the income from that crop will begin to be received from about the third week of November 2011.
In the weeks before the trial commenced, the parties’ lawyers exchanged correspondence about the availability of funds from the overdraft account to meet legal fees.[70] The above impediments to the withdrawal of further funds from the overdraft account to service legal fees were explained by the husband’s lawyers in that correspondence. Indeed, the husband’s lawyers billed the husband for costs but then wrote-off $12,493.71 before the end of the last financial year because of the husband’s perceived inability to pay those costs prior to 30 June 2011.[71] The husband is really in no better a position than the wife to pay legal fees pending sale of the farm.
[70] Exhibit W2
[71] Exhibit H5
I am satisfied only that it is appropriate for the wife to be immediately paid from the overdraft account the sum of $7,824, the payment of which will then ensure that the parties have received equal amounts from the available matrimonial personal property. That will increase the overdraft debit balance by that amount to $144,667 (= 136,843 + 7,824), but the increase is not so large as to impinge upon the husband’s conduct of the farming business or his ability to service the enlarged debt.
It is necessary to ensure that when the farm is sold the parties bear equal liability for the debts associated with the farm and the farming business, but only to the extent of the current debit balances, including their increase by the amount of $7,824 just mentioned. The husband should bear sole liability, from his share of the net sale proceeds, for any increase in those liabilities. The wife should not be called upon to share equally in debts which are unilaterally enlarged by the husband during his sole occupation of the farm and his sole conduct of the farming business.
The parties proposed orders requiring the husband’s diligent conduct of the farming business and provision to the wife of financial details about that business.[72] No such order is made. Although the parties formerly conducted the farming business jointly, the husband always enjoyed sole legal proprietorship of it. The income he declared from its operation excluded the monies he paid to the wife as an overhead expense pursuant to the Share Farming Agreement.[73] The income earned by the wife under the Share Farming Agreement was separately declared for tax purposes. The husband now conducts the business through the vehicle of C Pty Ltd. The wife has no interest in either that corporation or the business. In order to protect the wife against exposure to greater liability, the orders make provision for the husband’s service of the debts to the National Australia Bank and the discharge of those liabilities in the manner just explained upon sale of the farm.
[72] Further Amended Initiating Application filed 12 April 2011, Order 9
[73] Wife’s affidavit, Annexure B
The wife sought an order about the husband’s surrender to her of some nominated items of personal property.[74] A similar, but not identical, order was proposed by the husband.[75] No evidence was adduced on the issue and no mention of it was made in final submissions, however, similar orders are made in the terms volunteered by the husband .[76] No order can be made beyond the husband’s admission in the absence of any evidence.
[74] Further Amended Initiating Application filed 12 April 2011, Order 5
[75] Amended Response filed 27 April 2011, Order 9
[76] Orders 9(d), 10(b)

The orders set out at the commencement of these reasons ensure a just and equitable division of matrimonial property and resources.

I certify that the preceding one hundred and ten (110) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Austin delivered on Monday, 22 August 2011.

Associate:

Date: 22 August 2011

Amended Response filed 27 April 2011, Order 5.1.4

[2011] FamCA 654

22 August 2011

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Family Law

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