Sacamano & Sacamano
[2008] FamCA 1073
•1 December 2008
FAMILY COURT OF AUSTRALIA
| SACAMANO & SACAMANO | [2008] FamCA 1073 |
| FAMILY LAW – PROPERTY SETTLEMENT – Wife’s contribution based entitlement of $100 000, approximately 20 percent of the parties net assets – Section 75(2) adjustment in the wife’s favour of $150 000 – Treatment of real estate of which the husband is the registered proprietor, in circumstances where a special condition of the contract pursuant to which the husband acquired the property from his parents provides that, if the husband dies or “disposes of any part of his interest” in the property, the property reverts to the husband’s parents – To regard the husband as having total and unfettered equitable ownership of the property is a finding not reasonably open to the Court – The real estate property, and any liability alleged to relate to it, is to be excluded from the balance sheet, and the rights conferred upon the husband by the contract pursuant to which he acquired the property treated as a financial resource and reflected in the context of Section 75(2). FAMILY LAW – EVIDENCE – VALUATION OF BUSINESS – EXPERT OPINION EVIDENCE – Valuations based on similar but, in certain respects, differing methodologies of two experts considered – With respect to the appropriate adjustment to be made to future maintainable earnings with respect to employees, the Court preferred the approach which had regard to actual payments to employees rather than what might be paid – With respect to the capitalisation rate to be applied to the future maintainable earnings, in circumstances where the methodology employed by each expert was impeccable, and in the absence of a directly comparable sale in the market place, the Court adopts the average of figures for the capitalisation rate provided by the experts – Such approach considered a permissible “value judgment” (see Federal Commissioner of Taxation v St Helens Farm (ACT) Pty Ltd (1980) 146 CLR 336) FAMILY LAW – SPOUSAL MAINTENANCE – Lump sum spousal maintenance not appropriate in the circumstances of the case, particularly in view of the wife’s proposed recommencement of employment – Period spousal maintenance payable to wife – Not appropriate to reduce sum by virtue of the proposed s 79 order in her favour (Bevan & Bevan (1995) FLC 92 600) |
| Family Law Act of 1975 (Cth) ss 75(2), 79, 81 Federal Commissioner of Taxation v St Helens Farm (ACT) Pty Ltd (1980) 146 CLR 336 |
| APPLICANT: | Ms Sacamano |
| RESPONDENT: | Mr Sacamano |
| FILE NUMBER: | PAF | 245 | of | 2006 |
| DATE DELIVERED: | 1 December 2008 |
| PLACE DELIVERED: | Parramatta |
| PLACE HEARD: | Parramatta |
| JUDGMENT OF: | COLEMAN J |
| HEARING DATE: | 10 & 11 November 2008 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr Tom Reeve |
| SOLICITOR FOR THE APPLICANT: | Marsdens Law Group |
| COUNSEL FOR THE RESPONDENT: | Mr Andrew Givney |
| SOLICITOR FOR THE RESPONDENT: | Westminster Lawyers Pty Ltd |
Orders
That by way of settlement of property the Husband assign to the Wife absolutely and beneficially one half by value ($100 000) of his share portfolio provided that the Wife indemnify the Husband and keep him indemnified with respect to any liability for CGT with respect to the said shares and the Husband indemnify the Wife and keep her indemnified with respect to any unpaid share capital or margin calls in relation to such shares.
That by way of settlement of property the Husband pay to the Wife the sum of $150 000 which shall be payable:
(a)As to the sum of $100 000 by paying such sum in cash to the wife on or before 31 December 2008 or, at the election of the Husband, paying to the Wife the proceeds of sale of one half of the Husband’s share portfolio subject only to the deduction of the Husband’s CGT liability with respect to the realisation of such shares on or before 31 December 2008.
(b)As to the sum of $50 000 by paying such sum in cash to the Wife on or before 31 December 2009 together with interest thereon from 1 January 2009 until paid in full at a rate of 2 percent above the prime rate from time to time determined by the Reserve Bank of Australia payment of which monies shall be and remain a charge over the interest of the Husband in the properties A Street and C Street until the whole of such sum together with accrued interest has been paid to the Wife in full.
Reserve liberty to apply on 7 days notice for further orders implementing these orders.
That the Wife’s claim for lump sum spousal maintenance be dismissed.
That the Husband pay interim spousal maintenance in the sum of $626 per week until 30 June 2010.
That costs be reserved.
That the parenting proceedings stand over to a date to be fixed.
IT IS NOTED that publication of this judgment under the pseudonym Sacamano & Sacamano is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth)
| FAMILY COURT OF AUSTRALIA AT PARRAMATTA |
FILE NUMBER: PAF 245 of 2006
| MS SACAMANO |
Applicant
And
| MR SACAMANO |
Respondent
REASONS FOR JUDGMENT
The proceedings before the Court relate to settlement of property, periodic and lump sum spousal maintenance.
Ms Sacamono, (“the wife”) by her application filed 3 March 2006, as clarified by her Counsel in a Minute of Order provided at the commencement of the trial, sought orders in the following terms:
1. That the husband pay to the wife by way of Spouse Maintenance an amount of
1.1Up until January 2010 $823.00 per week plus CPI index increases;
1.2 From 2010 to 2020 $52 per week together with CPI increases;
1.3Lump sum payment of Spouse Maintenance in the amount of $146,352.00.
PROPERTY ORDERS
2.That the husband pay to the wife within twenty eight (28) days of the date of these Orders the sum of $820,000.00 by way of final property settlement.
3.That the husband is declared to be the sole owner of the property at [A Street]. The wife shall have no right or entitlement in law or in equity to this property.
4.In the event that the husband defaults in effecting Order 1 within twenty eight (28) days of these Orders, then the husband shall do all acts and things and execute all deeds, documents, instruments and writings necessary to forthwith sell the following properties and shares:
(a)the [business] at [G], Victoria;
(b)[A Street property]
at a price agreed or equivalent to the mean of two (2) valuations by registered valuers being members of the Australian Institute of Valuers, both obtained at the expense of the husband, such valuations to be made not more than two (2) weeks apart from each other.
5.That in the event that either or both properties referred to above in Order 3 are not sold within three (3) months from the date of listing the properties for sale, then the husband shall do all acts and things and execute all deeds, documents, instruments and writings necessary to procure the sale of the former matrimonial home at [A Street] and the [business] at [G], Victoria by public auction and in particular.
(a)place the said [A Street] and [G] properties with an auctioneer (hereinafter called “the auctioneers”) for sale by public auction at the earliest Possible date;
(b)execute all documents requested by the auctioneers;
(c)request the auctioneers to recommend a reserve price to be placed on the said [A Street] and [G] properties for the purpose of the auction sale and accept such recommended reserve price;
(d)pay the auctioneers any sums requested for advertising expenses in relation to the auction;
(e)attend at the auction sale or sales and negotiate with the highest bidder in the event that the reserve price is not reached and accept the advice of the auctioneers as to the acceptance of a price less than the reserve price;
(f)execute contracts of sale;
(g)co-operate in every way with the auctioneers in relation to the auction of the said [A Street] and [G] properties;
(h)execute all other documents necessary to complete the sales.
6.Simultaneously with Order 3 above, the husband will ensure the sale of the Share Portfolio with St George Bank, (formerly HSBC) in the husband’s name.
7.That the sale proceeds of the [G] and [A Street] properties and sale of the Share Portfolio with HSBC shall be disbursed as follows:
(a)all costs associated with the sales;
(b)towards any allowance for Capital Gains Tax incurred on the sales;
(c)discharge of the HSBC Lending Loan associated with the shares;
(d)$966,352.00 to the wife;
(e)balance to the husband.
8.That the Mercedes motor vehicle registration number […] presently in the name, possession and control of the husband shall remain his absolutely to the exclusion of the wife.
9.That the BMW motor vehicle registration number […] presently in the name, possession and control of the wife shall remain hers absolutely to the exclusion of the husband.
10.That all other items of property, financial resources, shares and superannuation presently in the name, possession or control of the wife shall remain absolutely in the possession and control of the wife to the exclusion of the husband.
11.That all other items of property, financial resources, shares and superannuation presently in the name, possession or control of the husband shall remain absolutely in the possession and control of the husband to the exclusion of the wife.
12.That pursuant to Section 106A of the Family Law Act the Registrar of the Court shall be appointed to sign all documents required to be signed by the parties in the event that they fail or neglect to do so.
13.That both the husband and wife shall do all acts and things and give all consents and execute any documents in relation to give effect to these Orders made herein.
PARENTING ORDERS
14.That the mother shall have sole parental responsibility of the child […].
15.The father shall see the child as agreed between the parties.
Mr Sacamano (“the husband”) by his response to the wife’s application opposed the granting of relief in the terms sought by her and, as clarified by his learned Counsel in a Case Summary document provided at trial sought orders in the following terms:
1.For the purposes of these Orders, the following words and phrases shall have the following meanings:
(a)“[C Street]” shall mean the real property located at [C Street], Victoria; being the land contained in Certificate of Title Volume […], Folio […].
(b)The “[Business]” shall mean the husband’s 60% interest in the [Business at G].
(c)The “Business Loan” shall mean the business loan from the ANZ Bank secured partly by way of mortgage over the title of [the A Street property] and partly by way of fixed and floating charge over the [G Business], that loan currently having an outstanding balance of approximately $1,394,472.
(d)The “Mercedes” shall mean the husband’s 1998 Mercedes […], registered […].
(e)The “Shares” shall mean the husband’s share portfolio, which has a current value of approximately $209,429.
(f)The “BMW” shall mean the wife’s 1999 BMW […], registered […].
(g)The “BMW Loan” shall mean the loan secured by the BMW (if any).
(h)The “Husband’s Savings” shall mean the savings of the husband in this bank accounts.
(i)The “Contents” shall mean the furniture and chattels contained in the home at [A Street].
(j)The “Husband’s Super” shall mean the husband’s superannuation entitlement with the Navigator Superannuation Fund.
(k)The “Wife’s Super” shall mean the wife’s superannuation entitlements with the Guild Superannuation Fund.
(l)The “HECS Debt” shall mean the amount owing by the wife to the Australian Government arising from the wife’s HECS debt.
(m)The fit out loan will mean the amount owing by the husband to Suncorp Metway in the sum of $111,875.00.
(n)The [IP Finance] loan shall mean the amount owing by the husband to [IP Finance] for forward charging in the sum of $88,328.00.
2.The husband shall retain the following assets to the exclusion of the wife, who shall have no further interest in those assets, either at law or in equity:
(a)[C Street property].
(b)[G Business].
(c)The Mercedes.
(d)The Shares.
(e)The Husband’s Savings.
(f)The Husband’s Super.
(g)The Husband’s Super.
(h)The Contents.
3.The wife shall retain the following assets to the exclusion of the husband, who shall have no further interest in those assets, either in equity or in law:
(a)The BMW.
(b)The Wife’s Super.
4.The husband shall remain liable for payment of the business Loan. The husband shall indemnify the wife and hold the wife indemnified in relation to any liability she may have in relation to that debt.
5.The Wife shall remain liable for the BMW loan and the HECS Debt. The Wife shall indemnify the husband and hold the Husband indemnified in relation to any liability he may have in relation to those debts.
6.The husband shall within three months of the date of these Orders pay to the wife the sum of $117,000.00 and upon such payment the wife shall remove caveats lodged against the properties at [A Street] and [C Street].
7.Unless otherwise specified in these Orders and, save for the purposes of enforcing any monies due under these or any subsequent Orders:
(a)Each party shall be solely entitled to the exclusion of the other to all other property (including choses-in-action) in the possession of such party as at the date of these Orders.
(b)Monies standing to the credit of the parties in any joint bank account shall be divided equally between them.
(c)Each party shall forego any claims they may have to any superannuation, long service leave, redundancy, retirement oand like benefits belonging to or earned by the other.
(d)Insurance policies shall remain the sole property of the owner named thereon.
(e)Each party be solely liable for and indemnify the other against any liability encumbering any item of property to which that party is entitled pursuant to these Orders.
(f)Any joint tenancy of the parties in any real or personal property is hereby expressly severed.
8.Order 1 made by this Honourable Court on 11 October 2006 (not by consent) shall be discharged.
Although Counsel for the parties remained sanguine that the parenting aspect of the case would be resolved, and the evidence at trial in the financial proceedings leaves little room for uncertainty as to the likely outcome of the parenting dispute, the issue remained unresolved at the conclusion of the trial of the financial proceedings.
In the circumstances of the case, and to hopefully avoid the parties’ further angst or expense, the Court reserved for determination on a later date suitable to Counsel for the parties and the Court the determination of the parenting dispute should that dispute fail to be resolved.
Credit
To the extent that credit might be thought to assume significance in the proceedings by reference to the pleadings and affidavit material, that potential failed to materialise.
Each party presented as a refreshingly frank, honest and impressive recounter of fact. Significantly absent from the evidence of either party were attempts to denigrate the efforts of the other party or promote or otherwise advance his or her own case.
It is unnecessary to detail why the Court concludes that the evidence of each party is essentially reliable and able to be accepted. Two examples however hopefully serve to illustrate why the Court concludes as it does with respect to credit.
During the course of her oral evidence, the wife volunteered that she proposed returning to the practice of her profession in 2010 when the infant child of the parties would start school. Whilst it was reasonable for the wife to adopt that course, in the circumstances of this case, the wife could have chosen, with some justification, to suggest a later time at which she might wish to resume the practice of her profession.
As will be seen, the concession made by the wife has considerable potential financial significance. The evidence before the Court suggests that it was unlikely that the wife would not have realised that her concession had such potential significance. Against the background of a concession of that kind, in the absence of cogent reasons for not doing so (and there are none), it would be difficult not to accept the broad thrust of other evidence given by the wife.
The husband readily conceded that a special condition in a contract pursuant to which he acquired a property from his parents without payment of the consideration referred to in such contract shortly prior to marriage, was at least in part pursuant to a desire on the part of the husband and his parents to protect a property which had resulted from the husband’s parents’ hard work over many years prior to its transfer to the husband.
Whilst, as the transcript of the evidence during which that concession emerged would confirm, the Court would probably have inferred that such was the case, the readiness with which the husband made the concession and the difficulty of forensically proving what he conceded had he declined to do so, reflect favourably on the husband’s credibility. The evidence before the Court suggests that the husband would have been aware of the potential significance of the concession which he thus made.
As with the wife, in the face of a concession of this kind, absent cogent reasons for not doing so (and there are none), it would be difficult not to accept other evidence given by the husband. To the extent that it was ultimately asserted that the husband had failed to adequately explain the fate or movement of any significant sums of money in the pre or post separation period, the Court accepts the broad thrust of the husband’s evidence. If, which is not necessarily the case, any part of the wife’s case is that the husband has made less than full and frank disclosures of his finances, the evidence fails to establish that state of affairs.
The husband’s father was, sensibly in the Court’s view, not required for cross-examination on what remained after objections to his affidavit in evidence in chief. With respect to him, little now turns on the husband’s father’s affidavit evidence.
Material Facts
A number of material facts provide a helpful background to the proceedings. The Court is particularly indebted to learned Counsel for the husband for the carefully, and even-handedly, prepared “chronology” provided at the commencement of the trial.
The husband was born in March 1975 and is 33 years of age.
The wife was born in May 1978 and is 30 years of age.
It is not controversial that the parties married in March 2003 and finally separated, at the latest, during January 2005. To the extent that the husband asserts that the parties separated earlier, in October 2004, that is no doubt his genuine perception of the situation, as is the wife’s that the parties did not finally separate until January 2005.
The absence of any significant event or occurrence between October 2004 and January 2005, particularly having regard to the duration of the parties’ cohabitation and the time which has elapsed since it terminated render of no consequence whether separation occurred in October 2004 or January 2005.
There is one child of the marriage, who was born in March 2005, two months after the last date on which the parties may have separated. The child has primarily resided with the wife since her birth and will continue to do so, at least until she is 18 years of age.
Both parties have tertiary qualifications and are legally qualified to practice a profession. Both parties were qualified professionals prior to the marriage.
The parties did not cohabit until their marriage in May 2003. Both parties were then in employment in their profession.
In May 2004, eleven days prior to the marriage of the parties, the husband’s parents transferred to him a property at A Street in the state of Victoria (“A Street”) in circumstances which will receive closer scrutiny later in these reasons.
It is sufficient for present purposes to record that the sale price stated in the contract was $455 000 and that, save for the payment of Stamp Duty and, subsequently, a payment of $8 000 which was referrable to the First Home Owners Grant, no part of the stated purchase price of the property has been paid by the husband to his parents.
When the parties married, the husband had an interest (to use a neutral term) in A Street, a one half share in a business called S Business, a share portfolio which was subject to a margin loan of $100 000, a 1998 Mercedes Benz motor vehicle which was subject to a lease, savings of approximately $22 000 and superannuation entitlements of approximately $31 000.
The wife at the time had savings which may have approximated or slightly exceeded those of the husband, a BMW motor vehicle subject to a lease and an outstanding HECS debt.
The husband was employed, or self-employed, in his profession throughout the cohabitation. The wife was employed for part of the cohabitation, ceasing employment in her profession in September 2004 as a result of her pregnancy with the child.
The cohabitation of the parties was punctuated by brief separations. Given that on any view of the evidence the cohabitation did not exceed 20 months, and ended 3 years and 10 months ago in any event, little useful purpose is served by seeking to make findings of fact with respect to the various disruptions to the parties’ cohabitation, assuming, which it cannot, that such findings of fact could be made on the balance of probabilities.
In May 2004, together with his business partner, another professional, the husband commenced negotiating to purchase G Business at G in the State of Victoria (“G Business”).
In June 2004 the husband contracted to purchase a 60 percent interest in G Business for $1 860 000 plus legal expenses. The husband completed the acquisition of his interest in G Business by applying the net proceeds of sale of his interest in S Business in the sum of $250 000 together with the sum of $1 610 000 provided by the ANZ Bank secured by registered first mortgage over the A Street property and a personal guarantee and indemnity by the husband.
At the end of July 2004 the husband and his business partner took over the operation of G Business. The husband commenced work at G Business in September 2004.
Subsequent to separation, and after the birth of the child, the husband commenced to pay child support as assessed by the Child Support Agency. At the date of trial, the husband was paying $15 882 per annum or $305 per week by way of child support for the child. There does not appear to be any ongoing disputation with respect to the husband’s child support obligations.
In July 2006, in response to a perceived need to do so in the face of competition from another business, the husband and his business partner refitted G Business at a cost of $237 000, $215 801 of such cost being advanced by M Finance.
On 7 August 2006, the husband purchased a property at C Street in the State of Victoria (“C Street”) for $450 000 in his capacity as a director of H Pty Ltd which is the Trustee of the JS Trust. The acquisition was substantially funded with borrowings from the ANZ Bank.
Sensibly in the Court’s view, the husband conceded through his learned Counsel that H Pty Ltd and the JS Trust could be seen as alter egos of the husband for the purpose of these proceedings.
On 11 October 2006 Waddy J ordered that the husband pay $350 per week by way of interim spousal maintenance. That order continues. There is no evidence that the husband has failed to comply with his obligations pursuant to the order.
In August 2008 the husband remarried. Prior to that time the husband lived with his parents during the post separation period. Throughout the post separation period the wife, and after her birth the child, have lived with the wife’s parents.
The property of the parties
At the conclusion of the trial, learned Counsel for the husband provided the Court with four possible joint balance sheets. Such balance sheets revealed the various scenarios which would result from the Court’s determination of disputed balance sheet items, and produced, on the outcome most favourable for the husband, net assets of $252 699.70 as against the outcome most potentially favourable for the wife which resulted in net assets of $1 454 087.59.
It is thus necessary to resolve a number of balance sheet items.
Whilst it is common ground that the husband is the registered proprietor of A Street, and that the property has a value of $690 000, the parties disagree as to the nature and value of the husband’s interest in the property. The husband asserts that he holds the property on trust for his parents and thus has no beneficial interest in it. In the alternative, the husband asserts that if he does have an interest in the property, that interest is subject to unpaid purchase monies in the sum of $447 000.
As noted earlier, it is common ground that the husband acquired A Street in May 2003, shortly prior to the parties’ marriage. It is also common ground that, other than the $8 000 remitted to his parents upon the husband’s receipt of the First Homeowner’s Grant in the sum of $8 000, and the payment of Stamp Duty, the husband has not made any payments with respect to the acquisition of the property.
The evidence reveals that the husband has represented the property as beneficially his to the ANZ Bank when seeking finance and has, without apparent objection from his parents, charged the property in favour of the ANZ Bank for borrowings made by him, principally for the acquisition of his interest in G Business.
The key to determining the interest, if any, that the husband has in the A Street property, and its nature, is the special condition to the contract pursuant to which the husband acquired the property from his parents in May 2003.
The special condition to the contract states:
Notwithstanding the contract contains a consideration of $455,000.00, the Vendors are prepared to transfer the subject property to the purchaser without payment of any monies but in the event that the purchaser disposes of any part of his interest in the property or dies, that the purchaser undertakes to transfer the subject property back to the Vendors and all costs associated with such transfer will be payable by the purchaser. The purchaser consents to the Vendors lodging a Caveat against the Title to the subject property in order to reinforce the agreement herein reached between the parties and the costs of lodgement of such caveat will be payable by the purchaser.
It is common ground that the husband became, and remains, the registered proprietor of the property. It is clear from the special condition that, if the husband dies or “disposes of any part of his interest” in A Street, the property reverts to the husband’s parents.
Provided that the husband does not die or dispose of his interest, the property is his to use or deal with as he pleases. Nothing in the special condition or elsewhere in the contract pursuant to which the husband acquired A Street suggests otherwise. The husband’s own conduct, and his parents’ acquiescence in such conduct, reinforces that impression.
Learned Counsel for the husband made a number of submissions in support of his assertion that the husband held his property on trust for his parents. The submissions of learned Counsel for the wife were rather more directed to a conditional gift. Another possible view of the transaction between the husband and his parents was that it gave rise to a life estate on the part of the husband. Ultimately, it is unnecessary for present purposes to express a concluded view as to the precise nature of the husband’s equitable interest in A Street.
The only valuation evidence with respect to A Street assumes that the husband beneficially owns the property which is vested in his name. On any view of it, as learned Counsel for the husband sensibly conceded, whatever rights the husband has with respect to A Street, those rights have been, and are likely to continue to be valuable. To the extent that previous borrowings by the husband secured in favour of the ANZ Bank have not reduced his “equity” in the property to a level which precludes further borrowings being secured against the property, A Street is available to the husband as potential security for borrowings required to comply with any orders made by the Court in these proceedings.
Whilst the Court must attempt to produce a balance sheet, so doing in a case such as this does not have the significance or impact which it would have in many other cases.
Sensibly, there is no application before the Court to interfere with the special condition in the contract pursuant to which the husband acquired his interest in A Street. There was no “anticipation” of an order under Part VIII of the Family Law Act 1975 (Cth) (“the FLA”) at the time the contract was entered into. Fairly, cross-examination of the husband did not suggest the transaction to have been a sham. The husband’s father was not required for cross-examination and thus no assertion that the special condition having been a sham was ever suggested to him.
There is no doubt that the husband’s interest in A Street, whatever it actually is, is “valuable”. Notwithstanding the uncertainty which the special condition creates, regarding the husband as having total and unfettered equitable ownership of the property is a finding not reasonably open to the Court.
Only two figures emerge from the evidence as a possible valuation of the husband’s interest in A Street in a balance sheet sense. Those figures are zero or $690 000. Neither could realistically reflect the value of the interest in the property to the husband. To include A Street at $690 000 and offset against that figure the unpaid purchase price of $455 000, or any other similar sum, would not be justifiable having regard to the special condition in the contract pursuant to which it was acquired. In the circumstances, the Court proposes excluding A Street, and any liability alleged to relate to it, from the balance sheet, and treating the rights conferred upon the husband by the contract pursuant to which he acquired the property, in the light of whatever the special condition may actually mean, as a financial resource.
Given that the property was acquired entirely without direct or indirect contribution from the wife, and that her contributions to the conservation or improvement of the property must, on any view, be no more than minimal, this approach does not have the potential to visit an injustice upon the wife. On the other hand, as a valuable financial resource, this approach enables the Court to more fairly reflect the true impact of this resource in the context of Section 75(2).
The second disputed balance sheet item is the husband’s 60 percent interest in G Business. On behalf of the wife, in reliance upon the expert opinion evidence of Mr P, a figure of $1 643 165 was asserted. On behalf of the husband, in reliance upon the expert opinion evidence of Mr F, a figure of $1 436 000 was asserted.
Mr F, who was originally appointed as a joint expert, and Mr P, who was referred to at trial as the wife’s “shadow expert”, conferred and produced a very helpful memorandum dated 30 October 2008. Notwithstanding their best endeavours, for reasons which are understandable, Mr F and Mr P were unable to bridge the modest divide between their respective valuations of the husband’s interest in G Business.
As their joint memorandum reveals, the issues which separated the two experts were two in number. The first of those issues, the adjustment appropriate to be made for the purpose of assessing future maintainable earnings for employed professionals, is ultimately an issue of fact. The second, the capitalisation rate, or multiplier applied to the adjusted future maintainable earnings (adjusted EBITDA) emerges as purely an exercise in the application of individual expertise.
So far as the difference of opinion with respect to the appropriate adjustment to be made with respect to employed professionals was concerned, in essence Mr F relied upon what the husband told him G Business paid to employed professionals. In essence, in the absence of any reason for doubting what he was told, or concluding that what was being paid was excessive, Mr F was content to rely upon the figures provided to him by the husband.
The husband’s evidence underpinned the figures upon which Mr F relied. No cross-examination of the husband provided a rational basis for doubting the reliability of the evidence given by him in that regard. Mr F disavowed any expertise in relation to the appropriate level of remuneration, as did Mr P.
Fairly, Mr P conceded in oral evidence that he saw nothing to suggest that professionals employed by G Business were being underpaid or overpaid, or that there was anything to arouse suspicion in relation to such matters.
For his part, Mr P relied upon figures emerging from enquiries by reference to the Guild Wage Rates Schedule effective from 1 October 2007 and the median hourly rate for the relevant professionals in charge on two bases emerging from a survey produced by
It is readily apparent that the basis upon which each expert approached the adjustment for the remuneration of an employed professional was logical and reasonable. The Court does not suggest that either expert was in error in proceeding in reliance upon the data upon which each relied. Given however that the Court must express a preference, and particularly having regard to the concession referred to above and very fairly made by Mr P, the Court prefers to have regard to what is actually being paid than to what might be paid. On the assumption, reasonably held, that the husband and his business partner pay no more than they reasonably need to retain appropriate professional staff at G Business, there is much to be said for preferring to rely upon what is paid than what might be.
Thus preferring the figures relied upon by Mr F to those relied upon by Mr P, and without suggesting that Mr P is in error, the adjusted EBITDA for the purpose of calculating the value of the husband’s interest in G Business is accordingly $444 000.
The second issue which separated the experts related to the “capitalisation rate” appropriate to be applied to the future maintainable earnings of the business. Mr P, very frankly and fairly agreed that the difference between his range of capitalisation rates and Mr F’s range of capitalisation rates largely reflected each expert’s opinion of “risk” by virtue of recent and anticipated competition for that profession.
Whilst each expert had some regard to a report prepared in January 2008 on behalf of the ANZ Bank by Rose Partners, as the oral evidence of Mr P and Mr F confirms, ultimately the preferred capitalisation rates requires consideration of very limited issues.
Mr F, who suggested a capitalisation rate of between 5 and 6 times EBITDA, compared with Mr P’s 5.6 to 6 times EBITDA, conceded that this range was “wider than the range that would generally be adopted”.
It is common ground that there are potentially two competitors relevant to the assessment of “additional risk” which in turn impacted upon the capitalisation rate. There is no question that L Company operates the same business within reasonably close proximity of G Business. (See Exhibit R1). Mr F clarified in oral evidence that he was influenced by reported “overtures” by another business entity “W Company”. As the documentation to which Mr F was referred by learned Counsel for the wife confirmed, whatever overtures W Company may have been making, that had apparently not reached the point of any approach to the regulatory authorities.
In cross-examination, having confirmed the two bases in reliance upon which he determined his range at the lower end of his capitalisation multiplier, Mr F suggested that, if reliance upon the possibility of W Company commencing business in the G area was not relevant his range would become 5.25 to 6. Objectively, in the absence of more compelling evidence than has been adduced in support of Mr F’s valuation, the Court does not consider that reliance upon what W Company may or may not do in the future is, in the circumstances of this valuation, a matter which could properly impact upon determining the capitalisation rate.
The question then becomes whether Mr P’s range should be preferred to Mr F’s adjusted range, albeit that only involves a disparity of .25. Mr P fairly conceded that his researches had not revealed a purely directly comparable sale to which regard could be had for a purpose of deducing, or testing, a hypothetical valuation of G Business. Mr F did not suggest otherwise.
The methodology by each expert was impeccable. No criticism was directed by learned Counsel for the parties to the methodology of either expert. Ultimately, as Mr P suggested, and Mr F did not dispute, determining the cap rate involves a subjective application of expertise. It is unsurprising that the current differences have emerged, minor though they are.
The absence of a purely directly comparable sale in the market place denies each expert in this case the ability to thereby underpin his opinion, but also precludes either expert, or the Court, from concluding that one is inherently preferable to the other.
In circumstances where, other than by a purely arbitrary decision, there is no rational basis for preferring the opinion of Mr P to that of Mr F or vice versa, the average of the ranges has much to commend it. The question is whether that is a permissible approach for the Court to adopt. In Federal Commissioner of Taxation v St Helens Farm (ACT) Pty Ltd (1980) 146 CLR 336 Mason J said at 381:
This Court has consistently applied the rule that on a question of valuation an appellate tribunal is not justified in substituting its own opinion for that of the court below unless it is satisfied that the court below acted on a wrong principle of law or that its valuation was entirely erroneous (The Commonwealth v. Milledge; Commissioner of Succession Duties (S.A.) v. Executor Trustee and Agency Co. of South Australia Ltd.; The Commonwealth v. Reeve). See also Emerald Quarry Industries Pty. Ltd. v. Commissioner of Highways. As with the assessment of damages, especially in personal injury cases, the valuation of property by a court has many of the characteristics of a discretionary judgment. Valuation is a matter of estimation, not of precise mathematical calculation. It certainly involves the making of a value judgment in the metaphorical as well as the literal sense. (footnotes omitted)
In the absence of any authority precluding the Court from making a “value judgment” of the kind described by Mason J, the Court proposes adopting the figure of 5.625 which emerges when the figures relied upon by Mr P and Mr F are averaged. Applying 5.625 to the future maintainable earnings of $444 000, the figure of $2 475 000 emerges and will be regarded as the figure relevant for present purposes. The husband’s 60% share is thus worth $1 485 000.
The wife’s BMW motor vehicle was agreed to be worth $14 000 and the husband’s Mercedes motor vehicle is agreed to be worth $16 000.
The husband’s share portfolio, in the light of evidence given by him at trial and able to be accepted, is worth approximately $210 00.
The husband has an ANZ Premium Cash Management Account with $14 907.94 in it, a Bendigo Bank Cheque Account with $12 405 in it and a Westpac Business Cheque Account with $2 912.65 in it.
The husband has CMC Market shares worth $193.12 and has prepaid legal fees of $76 513.88 of which the evidence reveals approximately $50 000 to have been paid from the sale of the shares which the husband had at separation. To include $50 000 but exclude the balance ($26 513.88) generated from income from other sources in the post separation period would be appropriate.
The wife has prepaid legal fees of $7 910.05.
Learned Counsel for the wife sought that the Court add back some $20 585 which the husband drew against his ANZ Business Loan to finance his remarriage earlier this year. Given that the drawings were very recent, and clearly reflected in the liabilities of the parties, adding back that sum, whatever it was used for by way of capital or other expenditure, would be justifiable. The reality is that the expenditure was not business related supports so doing.
C Street is agreed to be worth $490 000.
The assets of the parties are accordingly worth $ 2 323 913.76.
The liabilities of the parties
That the liabilities of the parties are not insignificant is not in doubt.
The husband’s ANZ Business Loan with respect to his interest in G Business currently stands at $1 394 472.65. Particularly having regard to the Court’s conclusion with respect to the adding back of $20 585, including the sum at that figure, rather than the lesser figure asserted on behalf of the wife of $1 358 728 would seem appropriate.
The wife continues to have a HECS debt of $17 672 whilst the husband owes his parents $18 000 with respect to his Mercedes motor vehicle. It will be immediately apparent that the values of the motor vehicles possessed by each party, albeit in different ways, are virtually completely offset by these debts.
The wife owes her parents $7 910.05 for legal fees. Those legal fees having been added back, it is appropriate to allow the debt which enabled the fees to be paid and thus added back.
Although it is not entirely clear, the probabilities are that Mr P and Mr F factored into the net assets of G Business, the IP Finance Business Loan and Shop Fit Out Loan asserted on behalf of the husband by his learned Counsel in final submissions. Ultimately, the Court does not propose including these sums as it has not been established on balance that they should be taken into account or that they have not been taken into account by the experts in reaching the valuation of the business. Given that neither expert was cross-examined in relation to the topic, the reference by each of them to “net assets employed by the business” suggests that the debts attaching to the tangible business assets of G Business were factored into the expert’s calculations.
There is a mortgage over the C Street property of $379 042.
Accordingly, the liabilities of the parties approximate $1 817 096.70. The net assets of the parties accordingly approximate $506 817.06. Set out below in graphic form are the parties’ assets and liabilities and quantum thereof:
Assets
60% interest in G Business
$ 1 485 000
C Street
$490 000
Wife’s BMW
$14 000
Husband’s Mercedes
$16 000
Husband’s share portfolio
$210 000
ANZ Premium Cash Management Account
$14 907.94
Bendigo Bank cheque account
$12 405
Westpac account
$2 912.65
CMC Market Shares
$193.12
Husband’s prepaid legal fees
$50 000
Wife’s prepaid legal fees
$7 910.05
Add back to ANZ Business loan
$20 585
Total assets
$2 323 913.76
Less Liabilities
ANZ Business loan G Business
$1 394 472.65
Wife’s HECS loan
$17 672
Husband’s debt to parents for Mercedes
$18 000
Wife’s debt to parents for legal fees
$7 910.05
Westpac mortgage (C Street)
$379 042
Total Liabilities
($1 817 096.70)
Net Assets
$506 817.06
As noted earlier, the husband has a financial resource in the A Street property the precise value of which is not able to be determined on the evidence before this Court.
The husband has a superannuation interest which is currently said to be worth $75 772, somewhat less than was previously the case due no doubt, as the husband suggested in evidence, to the recent decline in the value of listed shares.
The wife’s most recent financial statement reveals an interest in the Guild Superannuation Accumulations Plan of $13 232 as the value of her superannuation interest.
Contributions
Although the Court could approach the valuation of contributions on an asset-by-asset basis, in the circumstances of this case the Court concludes the global approach to be preferable. This is particularly so given the Court’s conclusion as to the manner in which the husband’s interest in A Street should be regarded.
As learned Counsel for the wife submitted, the global approach does have the potential to avoid a degree of unreality which could arise in this case from a series of asset-by-asset determinations. Ultimately, as the High Court made clear in Norbis v Norbis (1986) 161 CLR 513, the choice of approach to the evaluation of contributions does not necessarily mean that justice and equity will or will not be achieved.
The Court proposes considering contributions by reference to two periods: the period of cohabitation and the post separation period.
As noted earlier, the husband brought to the relationship an interest in a business, which interest he realised in 2004. The realisation of that interest generated a fund of $250 000 which the husband utilised for the acquisition of his interest in G Business. Within no more than 7 months of that acquisition the parties had finally separated. C Street was purchased well after the parties separated.
Whatever its value, the husband had a not insignificant share portfolio at the commencement of the parties’ relationship. Whatever the true nature of the husband’s equitable interest in it, and its value, A Street was acquired prior to the parties’ cohabitation commencing. On any view of it, the only asset of significance which was acquired during the parties’ cohabitation, the husband’s interest in G Business, was acquired, in terms of the husband’s equity, by the realisation of an interest which he had prior to the commencement of the parties’ relationship.
Whilst it would be reasonable on the evidence to conclude that the parties’ contributions on a periodic or day-to-day basis during their cohabitation could be seen as equal, the more difficult question is the significance of so finding. The probabilities are that the husband earned somewhat more than the wife during cohabitation but that the combination of the wife’s earnings and her contributions as homemaker should be seen as equal to the contributions made by the husband in those areas.
Realistically, on any view of the evidence, the wife’s contributions to the conservation of the assets which the husband had at the commencement of cohabitation and the asset which he acquired six months before the cohabitation ended could only be seen as indirect. To the extent that the wife contributed her income for periodic expenses during cohabitation, as she undoubtedly did, the husband would have had more available to him from his employment in his profession with which to conserve the assets he had when cohabitation commenced and the asset which he acquired during cohabitation.
Putting the wife’s indirect contributions to the assets which existed at the date of separation at their highest, having regard to the duration of cohabitation, the nature of the contributions the parties made and the origin of the assets of significance which existed when the parties’ cohabitation terminated, the wife’s contribution based entitlement must be seen as negligible. To suggest a contribution based entitlement for that period not exceeding $50 000, though necessarily arbitrary, would in the Court’s view be a generous but not excessive reflection of the wife’s contributions during that period.
In the post separation period, the wife has made the overwhelming non-financial contributions to the care of the parties’ child. Whereas in many cases that burden is relieved on a substantial and regular basis, through no fault of either the husband or the wife that has not been the case for these parties in the post separation period. Whilst it is not a criticism of the husband, he has made minimal non-financial contribution to the care of the parties’ child in the post separation period. The burden which has thereby fallen on the wife should not receive less recognition given that the evidence does not establish that it was the fault of the wife that the husband did not play a larger role in the care of the child than he did.
In the post separation period the husband has had the use and enjoyment of the great bulk of the parties’ assets. Realistically, given that the husband made a far greater contribution to their acquisition and conservation during cohabitation, and the only contribution to conservation, or acquisition in the case of C Street, in the post separation period, that ought not be a matter of significance in determining the parties’ contribution based entitlement.
In the post separation period the husband has appropriately supported the parties’ child and, from the time an order was made against him, the wife. The husband has undoubtedly had a significantly greater income than the wife during the post separation period but, as his learned Counsel pointed out, has made substantial contributions in order to “keep all the balls in the air” during that period. There is little doubt that, had the husband not skilfully managed his assets, investments and business, and service the very substantial liabilities attaching to them, there would today probably have been little or nothing to fight over.
To the extent that the wife’s contribution based entitlement was sought to be bolstered by virtue of her inability to re-enter the workforce during the post separation period by virtue of having the parties’ child, the Court does not consider that to be a matter of relevance in the evaluation of contributions. Essentially, contributions relate to what was rather than what might have been. What might have been may well have relevance under Section 75(2), but the Court does not consider in this case that it could or should when contributions are being assessed.
That is not to suggest that what was in the post separation period is disregarded. As earlier noted, the husband had available to him a significantly greater income than did the wife during this period. By virtue of the wife undertaking the overwhelming bulk of caring duties for the parties’ child, the husband was absolved of those duties and better able to pursue his business and other financial interests. The husband’s enjoyment of greater income during the post separation period can thus be seen as directly referrable to, and thereby indirectly contributed to, by the wife undertaking the overwhelming bulk of parenting duties during that period and, until these proceedings are determined, not causing the husband to have to deplete his capital or asset base.
In the Court’s view, to fail to reflect the wife’s indirect non-financial contributions in the post separation period in her favour in the assessment of contributions would be unjust and inequitable. Determining to what extent the wife’s contribution based entitlement should be enhanced by virtue of the post separation period is the more difficult question.
On the one hand, the evidence does not suggest any lack of skill or diligence on the part of the husband in conserving and maintaining, and in the case of C Street, acquiring assets in the post separation period. The most significant of the parties’ assets, the husband’s interest in G Business, clearly required a considerable commitment of effort.
For her part, by relieving the husband of virtually all obligation, other than financial, to care for the parties’ child, the wife has contributed indirectly to the conservation and/or improvement of the assets which existed at the time of separation and exist today.
Just as there is no reliable evidence of the net worth of the husband when cohabitation commenced, there is, unsurprisingly no reliable evidence of the worth of the husband when cohabitation ceased. It cannot be suggested that the Court’s evaluation of the contribution based entitlements of the parties at the present time has any empirical underpinning.
Notwithstanding these difficulties, the Court must reflect contribution based entitlements in financial terms, whether they be by reference to sums of money or percentages. In the circumstances of this case, percentage entitlements have little real meaning and considerable potential to cause an injustice.
Objectively, a contribution based entitlement of the wife by virtue of the post separation period of $50 000, though necessarily arbitrary, does in the Court’s view reflect the realities to which reference has been made.
Necessarily, having regard to the reality that the assets which existed or came into existence in the post separation period either were, or derived from, assets which the husband had at the commencement of cohabitation, the wife’s overall contribution based entitlement ($100 000) translates as a modest proportion of the current net assets of the parties (approximately 20 percent). Whilst it is conventional to express entitlements in percentage terms, no particular significance attaches to such percentages in cases such as the present. Each case turns on its own facts and circumstances. Others may well, on the evidence to which the Court has had regard, consider that the wife’s contributions are entitled to lessor or greater recognition. That is the nature of the exercise of discretion.
Section 75(2)
Section 75(2) undoubtedly favours the wife, the only question being to what extent. As will be seen, evaluating the various Section 75(2) factors which are relevant to this case does require some caution in order to avoid on the one hand failing to reflect relevant Section 75(2) factors in the wife’s favour whilst guarding against doing so in a manner which represents an impermissible double counting, thereby unfairly disadvantaging the husband.
The age and state of health of each of the parties (Section 75(2)(a)) does not operate in this case to alter the contribution based entitlements of the parties. There is no evidence that either party is other than in good health. Both parties are young and have professional qualifications.
Section 75(2)(b) is relevant but must be approached carefully in order to avoid double counting. The husband has a greater income than does the wife at present, and is likely, at least until 2010, to continue to have a greater income than will the wife. The parties have not dissimilar “physical and mental capacity” for appropriate gainful employment in their profession. The husband’s potentially greater earnings over the next few years, despite the not dissimilar capacity for employment of the parties, is referrable to the impact on the wife of having the almost overwhelming obligation to care for the parties’ child into the future. That factor of itself enlivens an adjustment in favour of the wife pursuant to a separate provision of Section 75(2).
The husband has, and will continue to have, greater “property and financial resources” than the wife in the future. That however is largely because at the commencement of cohabitation the husband had considerably greater property and financial resources than did he wife.
To adjust significantly in the circumstances of this case, where the disparity was so great at the commencement of cohabitation, the cohabitation having been so short, and having terminated so long ago, would be unjust. On the other hand, to completely ignore the disparity in property and financial resources in favour of the husband, would be unjust to the wife. This is particularly so when it is remembered that the husband has a valuable interest in A Street.
It ought not be forgotten that, although included in the balance sheet, the husband’s interest in G Business is not available to him, thus, whilst the husband does derive a greater income than the wife from the practice of his profession, the downside of so doing is that his major asset is not available to be used or otherwise utilised by him.
In the Court’s view, the single greatest Section 75(2) factor favouring the wife, and doing so to a very considerable extent, relates to the wife’s care of the parties’ child who is but 3 years of age. For potentially 15 years, the wife will have not less than 96 percent (on the husband’s own evidence) of the day-to-day obligation of caring for the parties’ child. This represents a massive commitment of time and effort on the part of the wife and must impact adversely on her ability to pursue employment, at least until the child is well established at school.
On balance, a not insignificant adjustment in the wife’s favour by virtue of the husband being likely to have a greater income than the wife for some years to come and greater property and resources than the wife is required. The resource represented by A Street is influential in this context.
Each party has superannuation entitlements, that of the husband considerably exceeding that of the wife. Given the ages of the parties, and thus the years before either could anticipate accessing their superannuation interests, the duration of their cohabitation, and time which has elapsed since that cohabitation terminated, to adjust other than minimally in the wife’s favour by virtue of the parties’ superannuation interests would not be justifiable.
To the extent that it is suggested on behalf of the wife that she is entitled to a settlement that enables her to purchase a property, the Court does not accept that such is the case. The Court must consider “a standard of living that in all the circumstances is reasonable” (emphasis added).
With respect to her, the wife brought to the relationship very modest assets. The husband by comparison brought a substantial share portfolio, an interest in the business which was realised the year after marriage and generated $250 000, and, at its lowest, the right to occupy the A Street property for life.
There is no evidence that the wife does not have a reasonable standard of living. The wife will receive, albeit far short of the sum claimed by her, a substantial payment by way of settlement of property as a result of the determination of these proceedings. Whilst that sum will fall short of the figure which the wife suggests, with some justification, would enable her to buy accommodation which she regards as suitable, that sum would enable her to provide a standard of living which is more than reasonable “in all the circumstances” of this case. To the extent that the husband might enjoy a higher standard of living than the wife, given the comparative asset positions of the parties prior to their short cohabitation that is not a matter which the Court considers should increase the wife’s entitlement.
Section 75(2)(h) is not relevant. As noted at the outset of these Reasons, the wife’s maintenance is, or will be, “under consideration”. It is clear from the wife’s evidence that her capacity to derive income in her profession is undiminished by the cohabitation between herself and the husband or its termination. The wife retains her registration in her profession and, as she readily revealed in oral evidence, is not required to undertake refresher or other retraining before resuming practice. No adjustment pursuant to this provision is thus appropriate.
At least inferentially, learned Counsel for the wife sought to enhance the wife’s entitlement by reference to Section 75(2)(j) of the Act which provides:
Matters to be taken into consideration in relation to spousal maintenance
…
(2) The matters to be so taken into account are:
…
(j) the extent to which the party whose maintenance is under consideration has contributed to the income, earning capacity, property and financial resources of the other party;
With due respect to the wife, whilst the wife’s indirect contributions, particularly in the post separation period with respect to the parties’ child, have indirectly assisted the husband to maintain and conserve his assets, the evidence does not establish that the wife has contributed to the husband’s income or earning capacity, given that the husband’s property and financial resources derive either from pre-cohabitation contributions by or on behalf of the husband or from the income earning capacity which he already had at the commencement of cohabitation and during cohabitation. To the extent that the wife has made indirect contributions of the kind envisaged by s 75(2)(j), these have been acknowledged and reflected in the contribution based entitlements of the parties. Quite apart from the absence of an evidentiary foundation for doing so, to again recognise these matters within the context of Section 75(2) would, in the Court’s view, be to count the same thing twice and unfairly so to the husband.
Counsel for the wife sought to rely upon “the duration of the marriage and the extent to which it has affected the earning capacity of the parties whose maintenance is under consideration” (Section 75(2)(k).
Significantly, this provision focuses on the “duration of the marriage”. The evidence before this Court does not suggest that the marriage, or its duration, has impacted upon the wife’s earning capacity. Quite simply, the wife is capable of now earning, albeit no doubt in monetary terms more now than then, what she was capable of earning at the commencement of cohabitation, and doing so in precisely the same manner as she did at that time. Realistically, it is not the duration of the marriage which will impact on the wife’s earning capacity in the years ahead, but rather it is having the overwhelming obligation (at least in a non-financial sense) of raising the parties’ child, who is only three years old, which is likely to adversely impact upon the wife’s earning capacity.
The wife’s evidence, which the Court accepts, is that during 2010 the wife will return to the workforce. There is no evidence to suggest that the wife will experience any difficulty in so doing in her profession. The evidence of Mr P and Mr F suggests that the wife could, by working as little as 20 hours per week, generate an income of not less than $700 per week from the practice of her profession. Thereafter, as the parties’ child progresses through her schooling, the wife could increase her earning capacity. Whether, before the child attains 18 years of age, the wife could ever achieve the same level of income as the husband is less certain, but that is not relevant for the purpose of this provision of Section 75(2) in any event.
Whilst the Court accepts, and will reflect in the Section 75(2) adjustment made in favour of the wife, the reality that the child which has resulted from the parties’ marriage has an ongoing and significant impact upon the wife’s earning capacity, the duration of the marriage has not, and no adjustment by virtue of this provision should be made.
Of partial relevance, at least until 2010, is the wife’s desire to continue her role as the child’s primary carer (Section 75(2)(l)). So doing however does not materially advance matters given that the Court will, by virtue of that desire, and the Court’s acceptance of its reasonableness, include in the Section 75(2) adjustment which it makes, an allowance for the disparity of income between the parties for some years to come.
There is no evidence that the wife cohabits with another person. The husband has remarried and presumably cohabits with his new wife. There is no evidence that the husband’s new wife represents a relevant financial resource to him. Nor is there any assertion on behalf of the husband that anything arising from his remarriage should operate to his advantage in the context of a Section 75(2) adjustment. Realistically, absent evidence that either party had re-partnered in circumstances involving significant affluence or significant penury, this provision ought not enliven an adjustment in either direction.
Section 75(2)(n) requires the Court to have regard to the terms of any order to be made or proposed to be made under Section 79 in relation to the property of the parties. Just how that should be taken into account is difficult to know in this case. Clearly, as a result of the Section 79 order the Court will make, the wife’s position will be materially enhanced and the husband’s correspondingly reduced. That would not of itself seem to be a reason to reduce what would otherwise be an appropriate Section 75(2) adjustment in the wife’s favour.
Section 75(2)(na) is not relevant. The husband has always paid, and will continue to go on paying appropriate and substantial child support. As these Reasons for Judgment hopefully make clear, the Section 75(2) adjustment to which the wife is entitled is primarily enlivened by her future obligation to care for the parties’ child and the consequences of that obligation on the income the wife is likely to receive. Without suggesting that the child support paid by the husband exhausts the financial commitments of the wife to care for the child, other than by assuming, which the Court does not, that the husband should discharge the totality of the child’s expenses, the Court could not justify increasing the wife’s entitlement pursuant to Section 75(2)(na).
Whether considered under Section 75(2)(o) or Section 79(2), reality demands that regard be had to the nature of the husband’s assets and the substantial debts attaching to them. On balance, the Court considers those factors relate more properly to the manner in which the wife should receive her proper entitlement than to the determination of its quantum.
It remains to determine what, in all the circumstances, is an appropriate adjustment in the wife’s favour by virtue of Section 75(2). In the light of the Court’s observations with respect to the various provisions of the Section that are relevant, without suggesting that it has an empirical or scientific underpinning, the Court concludes that an adjustment in the wife’s favour of $150 000 would be appropriate. Whilst it is clearly unsatisfactory to proceed from a qualitative analysis of s 75(2) to a quantitative reflection of such analysis, it is in nature of the exercise of discretion that such a “leap” must occur.
The likelihood that the wife could otherwise probably earn twice or more than twice what she could reasonably anticipate earning for some years after 2010 is of some assistance in appreciating how the figure of $150 000 was calculated, as is an unquantified appreciation of the impact over 15 years of the largely unrelieved obligation of attending to every aspect of the child’s upbringing.
Section 79(2) requires the Court to be satisfied that any order proposed to be made is just and equitable. As the Court’s Reasons for Judgment hopefully explain, this is a case in which the contribution based entitlements of the husband greatly exceed those of the wife (in a ratio of 4:1). By virtue of the circumstances of the parties’ child, s 75(2) heavily favours the wife (by approximately 30 per cent of the net asset pool).
By reference only to the balance sheet set out earlier in these Reasons, it may appear that the wife is receiving 50 per cent of the net assets of the parties. That however is by no means the case as, for the reasons which the Court has advanced, the balance sheet does not include any sum with respect to the A Street property, notwithstanding that it has historically been, and is likely to continue to be, of considerable value to the husband. Beyond recording that, in the exercise of a broad discretion, the Court is satisfied that the orders proposed are just and equitable, little more can productively be said.
For reasons which the Court articulated, the wife should receive pursuant to Section 79 the sum of $250 000. How that sum is to be paid requires some consideration.
It is common ground that the husband should transfer one half of his share portfolio (worth approximately $100 000 to the wife) provided that the wife will pay any CGT arising from the sale by her of the shares transferred to her subject to the roll over provisions of the relevant statutes.
It is also common ground that the husband liquidating the other half of this share portfolio will generate a CGT liability. The payment by the husband to the wife of the proceeds of sale of one half of the share portfolio less CGT will further, and substantially, satisfy the wife’s entitlement.
The matters which have been traversed in relation to the transfer of shares complicate to some extent calculating the balance of the wife’s entitlement after the share transfers and/or sales are completed, as the Court is not able to calculate the likely impost of CGT. Were the Court able to calculate CGT, the net asset pool would be correspondingly reduced. Although, in the circumstances of this case, the wife’s entitlement has not been determined on the basis of a percentage of the net asset pool, reducing the net asset base would see the wife’s entitlement diminish.
In the circumstances, to require the husband to pay to the wife $150 000 over and above the transfer to her of one half of the husband’s share portfolio, and thereby credit the husband with the payment of $100 000 would, though less than an entirely satisfactory approach, be substantially fair to both parties.
The Court will accordingly order that the husband transfer to the wife one half of his share portfolio (up to the value of $100 000) and pay a further sum to the wife of $150 000. Payment by the husband to the wife of $100 000 of the sum of $150 000 does not create significant difficulty. There seems no reason why that sum could not be paid by the end of December 2008, presumably by the sale of shares. Payment of the remaining sum of $50 000 however requires some thought.
A number of factors impact upon how, and in what time frame that sum should be paid. The first of those is the reality that the ANZ Bank has security over A Street, C Street, G Business, as well as personal covenants from the husband.
In the current financial climate it is not difficult to imagine that the husband may, particularly after he loses his share portfolio in its entirety, experience some difficulty in raising that sum.
Given the Court’s acceptance of the limitations on the husband’s interest in the A Street property, the sale of A Street as a means of satisfying part of the wife’s entitlement would not be appropriate or effective. There is a substantial debt over C Street relative to its agreed value.
To force the sale of G Business in order to satisfy the wife’s entitlement would have the potential, at least in the short term, to reduce the capacity of the husband to earn which contributed to the Section 75(2) adjustment which forms a substantial component of the wife’s overall entitlement. Moreover, the husband only has 60 percent interest G Business. The rights of his business partner with respect to that property also require consideration.
The provisions of Section 79(10) of the Act relevantly provide:
(10) The following are entitled to become a party to proceedings in which an application is made for an order under this section:
…
(b) any other person whose interests would be affected by the making of the order.
Although, sensibly in the circumstances of this case, there has never been any suggestion that the husband’s business partner would intervene or otherwise become a party to the present proceedings, the terms of s 79(10), commercial reality, and common sense all suggest that to fail to have regard to the reality that the husband’s finances are to a significant extent linked with those of his business partner would be unjust.
In Elsey & Elsey (1997) FLC 92 727 the Full Court (per Baker J) said:
In my opinion, trial judges must consider the economic consequences which flow from their orders before making them. Otherwise, the result achieved may not be just and equitable, as s 79 requires. Indeed, the provisions of s 79 clearly require trial judges to consider the effect of any proposed order upon the earning capacity of the parties before consideration is given to the s 75(2) factors.
The Court foreshadowed with Counsel for the parties the possibility of the husband being allowed time to pay part of the wife’s entitlement to her. The Court understands there to be no objection in principle to such a course. The Court does not perceive there to be any statutory impediment to such a course. Provided that the entitlement is finally determined, and the basis upon which the entitlement is to be received is also finally determined, the Court perceives there to be no philosophical hurdle to an order for instalment payments by virtue of Section 81 of the Act. Objectively, it is in the interest of both the husband and the wife that the husband be able to comply with the Court’s orders without the need for fire sales of any of his property.
Given the enmeshed nature of the husband’s interests, and the embeddedness of his creditors, it is probably in the wife’s interest that she affords the husband time to generate part of her entitlement, albeit on terms, rather than be left to seek to enforce such entitlement via the avenues of enforcement available under the Act. On the other hand, if the wife is to become in part the husband’s financier, he cannot realistically expect that to be on unduly benevolent terms.
In the circumstances, to require the husband to pay the wife by way of interest on the outstanding balance of her entitlement ($50 000) at a rate 2 percent in excess of the rate from time to time determined by the Reserve Bank of Australia to be the prime rate would provide the wife with a proper rate of interest and the husband with an incentive to liquidate her entitlement expeditiously. A period not exceeding 12 months would in the Court’s view strike a reasonable balance between the wife’s entitlement to be paid and avoiding jeopardising the husband’s financial survival.
The spousal maintenance claims
As noted at the outset of these reasons, there are two components of the wife’s spousal maintenance claim. Whilst it might not be technically strictly correct to do so, the Court proposes first considering the claim for lump sum spousal maintenance.
From as early as the decision of the Full Court in Spano (1979) FLC 90-707, the difficulties which confront an applicant for lump sum spousal maintenance have been recognised. The circumstances of this case do not provide a foundation for ordering lump sum spousal maintenance. The factors which influenced the Full Court in Spano have application to this case.
The wife’s own evidence, readily and fairly given, that she will resume employment in 2010 militates against making an order for lump sum spousal maintenance. Little more can or needs to be said about this aspect of the wife’s claim.
The husband will pay spousal maintenance in accordance with the Court’s order. If, contrary to the husband’s demonstrated record of financial responsibility, he fails to pay spousal maintenance there are ample avenues of successful enforcement of the Court’s orders.
The periodic spousal maintenance claim remains to be determined. The issue is limited to the reasonableness of the wife’s claim. Although a greater sum was asserted, the Court does not understand Counsel for the wife to cavil with the proposition that $626 per week represents the reasonable weekly needs of the wife for her own support.
Learned Counsel for the husband sensibly did not dispute that the husband had the capacity to pay such an order or, if an order was made, that it ought to operate until 30 June 2010. To the extent that it might be controversial, the Court finds the wife’s reasonable weekly needs for her own support to approximate $626. So far as the reasonableness of those needs is concerned, the Court does not accept that the wife failed to make out her claim.
Neither party was cross-examined with respect to his or her claimed weekly needs. That is sensible having regard to the apparent reasonableness of the weekly needs claimed by each party and the measure of similarity between the various components of the weekly needs asserted by each of them. Realistically, when costs of spending time with the child and certain business expenses are excluded from the husband’s weekly claimed expenses, the personal items which remain correspond quite closely, or in some instances exactly with those claimed by the wife. In some areas the wife’s claims exceed those of the husband whilst in others the claims of the husband exceed those of the wife. Overall, there is little net disparity.
Objectively, only by concluding that the husband’s claimed weekly expenses are unreasonable could the Court accept the submission of learned Counsel for the husband that the wife’s claimed weekly needs are unreasonable. The Court does not so conclude.
Objectively, at least until 30 June 2010, a period of about 5 months after the child will commence school and, on her own frank evidence, the wife will resume employment in her profession, the husband should pay spousal maintenance of $626 per week.
Mindful of the decision of the Full Court in Bevan & Bevan (1995) FLC 92 600, the Court records that it is aware that, by virtue of the order for settlement of property which it proposes making, the wife will receive a capital sum of not insignificant magnitude which, at least notionally, could be seen as generating income by way of interest from which the wife could contribute to her own support.
The Court does not however propose reducing the quantum of the wife’s weekly interim maintenance award by virtue of the proposed Section 79 order in her favour. In part that is because to do so would in reality be obliging the wife to, at least in part, pay her own maintenance out of a settlement of capital which included no provision for spousal maintenance.
More significantly however, the payment of capital is likely to be utilised by the wife for the purpose of acquiring accommodation for herself and the child. The wife currently, no doubt on somewhat favourable financial terms, lives with her parents. To some extent at least her reasonable weekly needs are thereby reduced, as is the husband’s obligation to support her on an income basis.
In the circumstances, to reduce the wife’s interim maintenance order by reference to some notional earnings on her settlement of property would not in the Court’s view be fair to the wife. This is particularly so when it is remembered that part of the sum which the wife will receive will in fact not be received for some time, the Court having accepted that time for the husband to raise at least part of the wife’s entitlement would be appropriate.
The Court proposes ordering that the interim spousal maintenance order expire on 30 June 2010 unless the wife secures its extension beyond that date. Such a course is to be preferred to the alternate of making an order “pending further order”. Having regard to the terms of s 72 of the Act, the wife should bear the onus of establishing an entitlement beyond June 2010, rather than the husband having to establish a negative in a case where he is likely to have little knowledge of the wife’s circumstances.
I certify that the preceding one hundred and sixty eight (168) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Coleman
Associate:
Date: 1 December 2008
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