Samper & Samper
[2021] FamCAFC 140
•5 August 2021
FAMILY COURT OF AUSTRALIA
Samper & Samper [2021] FamCAFC 140
Appeal from: Samper & Samper [2020] FCCA 1675 Appeal number(s): EAA 108 of 2020 File number(s): SYC 2499 of 2015 Judgment of: AINSLIE-WALLACE, WATTS & AUSTIN JJ Date of judgment: 5 August 2021 Catchwords: FAMILY LAW – APPEAL – PROPERTY – Where, given the way the parties presented their cases, it was open to the primary judge to value the husband’s business at the mid-point of a range given by an expert – Where the wife operated a second business under a partnership structure with the husband – Where findings as to the wife’s income and the profits from the partnership business were open to the primary judge – Inheritance – Where the husband received an inheritance post-separation – Assessment of post-separation contributions – Immaterial error – Where the primary judge did not err when considering s 79(4)(d)–(g) factors – Appeal dismissed – Costs ordered in a fixed sum. Legislation: Family Law Act 1975 (Cth) s 79 Cases cited: Bankstown Trotting Recreational Club Ltd v Chisholm (2016) 218 LGERA 428; [2016] NSWCA 274
Benson & Drury (2020) FLC 93-998; [2020] FamCAFC 303
Commissioner of Taxation (Cth) v St Helens Farm (ACT) Pty Ltd (1981) 146 CLR 336; [1981] HCA 4
Commonwealth v Milledge (1953) 90 CLR 157; [1953] HCA 6
Dasreef Pty Ltd v Hawchar (2011) 243 CLR 588; [2001] HCA 21
De Winter and De Winter (1979) FLC 90-605
Dickons v Dickons (2012) 50 Fam LR 244; [2012] FamCAFC 154
Hickey and Hickey and Attorney-General (Cth) (Intervener) (2003) FLC 93-143; [2003] FamCA 395
Horrigan & Horrigan [2020] FamCAFC 25
House v King (1936) 55 CLR 499; [1936] HCA 40
Jabour & Jabour (2019) FLC 93-898; [2019] FamCAFC 78
Malec v J.C. Hutton Pty Ltd (1990) 169 CLR 638; [1990] HCA 20
Sellars v Adelaide Petroleum N.L. and Ors (1994) 179 CLR 332; [1994] HCA 4
Division: Appeal Division Number of paragraphs: 80 Date of hearing: 15 April 2021 Place: Sydney Counsel for the Appellant: Mr Coleman SC with Mr Hodgson Solicitor for the Appellant: Malouf Solicitors Counsel for the Respondent: Mr Schonell SC Solicitor for the Respondent: Barry Nilsson Lawyers ORDERS
EAA 108 of 2020
SYC 2499 of 2015APPEAL DIVISION OF THE FAMILY COURT OF AUSTRALIA
BETWEEN: MR SAMPER
Appellant
AND: MS SAMPER
Respondent
ORDER MADE BY:
AINSLIE-WALLACE, WATTS & AUSTIN JJ
DATE OF ORDER:
5 AUGUST 2021
THE COURT ORDERS THAT:
1.Leave be granted to the Appellant to rely on their schedule of costs.
2.The appeal be dismissed.
3.Within 28 days, the appellant pay the respondent’s costs fixed in the sum of $30,418.
Note: The form of the order is subject to the entry in the Court’s records.
Note: This copy of the Court’s Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to 17.02 Family Law Rules 2004 (Cth).
IT IS NOTED that publication of this judgment by this Court under the pseudonym Samper & Samper has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
AINSLIE-WALLACE, WATTS & AUSTIN JJ:
By Notice of Appeal filed 30 July 2020, Mr Samper (“the husband”) appeals a property settlement order made by a Judge of the Federal Circuit Court on 6 July 2020. Ms Samper (“the wife”) resists the appeal.
The grounds of appeal relate to asserted errors in the primary judge’s consideration of the valuation of the husband’s business, post-separation contributions and the assessment of s 79(4)(d)–(g) of the Family Law Act 1975 (Cth) (“the Act”) considerations.
There is also a broad contention that given that there was a delay of 11 months between the conclusion of submissions at the trial and delivery of judgment, “special care” or “closer than usual scrutiny” is required when looking at any challenged finding of fact.
For reasons which follow, the appeal fails.
BACKGROUND
The parties met in Country W, they married in mid-1987 and commenced cohabitation at that date. There are three adult children from the marriage, one of whom was under 18 years at the date of separation. The parties migrated to Australia in 1992 and became Australian citizens in 1996. The parties separated on a final basis on 27 June 2013 after a 26 year cohabitation and were divorced on 24 July 2015.
The net pool of assets was $5,806,567.
The wife, aged 60 years at the hearing before the primary judge, has education qualifications. The parties, under an oral partnership agreement, ran D Company, and this business (including the property from which it operates) (“the D Company business”) is the major asset in the pool ($3,544,665 net). In the six years since the date of separation, the wife has worked in, maintained and managed the D Company business without involvement by the husband.
The husband, aged 63 years at the hearing before the primary judge, is a health care worker operating as a sole trader from rented premises. The primary judge valued the husband’s practice at $162,093.
Before the primary judge, both parties agreed that their contributions to the date of separation were equal. Consequently the focus of the hearing was on whether or not there should be any different result when post-separation contributions and s 79(4)(d)–(g) considerations were taken into account.
Each of the parties contended that there should be a 55/45 division of the net pool in their favour.
THE PRIMARY JUDGE’S REASONS
The primary judge assessed, what, if any, appropriate and just and equitable adjustment to the parties’ property should be made by using the “preferred” four stepped approach (Hickey and Hickey and Attorney-General (Cth) (Intervener) (2003) FLC 93-143) and specifically focused on issues raised by the parties during the hearing.
At [166], relevant to s 79(2) of the Act, the primary judge noted:
Both parties agree that their property interests require adjustment to finally terminate their financial relationship.
The primary judge resolved the issue as to the value of the husband’s practice and this shall be discussed when dealing with Ground 3. By the end of the hearing, the value of all other assets, liabilities and superannuation was agreed.
At [10] and [128] the primary judge referred to the parties’ agreement as to the equality of contributions at the date of separation. As indicated, the focus of the dispute was on the post-separation contributions and activities of the parties in the six years after separation and on whether there should be a further s 79(4)(d)–(g) adjustment.
The primary judge extensively discussed the wife’s operation of the D Company business and how the profits of that business were expended by her in the six years after the separation. We discuss his Honour’s treatment of that issue when dealing with Ground 4.
It was not controversial at the hearing before the primary judge that the husband made significant post-separation contributions in the form of an inheritance from his mother’s estate in 2018 of $290,000. There is an issue on appeal as to the extent that contribution was acknowledged in the reasons (see Ground 1 below).
The primary judge assessed all contributions holistically over a 32 year period and found them to be equal; made no further adjustment for s 79(4)(d)–(g) matters (discussed further under Ground 2); and gave the wife the first option to acquire the D Company business.
GROUNDS OF APPEAL
Did the primary judge err in the valuation of the husband’s practice? (Ground 3)
The parties retained a single expert to provide a valuation of the husband’s practice. He provided a report and was not cross examined. The husband did not have a signed lease for his business premises. The valuer concluded that the value of plant and equipment was $45,624. The valuer opined that there was no goodwill in the husband’s practice without a signed lease. However, if the husband obtained a lease on market terms with a minimum term of five years with a five year option, the value of goodwill of the practice would be in a range from $100,000 to $150,000.
The primary judge dealt with the issue of the value of the husband’s practice at [15]–[36] and ultimately concluded that it had a value of $162,093 at [35]. That figure was calculated by the primary judge adopting a goodwill figure of $125,000, adding the plant and equipment and applying a five per cent discount (($125,000 + $45,624) x 95 per cent).
The two central challenges in Ground 3 relate to what the range of possible values were, and what discount should be applied arising from the availability of a lease of the premises from which the husband operated the practice.
The question of valuation is “a matter of estimation, not precise mathematical calculation”. The primary judge’s findings as to the business’ value, have “many of the characteristics of a discretionary judgment”. The role of an appellate court in reviewing his Honour’s finding as to value, is a limited one and we would not be justified in substituting our opinion for that of the court below “unless … satisfied that the court below acted on a wrong principle of law or that its valuation was entirely erroneous” (Commissioner of Taxation (Cth) v St Helens Farm (ACT) Pty Ltd (1981) 146 CLR 336 at 381; Bankstown Trotting Recreational Club Ltd v Chisholm (2016) 218 LGERA 428 at [108]).
What range should the primary judge have chosen?
It was within the “specialised knowledge” of the forensic valuer to provide his opinion of a high and low figure by way of a range of the value of the business if a new lease was entered into, or otherwise available to a prospective purchaser (Dasreef Pty Ltd v Hawchar (2011) 243 CLR 588 at 604).
Counsel for the husband during the hearing before the primary judge, and senior counsel for the husband before us, argued the primary judge should have selected a mid-point of $75,000, (being a mid-point between $150,000 and nil) rather than a mid-point of $125,000 (being a mid-point between $150,000 and $100,000). Given the primary judge found the opportunity for the husband to obtain a new lease was “very likely”, it was open to his Honour to adopt a range of values that assumed that likelihood.
In circumstances where a valuer has provided a range of values, the court is free to form its own view as to the proper value of an asset. It is usually inappropriate to simply select the mean of two valuations (see the decision of Dixon CJ and Kitto J in Commonwealth v Milledge (1953) 90 CLR 157 at 161). However in this case, both parties submitted that the primary judge pick the mid-point, albeit of different ranges. In those circumstances, the husband cannot legitimately complain when that is what the primary judge did.
The five per cent reduction
The husband argues that, having selected the mid-point figure, the percentage reduction then made by the primary judge raised an issue which involved the evidence of an expert and it was not within the primary judge’s expertise to make an allowance for a lease being available or unavailable on the basis of probability, particularly when there was no evidence from the landlord as to his intention to continue the lease or whether the landlord may decide to increase the rent to an unacceptable level to a prospective tenant.
The husband also submitted that the primary judge failed to give adequate reasons for determining the likelihood of a lease being available was 95 per cent.
It was not a matter of contention before us that it was open to the primary judge to take into account the hypothetical chance of the husband obtaining a future lease. The High Court in Malec v J.C. Hutton Pty Ltd (1990) 169 CLR 638 said at 643 “… unless the chance is so low as to be regarded as speculative – say less than 1 per cent - or so high as to be practically certain – say over 99 per cent - the court will take that chance into account…” (see also Sellars v Adelaide Petroleum N.L. and Ors (1994) 179 CLR 332 at 350).
The primary judge recorded:
24.The only evidence as to the likelihood of a lease being available came from [the husband], as part of his instructions to [the valuer]. The most contemporaneous evidence from [the husband] was included at paragraph 39 of [the valuer’s] final report:
The practice premises are leased. The current lease is towards the end of its second 5 year term with an end date of 31 December 2019. However, we understand that the lease extension was never signed and that in effect the Practice is currently occupying the premises on a month to month basis. At this time, there is no written confirmation available indicating that the lease will be able to be renewed at its theoretical end date of 31 December 2019 and on what terms. [The husband] has advised … that he intends to continue to occupy the premises on a month to months (sic) basis after 31 December 2019. [The husband] has advised … that he has no reason to believe that the landlord will not accept his continued occupation on this basis. Equally [the husband] advised … that he has no reason to believe that he would not be able to enter into a formal lease on similar terms to the existing lease albeit with potentially an increase in rent in line with the market should he choose to do so.
25.Given the landlord has been content to proceed on a month-to-month basis for five years, and that [the husband] said he had no reason to believe he would not be able to enter into a formal lease on similar terms assuming a rent increase in line with the market, I find that a lease in terms identified by [the valuer] at paragraph 74 of his report is very likely to be available to [the husband] or a prospective purchaser. However, I do not believe this evidence alone, and without evidence from the landlord, would justify a finding that it is a practical certainty.
….
32.Given the finding I have made about the likely availability of a lease, the appropriate course is to approach the valuation by reference to a lease being very highly likely to be available. As it is necessary to apply a percentage figure for the purposes of calculations I find that likelihood is 95%.
(Emphasis removed)
Given the primary judge concluded that there was a high probability that there could be a new lease, it was open for the primary judge to select the discount his Honour did.
Even if that is incorrect and an appropriate discount should have been say 20 per cent, that additional 15 per cent discount would be a sum of $25,594, an amount which is de minimis in a pool of net assets of $5,806,567.
Accordingly there is no merit in Ground 3.
Did the primary judge err when analysing the wife’s use of the profits from the D Company business after the separation? (Ground 4)
The husband’s complaints under this ground relate to:
(a)the primary judge’s finding that $150,000 per annum gross salary which the wife received from financial years 2016 onwards was reasonable and appropriate;
(b)the primary judge’s finding that a reasonable total gross notional salary for the wife for the two financial years that she did not get paid (2014 and 2015) was $285,000; and
(c)the primary judge not accepting that the husband should be entitled to an adjustment of one half of the profits of the D Company business in the post-separation period.
Prior to separation, the D Company business was operated by the wife and the husband in partnership. That partnership structure continued after the separation, notwithstanding the wife operated the D Company business to the exclusion of the husband.
In the 2014 and 2015 financial years, the wife did not receive a salary. From 2016 the wife received a salary of $150,000 per annum. There was an equal distribution of the profits of the partnership recorded on the tax returns of each of the parties from 2014 onwards, even though the husband did not receive any of those profits.
The wife’s salary of $150,000
At [80]–[102], the primary judge considered whether it was appropriate for the wife to be paid a salary of $150,000 per annum for the 2016 financial year and following. The primary judge considers the evidence of the D Company business’ external chartered accountant and compares it to the evidence of the husband’s adversarial expert on the same point. At [74] the primary judge observed:
[The external chartered accountant for D Company] was cross-examined as to the approach used to determine the $150,000 figure, and explained that it had been looked at in a number of ways. She gave evidence that she sought and obtained a detailed list of [the wife’s] roles and duties, looked at the modern award for day care centres and using that award determined a base hourly rate, leave loadings and allowances based on that. She also took into account the fact that [the wife] looked after [the D Company business] in an ownership capacity as well as in an employee capacity, including looking after the finances, staff, employment, insurances and having to deal with the overall running of [the D Company business].
The primary judge made the following observations and findings:
100.[The external chartered accountant for D Company]’s sum of $120,000 plus superannuation, or $131,400 was based on a detailed analysis of the actual duties and roles performed by [the wife] in the context of the award, which also included [professional qualifications] and other tasks as required not accounted for by [the husband’s forensic accounting expert], and on that basis was likely to be an accurate assessment of the value of all of [the wife’s] work in [the D Company business]. For this reason I prefer [the external chartered accountant for D Company’s] analysis over that of [the husband’s forensic accounting expert], without any disrespect to [the husband’s forensic accounting expert] who was undertaking a different task and was not seeking to determine the proper valuation of [the wife’s] personal exertion, but rather was undertaking a general business valuation assuming that [the wife’s] labour could be entirely replaced by a non-professionally qualified director.
101.It is also relevant that the figure did not increase across the period from 2016 to 2019 which arguably involved a discounting in later years from the 2016 assessment.
102.I find that the $150,000 salary package valuation of [the wife’s] personal exertion income in all the roles and the operation of [the D Company business] in the years 2016 to 2019 was an accurate assessment of the value of her personal exertion in the [the D Company business] and an appropriate notional salary.
As conceded by senior counsel for the husband before us, the finding at [102] was open to the primary judge, based upon the wife’s evidence as to the hours that she had worked in the D Company business, the corroborating evidence of the book keeper, and the external accountant of the business.
The notional salary of $285,000 for the two earlier years
At [103]–[106], the primary judge considered whether or not an allowance should be made by way of notional salary for the wife’s personal exertion during the two financial years, 2014 and 2015. The primary judge concluded that the wife should receive a credit for those two years totalling $285,000 ($150,000 for each year, discounted by two per cent). Again, senior counsel for the husband conceded that finding was open to the primary judge.
The wife’s receipt of profits
The husband submits in his Summary of Argument filed 12 March 2021:
62.… [T]hat the appropriate manner for the primary Judge to have dealt with the Husband's entitlement to one half of the net profits of [the D Company business] from the time of separation until the hearing, should be calculated on the following basis. Those amounts “on paper” which he was entitled to receive during this period, and which were not distributed to him, as are disclosed in his income tax returns, should be added and determined as a total sum. Thereafter, those amounts which he conceded should be contributed by way of his share for the benefit of the family, including the adult children or to which he had had the benefit after separation, should then be deducted from this one half entitlement to the net profits.
Senior counsel for the wife submitted that this argument was not made to the primary judge at trial and the husband should not be permitted to advance it on appeal (Metwally v University of Wollongong (1985) 60 ALR 68). That submission is without substance because:
·first, whilst we accept that these submissions were not articulated in as precise a manner at trial, the husband did make general submissions which cumulatively could be seen as making these arguments; and
·secondly, there was no controversy about the underlying facts upon which this argument was based nor the primary judge’s findings about those facts.
We observe however that the submission referred to above, at [39], by the husband both before the primary judge and before us, have been made without precision. At no time did counsel for the husband offer the primary judge any analysis as to how the evidence led to a conclusion that there should be any adjustment in the husband’s favour, or what amount should be added back against the wife for monies that the husband said that she had appropriated from the profits of the D Company business.
The primary judge asked the husband’s counsel what he contends should be done for the wife’s use of post-separation profits but got no sensible answer (Transcript 13 August 2019, p.257 line 15). Otherwise counsel for the husband only made general assertions such as:
… We have to start from the footing that it is a partnership to which he at law is entitled to one-half. An adjustment, in my submission, should be made.
(Transcript 13 August 2019, p.268 lines 43–45)
Nor did counsel for the husband engage with the primary judge’s invitation to “look at how the money was actually used” (Transcript 13 August 2019, p.263, line 14).
The primary judge discussed:
·whether the wife took the husband’s share of the D Company profits;
·that the husband had not had a forensic expert accountant analyse the wife’s use of profits;
·as already indicated, the profits were calculated after the receipt by the wife of a salary of $150,000 per annum from the 2016 financial year onwards;
·considered the evidence of D Company’s bookkeeper; and
·considered the evidence of D Company’s external chartered accountant and the significant schedules prepared by her (Exhibit C) which were not challenged.
At [107]–[120] the primary judge undertakes a detailed analysis of the figures in Exhibit C, including the wife’s loan account in the D Company business and all monies received and expended by the wife in the post-separation period and calculates that the wife has properly accounted for all but $70,000 of the funds received by her from the D Company business in the post-separation period.
At [120] the primary judge concluded:
However, as [the wife] submitted, she continued to operate and be responsible for [the D Company business] “without drawing a wage in respect of her exertions until commencing to do so in 2016”. For the reasons given above I find that allowance must be made for [the wife’s] personal exertion in operating [the D Company business]. The above calculations make no allowance for her personal exertion in the two financial years 2014 and 2015 which I have estimated as being worth approximately $285,000. Setting $285,000 off against the $70,000 net benefit above, in round terms that is a positive post separation contribution by [the wife] of approximately $200,000 by reason of her operation of [the D Company business].
(Emphasis in original)
Again these findings were well open to the primary judge and accordingly, although the husband can point to $70,000 of profits for which the wife did not account, they are offset by the finding of the primary judge that the wife had not received salary (which he fairly assessed at $285,000) for the 2014 and 2015 financial years.
Accordingly the challenge to these findings in Ground 4 cannot be sustained. That is sufficient to dispose of the challenge in Ground 4.
Senior counsel for the husband submitted that even if Ground 4 failed, matters argued under this ground buttressed the argument in Ground 1. How that was so, was not developed. The only connection would seem to be that both Grounds 4 and 1 made complaints about how the primary judge dealt with particular aspects of post-separation contributions but otherwise the two grounds make different complaints about those separate aspects. We do not understand how failed arguments under Ground 4 could be said to assist arguments in Ground 1, to which we now turn.
When assessing contributions, was the primary judge’s consideration of the husband’s inheritance from his mother’s estate erroneous? (Ground 1)
The husband asserts that the primary judge proceeded on the mistaken belief that only $90,000 was received by way of inheritance from his mother’s estate after the date of separation and that it was a material error of fact (House v King (1936) 55 CLR 499), and if it was not a material error of fact, the primary judge failed to properly deal with the inheritance which otherwise uncontroversially came into existence after separation.
As indicated, it was agreed during the course of opening submissions that contributions to the date of separation should be treated as being equal (at [10]) and the primary judge was cognisant that the husband asserted his post-separation inheritance must be brought into account in the adjustment of property rights between the parties (at [12]).
At the hearing before the primary judge, the husband gave evidence that a property he owns in Suburb H (“the Suburb H property”) was purchased by him in July 2017 from: monies that he had received from the net proceeds of sale of the former matrimonial home; a borrowing in the amount of $200,000 from his mother; and a mortgage of $763,000 in order to complete the purchase. And that further, his mother died in February 2018 and the loan of $200,000 from his mother was forgiven and he became entitled to receive a further $90,000 from her estate. It was the husband’s case the total benefit received by the husband by way of inheritance was $290,000.
At trial, the wife accepted that the $290,000 inheritance was a post-separation contribution made by the husband but submitted when all contributions were taken into account, it did not lead to a “differential” (Transcript 13 August 2019, p.272 lines 15–20).
At [123] of the primary judge’s reasons, the primary judge said:
[The wife] submitted that the parties had had the benefit of the $200,000 loan during cohabitation and that that was part of [the husband’s] equal contribution prior to separation, so that the additional post separation contribution was only $90,000…
It was conceded that the primary judge was in error as the wife did not make that submission at hearing.
At [127] the primary judge made the following observations:
When considering the weight to be given to post separation contributions in the assessment of a property adjustment it is important to remember that the parties cohabited for approximately 26 years prior to separation. They had 3 children. [The husband] ran his … practices. [The wife] cared for the children. [The wife] also worked in [the husband’s] … practices at times. [The husband] helped with the children at times. The parties started [the D Company business] together, which [the wife] operated while [the husband] continued working as a health care worker. Each party received a loan from a parent. [The wife] received an inheritance from her mother. These are but a small selection of the myriad of contributions the parties made to each other and to the joint benefit of their family over this 26 year period.
(Emphasis added)
It is again conceded that the primary judge was in error in recording that the husband had received a loan from a parent during the period of the cohabitation as the loan from his mother was made in 2017.
It will be apparent that the errors made by the primary judge relate to the timing of the loan which the husband received from his mother. The primary judge did not, as asserted by the husband, make an error as to his receipt of an inheritance of only $90,000 on his mother’s passing in February 2018.
In fact, at [122] the primary judge observed:
[The husband] pointed in particular to an inheritance of approximately $290,000 received on his mother’s passing in February 2018. However, as there had been an outstanding loan of $200,000 from [the husband’s] mother that was set off and he received an additional $90,000. That all forms part of the pool. [The husband] submitted that this was equivalent to a contribution of $290,000 many years post separation which should be included, but given great weight justifying an adjustment in his favour.
It is reasonable to infer that the primary judge accepted what is set out in the first sentence of [122] given the apparent findings in the second and third sentences.
We are satisfied that the primary judge was cognisant of the uncontroversial timing of the receipt by the husband of the $290,000 inheritance from his mother’s estate in 2018 and took that into account when assessing post-separation contributions.
Turning then to how the primary judge assessed other post-separation contributions and contributions overall. As indicated during the discussion of Ground 4, his Honour analysed at length the activity of the wife in maintaining the D Company business and how the wife used its profits, concluding that the wife’s personal exertion post-separation, for which she had not been compensated, had a value of approximately $200,000 at [120].
In addition, his Honour also accepted that the wife primarily provided post-separation care for the youngest child of the parties (she was 16 and a half years of age at the date of separation) and that the wife increased the profits of the D Company business, but the primary judge did not give those contributions weight because his Honour found that the wife had excluded the husband from an opportunity of making a similar contribution (at [121] and [126]). There was no contention by the wife that the primary judge was in error in placing no weight on these post-separation contributions by her.
Significantly however as required by established authority (Dickons v Dickons (2012) 50 Fam LR 244; Jabour & Jabour (2019 FLC 93-898 at [73]–[87]; Horrigan & Horrigan [2020] FamCAFC 25 at [42]–[48]; Benson & Drury (2020) FLC 93-998 at [35]), the primary judge placed the post-separation contributions over that six year period in the context of all contributions made over a 32 year period and concluded:
128.The fact that the parties, quite rightly, agreed that contributions in this 26 year period were equal does not mean that the Court treats these as being mathematically equal and then ignores them when assessing and weighing post separation contributions. To do so would give undue weight to the contributions during the 6 post separation years over the 26 pre-separation years, particularly when the asset pool was largely developed over the period prior to separation. The post separation contributions are to be seen and weighed and as part of the totality.
129.This is not a mathematical exercise. While on one view [the wife] may have made slightly greater post separation contributions, weighing so far as possible all of the mutual contributions across the 26 years of cohabitation and the various post-separation contributions as set out above, I am not satisfied that there is any basis on which I should find that either party made greater contributions overall.
130.Accordingly, I find that the parties made equal contributions to the date of hearing.
(Citations omitted)
The primary judge was entitled to so find and gave adequate reasons for doing so.
We accept that the errors made by the primary judge in relation to the timing of the receipt of a loan in 2017 from the husband’s mother were not material (De Winter and De Winter (1979) FLC 90-605).
There is no merit in Ground 1.
Did the primary judge err in evaluating relevant s 79(4)(d)–(g) considerations? (Ground 2)
The solitary challenge to the primary judge’s evaluation of relevant s 79(4)(d)–(g) considerations was to his Honour’s finding “that each party has an approximately equal earning capacity” (at [151]).
The husband argued that the wife’s earning capacity was the remuneration that she had historically been receiving in her role as director of the D Company business in the sum of $150,000 per annum. As set out above, the primary judge found this past level of remuneration was justified, because of what the wife did for the D Company business in addition to her fulfilling the role of a non-professional director (at [89]–[106]).
A party’s future earning capacity is a prospective consideration and the wife’s historical wage is not necessarily relevant if it is not used to calculate the future maintainable earnings of a business she is retaining. In this case:
·the wife’s source of income was from the D Company business;
·the D Company business was the subject of competing valuations and an agreement as to value;
·at [147] the primary judge records:
[The D Company business] was valued on the basis of a notional salary for a non-[professional] director of $100,000 per annum including superannuation…
This finding is not challenged and it means that in the process of valuing the D Company business, the valuers had reduced the wife’s remuneration from $150,000 per annum to $100,000 per annum. This had the effect of increasing the net maintainable earnings of the D Company business by $50,000 per annum. When those additional maintainable earnings were capitalised, a higher value was accordingly achieved for the D Company business;
·that value (including the real estate) was an amount counted against the wife when assets were distributed as the wife was given the first option of retaining the business at the agreed value; and
·accordingly, on the basis upon which the balance sheet was settled, the income that the wife was to receive from the D Company business would be the sum of:
(i)$100,000 as the value of her personal exertion earnings upon the open labour market; and
(ii)a return on the capital she received as a result of the property settlement order (with the husband receiving the same amount of capital).
It would have been double counting to conclude that the wife’s earning capacity was $150,000 per annum whilst at the same time valuing the business she was retaining on the assumption her remuneration was $100,000 per annum.
The primary judge made the following observations about the evidence of the husband’s forensic accounting expert at [97]:
[The husband’s] business valuer, [the husband’s forensic accounting expert] in her report of 23 May 2019 at paragraph 57, when considering the appropriate valuation of [the D Company business] on a future maintainable earnings (FME) basis made an adjustment deducted from profits for a “Market salary and superannuation for the non-teaching director of $100,000 per annum as at 2019 based on industry averages in Sydney and reduced by 2% per annum historically.” That adjustment was explained in her comments at paragraph 64 on the basis that “Directors wages have been allowed at a market rate of $100,000 per annum including superannuation. This is above industry average but is reasonable considering the above average trading performance of” [the D Company business].
(Emphasis in original)
The primary judge was clearly alive to the question of the possibility of double counting. The primary judge recorded at [144]:
… Further, [the husband] submitted that if [the wife] is able to purchase [the D Company business] her earning capacity will be increased by the full profits of [the D Company business].
And in response to that submission, the primary judge observed at [149]:
[The husband’s] second point, that if [the wife] is allowed to purchase [the D Company business] her earning capacity will include the profits of [the D Company business], fails to distinguish between the return to personal exertion and the return to the business of [the D Company business]. The profits of [the D Company business] are the basis for the valuation of [the D Company business] at $4,025,000. That figure, in simple terms, is the capital sum equivalent in current dollar terms to the discounted likely future profits of [the D Company business]. The party who purchases the other party’s interest in [the D Company business], if that occurs, will have to borrow to pay a present capital sum equivalent to the other parties’ interest. The party whose interest is purchased will receive a present capital sum which may be invested as a passive investment or otherwise. This is not relevant to personal income earning capacity.
There is no challenge to these observations by the primary judge which are clearly correct.
At the hearing of the appeal, senior counsel for the husband abandoned a challenge to his Honour’s findings that the husband could earn approximately $98,550 per annum as an employed health care professional instead of continuing to conduct his own less remunerative practice.
The primary judge was entitled to conclude that his Honour was “… satisfied that each party has an approximately equal earning capacity on the open labour market and that there is no basis for any adjustment on these grounds” (at [151]).
The primary judge gave adequate reasons to explain why the wife’s earning capacity should be treated as being $100,000 per annum and why his Honour ultimately concluded that there be no adjustment for s 79(4)(d)–(g) considerations. The assertion in Ground 2(v) that his Honour’s refusal to make any adjustment at the third stage in favour of the husband was “plainly wrong” is unsustainable.
There is no merit in Ground 2.
CONCLUSION
Given that no ground of appeal has been successful, the appeal shall be dismissed.
COSTS
The husband rightly conceded that in the event the appeal was dismissed, it would be just for an order for costs to be made against him in the fixed sum of $30,418 and that sum should be paid within a period of 28 days.
I certify that the preceding eighty (80) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justices Ainslie-Wallace, Watts & Austin. Associate:
Dated: 5 August 2021
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