Sandstrom & Sandstrom

Case [2025] FedCFamC1F 209

FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA

(DIVISION 1)

Sandstrom & Sandstrom [2025] FedCFamC1F 209

File number: LNC 411 of 2022
Judgment of: MCGUIRE J
Date of judgment: 3 April 2025
Catchwords: FAMILY LAW – PROPERTY – Application for a property settlement – Husband argues that wife’s post separation “drawings” for business run solely by her be added-back to property pool or alternatively be considered as a “negative contribution” or wastage by the wife – Consideration of add-backs – Wife’s drawings considered as income and not added back - Contributions
Legislation:

Evidence Act 1995 (Cth) s 140

Family Law Act 1975 (Cth)
Cases cited:

Browne v Green [1999] FamCA 1483; (1999) FLC 92-873 at 86,360

Chorn & Hopkins [2004] FamCA 633; (2004) FLC 93-204

Kowaliw & Kowaliw (1981) FLC 91-092

MacKinnon & Talbot [2023] FedCFamC1A 156; (2023) FLC 94-161

Mayne & Mayne (No.2) [2012] FamCAFC 90; (2012) FLC 93-510

Omacini & Omacini [2005] FamCA 195; (2005) FLC 93-218

Standford & Stanford (2012) 247 CLR 108; [2012] HCA 52

Townsend & Townsend [1994] FamCA 144; (1995) FLC 92-569
Division: Division 1 First Instance
Number of paragraphs: 74
Date of hearing: 19 February 2025 and 11 March 2025
Place: Launceston, delivered Hobart
Counsel for the Applicant: Mr Trezise
Solicitor for the Applicant: McVeity Dean Lawyers
Counsel for the Respondent: Mr Doyle
Solicitor for the Respondent: Dobson Mitchell & Allport

ORDERS

LNC 411 of 2022

FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN:

MS SANDSTROM

Applicant
AND:

MR SANDSTROM

Respondent

ORDER MADE BY:

MCGUIRE J

DATE OF ORDER:

3 APRIL 2025

THE COURT ORDERS THAT:

1.The net property pool of the parties pursuant to the findings in these Reasons, but excluding superannuation, be divided as to 60 per cent to Ms Sandstrom (“the wife”) and 40 per cent to Mr Sandstrom (“the husband”).

2.Within 30 days of the date of these Orders the parties each make bids in writing to the other through their solicitors on the record or further bids as may be the case in respect of the property situate at C Street, Town B (“the Town B property”) with the highest bidder at the end of the 30 day period having first option to retain that property, but should the first option not be confirmed as taken up within seven (7) days of the close of bidding period then the other party have an option to retain the property at his or her highest bid such to be taken up within a further seven (7) days but providing that should neither party confirm the retention of the property at his or her highest bid then the property be placed on the market for sale provided that should either party elect to retain the Town B property then the other party transfer his or her right, title and interest to that party within 30 days of election to retain the property and the party retaining the property be solely responsible for and…

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AGLC
Sandstrom & Sandstrom [2025] FedCFamC1F 209
Case
[2025] FedCFamC1F 209
Decision Date

CaseChat Overview and Summary

In the Federal Circuit and Family Court of Australia, the case of Sandstrom & Sandstrom involved a property settlement dispute between Ms Sandstrom and Mr Sandstrom. The primary issue was whether the wife's post-separation drawings from her business, E Business, should be added back to the property pool or considered as a negative contribution by the wife. The court had to decide on the appropriate treatment of these drawings in the context of the overall property settlement. The husband argued that the wife's drawings, amounting to approximately $495,000, should be added back to the property pool, while the wife contended that these drawings should be treated as income and not added back. The wife also argued that she had used most of these drawings for joint loan repayments without significant contribution from the husband.

The court examined the evidence provided by both parties and found the wife to be an honest and responsive witness, whereas the husband's claims were compromised by his failure to present evidence from a forensic accountant who had apparently opined on the wife's drawings. The court concluded that the wife's drawings should be treated as income and not added back to the property pool. The court further decided that the net asset pool of the parties should be divided in a 60/40 ratio in favor of the wife. The court ordered the sale of certain assets, including the E Business and the property at F Street, Suburb G, and directed that the proceeds be used to pay off specific debts before any division of the remaining assets between the parties. The court also outlined a process for the parties to bid on specific properties and determined the distribution of personal assets and liabilities between the parties.

Orders

Orders of the court

LNC 411 of 2022

FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)

BETWEEN:

MS SANDSTROM

Applicant

AND:

MR SANDSTROM

Respondent

ORDER MADE BY:

MCGUIRE J

DATE OF ORDER:

3 APRIL 2025

THE COURT ORDERS THAT:

1. The net property pool of the parties pursuant to the findings in these Reasons, but excluding superannuation, be divided as to 60 per cent to Ms Sandstrom (“the wife”) and 40 per cent to Mr Sandstrom (“the husband”).

2. Within 30 days of the date of these Orders the parties each make bids in writing to the other through their solicitors on the record or further bids as may be the case in respect of the property situate at C Street, Town B (“the Town B property”) with the highest bidder at the end of the 30 day period having first option to retain that property, but should the first option not be confirmed as taken up within seven (7) days of the close of bidding period then the other party have an option to retain the property at his or her highest bid such to be taken up within a further seven (7) days but providing that should neither party confirm the retention of the property at his or her highest bid then the property be placed on the market for sale provided that should either party elect to retain the Town B property then the other party transfer his or her right, title and interest to that party within 30 days of election to retain the property and the party retaining the property be solely responsible for and indemnify the other in respect of the mortgage liability secured by Westpac Bank and provide a release of that liability from the bank to the other party.

3. Should the Town B property be placed for sale then the wife nominate three (3) qualified salespersons and the husband then within seven (7) days thereafter make an election from such nominees and that person or firm be instructed to conduct the sale of the property.

4. The parties cooperate in the sale of the Town B property by prudently signing all authorities and documents presented to them and accepting the advice of the agent as to the mode of sale and reasonable sale price and terms.

5. The proceeds of sale of the Town B property be disbursed as follows:

(a) the payment of any mortgage loan secured by the Town B property;

(b) the reasonable costs and disbursements on the sale; and

(c) the balance to the “D Business” loans owing by the parties to Westpac Bank being the particular loan as agreed by the parties and failing agreement then to the loan currently with the greater outstanding liability.

6. Forthwith the wife do all acts and things to sell the assets of the business “E Business” such sale to be at arm’s length and at value with the proceeds of such sales to be disbursed as follows:

(a) any legal costs and disbursements on the sales; and

(b) the balance towards the “D Business” loans owed to Westpac Bank and as agreed between the parties but failing agreement then to the loan with the greater current outstanding liability at that time.

7. Within 30 days of the date of these Orders the husband confirm in writing with the wife’s solicitors whether he elects to retain the property situate at F Street, Suburb G in Tasmania and if so then within a further 30 days from such election being conveyed by the husband:

(a) the wife transfer to the husband all her right, title and interest in the property situate F Street, Suburb G in Tasmania (“the F Street property”);

(b) the husband be solely responsible for and indemnify the wife in respect of any outstanding “D Business” loans owing to Westpac Bank and provide a release by the bank to the wife accordingly; and

(c) contemporaneously with the transfer, pay to the wife such cash sum so as to effect a 60/40 per cent division of the tangible property pool of the parties pursuant to the findings in the Reasons herein.

8. Should the husband not elect to retain the F Street property within the time limit provided for by these Orders then parties together do all things and sign all documents necessary to place the property for sale and for these purposes the husband nominate three suitably qualified and experienced real estate agents and within seven (7) days of receipt of the nominees the wife make an election from those nominees and such elected nominee then have carriage of the sale of the said property and the parties then follow all reasonable recommendations of the agent as to the mode of sale price and terms.

9. The proceeds of sale of the F Street property be disbursed as follows:

(a) to the reasonable costs and disbursement on the sale;

(b) to the payment of any outstanding “D Business” loan liabilities owing to Westpac Bank; and

(c) the balance so as to give effect to a 60/40 per cent division of the net tangible property of the parties pursuant to the Reasons herein.

10. Within 30 days of the date of these Orders the wife shall:

(a) transfer all her right, title and interest in the following to the husband absolutely:

(i) all personalty and chattels in the possession of or under the control of the husband as at the date of these Orders;

(ii) any motor vehicle in the possession or control of the husband as at the date of these Orders;

(iii) the caravan, boat, Motor Vehicle 2, and Motor Vehicle 3 in the possession of the husband as at the date of these Orders;

(iv) the balances of any bank accounts or like investments in the name of or to the benefit of the husband as at the date of these Orders; and

(v) the husband’s superannuation policy and entitlement.

(b) be solely responsible for and indemnify the husband in respect of the following:

(i) any liability attaching to any of the assets retained by the wife pursuant to these Orders; and

(ii) any and all liabilities incurred by the wife since separation in either her name alone or in joint names.

11. Contemporaneously with the transfer and vesting orders in order 10 herein, the husband shall:

(a) transfer and/or vest all his right, title and interest in the following to the wife absolutely:

(i) the property situate at H Street, Suburb G in Tasmania and registered in the wife’s name;

(ii) the properties situate at J Street, Suburb K in Tasmania;

(iii) all personalty and chattels in the possession or under the control of the wife as at the date of these Orders;

(iv) the wife’s Motor Vehicle 1;

(v) the Plant Hire;

(vi) the Site Office;

(vii) the balances of any bank accounts or like investments in the name of or to the benefit of the wife as at the date of these Orders; and

(viii) the wife’s superannuation policy and entitlement.

(b) be solely responsible for and indemnify the wife in respect of the following:

(i) any liabilities attaching to any of the assets to be retained by the husband pursuant to these Orders;

(ii) any and all liabilities incurred by the husband since separation either his name alone or in joint names; and

(iii) the loan in respect of the caravan to be retained by the husband pursuant to these Orders,

12. Pursuant to s 81 of the Family Law Act 1975 (Cth) the parties intend that these Orders shall as far as practicable finally determine the financial relationship between them and avoid further proceedings between them.

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 10.14(b) Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 10.13 Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).

Part XIVB of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish an account of proceedings that identify persons, associated persons, or witnesses involved in family law proceedings.

Background

Background to the litigation

The wife argues against add-backs saying that she has contributed at least the bulk of those monies towards joint loan repayments without contribution by the husband since separation or without substantial contribution by him. The wife has herself completed an “audit” of her drawings account and says that the husband and his accountant have ignored credits to that account and that the net balance is around $337,000.BACKGROUND The husband is 49 years of age. He is employed as a senior supervisor with an income of $107,000 per annum. He remains resident in the former matrimonial home at F Street, Suburb G. He has not re partnered. The wife is 46 years of age. She operates a business under the business name “E Business” and through an umbrella of some trusts and trustee companies. She has previously drawn a wage of $100,000 a year but says that a downturn in sales has seen her income reduced to $50,000 per annum in the last financial year but will further reduce to nil by reason of the pending sale of the assets of the business. She concedes that historically her “income” has included further drawings but disputes the net amount of E$495,000 argued by the husband. She has re partnered with Mr L who operates his own business. Both Mr L and the wife give evidence that there is some separation and independence in their finances. The parties commenced cohabitation in 1997 and married in 2001. There are two children of the parties namely X born in 2010 (aged 14 years) and Y born in 2013 (aged 11 years). The children live between their parents by way of consent orders made in 2023. The wife says that the marriage was troubled from 2016 when she first gave indication to the husband of an intention to separate. She says that separation occurred in late 2018. She agrees that she left the former matrimonial home in May 2020. The husband says that the parties finally separated in May 2020. The wife received an inheritance from her late father’s estate in the sum of $248,070 and by way of first instalment of $220,000 in February 2017 and the balance of $28,070 in October 2019. In May 2020 the wife moved into a rental property. The husband has remained in occupation of the unencumbered former matrimonial home at F Street, Suburb G albeit F Street seems to be security for some business loans. In December 2023 the wife and Mr L commenced cohabitation. The wife says that her relationship with Mr L began in late 2020. The husband says that the relationship began in 2017. In July 2001 the parties purchased three commercial properties at J Street, Suburb K. The deposit was paid by a loan from the wife’s grandmother in a sum of either $25,000 or $15,000. The balance purchase price was provided by way of mortgage security. The parties retain those properties which have historically been positively geared. In 2006 the parties completed construction of the now former matrimonial home at F Street, Suburb G. The parties had owned a unit at Town M which was sold to fund the construction of the former matrimonial home and the balance was funded by way of mortgage loans. The positively geared J Street commercial properties provided income to meet the J Street and F Street mortgages.

Evidence

Evidence Before The Court

I am able to deal with the property pool on a “one pool basis” inclusive of both tangible assets and superannuation or, alternatively, on a “two pool basis” where I deal with net tangible assets and superannuation separately. In this matter neither party argues for a splitting order in respect of superannuation. The respective superannuation balances are similar and relatively minimal. Where there is no argument by either party to the contrary, I will simply leave each party to retain their superannuation entitlements. THE EVIDENCETHE WIFE The wife gave her evidence in a confident and straightforward manner consistent with her affidavit. She was responsive in cross-examination whilst not retreating in her evidence. Essentially, the wife asserted that the E Business, and its associated umbrella of trusts was her alter ego. She explained that she ran the business alone with no assistance or contribution from the husband since separation and where her accountant distributed her “income” by way of salary and drawings. The wife maintained that it was she who met the ongoing instalment obligations on the remaining business loans and the loan attached to the Town B property. She explained the financial context of her relationship with Mr L and effectively where he had provided her with loans during the downturn of the sales business and that she was obligated in respect of those loans evidenced by a loan agreement. I found the wife to be an honest and responsive witness.MR L Mr L, the wife’s partner, gave evidence in an affidavit filed 30 January 2025. He was cross-examined briefly and supported the evidence of the wife.THE HUSBAND The husband gave evidence by his affidavit of 29 January 2025. He was cross-examined. His evidence continued the theme of his affidavit that the wife had taken substantial drawings from the sales business and that they were unexplained in their expenditure. Whilst the husband at times prevaricated and deflected in his responses in cross-examination, I saw his evidence as genuine and consistent with his affidavit. Significantly in my view, and where the thrust of the husband’s case is in respect of “unexplained drawings”, in his Case Summary document he makes reference to a forensic accountant being engaged to analyse the financials of the E Business who apparently provided an opinion of the wife “removing an additional $500,000 by way of drawings from the business”. For reasons that are unexplained, the forensic accountant did not provide an affidavit or give evidence to this Court. There is no suggestion that the forensic accountant had access to the wife who gives some explanation as to her “drawings” but also asserts that the figure of $500,000 is inflated on the basis that she has also made credits “to the business accounts”. As such, the assertions made by the husband are, in my view, compromised by his failure to adduce evidence from the forensic accountant. In his final submissions, the husband’s counsel claimed the net drawings were an estimated $495,000 but no evidence in proper form was given or adduced to substantiate this claim noting again the husband asserts reference to a forensic accountant but that person was not called to give evidence. CONSIDERATIONTHE PROPERTY POOL

Decision

Reasons for decision

There will be no adjustment between the parties pursuant to s 75(2) of the Act. CONCLUSION Consequently, I conclude that the net asset pool of the parties as set out above, will be divided as to 60 per cent of the wife and 40 per cent to the husband. I calculate the wife would be entitled to property at value of $870,171 and the husband $580,114. The wife will retain the following property: The net assets retained by the wife is $128,040. The husband will retain the balance of the assets and liabilities allocated to him in the balance sheet herein. It is imperative that the longstanding “D Business loans” of $603,895 and $165,903 totalling $769,798 be paid out. The husband wishes to retain the F Street property at $900,000. Realistically he can only do so if he is also to retain the balance of the loans after such are reduced by the payment of the proceeds of the assets of the “E Business” to those liabilities. Such reduction may make this a feasible option for the husband given that the husband is likely also to be required to make a cash adjustment to the wife the quantum of which will be dependant upon which party retains the Town B property (equity of $143,220) The husband’s case is argued on the basis of the pool including add-backs of some $495,000 and hence the husband seeks to keep both the F Street and Town B properties. He concedes the wife to retain the Suburb K commercial properties. She will retain her H Street rental property. Each of the parties express a desire to retain the Town B property. Again, the husband’s position appears to be based on an expectation that there would be an add-back to the pool of $495,000 allocated to the wife’s side of the ledger. This will not be the case. An option for the Court is simply to order that the property be placed on the market for sale at arm’s length and each of the parties be able to bid against other potential purchasers. Nevertheless, in these circumstances and so as to save undue costs, I propose to order that each of the parties bid against each other and through their solicitors with the highest bidder to retain first option to retain that property and if, unwilling or unable to do so, then the option be given to the other party at his or her highest bid or otherwise the property be sold and the net proceeds be put towards the parties’ liabilities. Finally, and where I am able to deal with the property on a “two-pool” basis, and given the quantum of the parties’ respective superannuation entitlements, I do not intend to make any separate superannuation splitting order or to consider superannuation entitlements within the overall pool on the 60/40 division of the net tangible assets. Each party will retain his or her superannuation entitlements.

Ratio Decidendi

Legal Principle Established

Significantly in my view, and where the thrust of the husband’s case is in respect of “unexplained drawings”, in his Case Summary document he makes reference to a forensic accountant being engaged to analyse the financials of the E Business who apparently provided an opinion of the wife “removing an additional $500,000 by way of drawings from the business”. For reasons that are unexplained, the forensic accountant did not provide an affidavit or give evidence to this Court. There is no suggestion that the forensic accountant had access to the wife who gives some explanation as to her “drawings” but also asserts that the figure of $500,000 is inflated on the basis that she has also made credits “to the business accounts”. As such, the assertions made by the husband are, in my view, compromised by his failure to adduce evidence from the forensic accountant. In his final submissions, the husband’s counsel claimed the net drawings were an estimated $495,000 but no evidence in proper form was given or adduced to substantiate this claim noting again the husband asserts reference to a forensic accountant but that person was not called to give evidence. CONSIDERATIONTHE PROPERTY POOL Where the wife purchased a property at Town T in 2023 but where, accepting the evidence of the wife and Mr L, the wife has no equity in that property, it was conceded by the husband’s counsel in final submissions that this property should not be included in the property pool. At the commencement of the trial and noting the husband’s Case Summary document, there appeared to be some dispute as to the value of the E Business. Again, by the time of final submissions, counsel for the husband reluctantly but appropriately agreed that the most recent valuation of the business was relevant for the purposes of these Reasons given that valuation on an asset basis and where it is now agreed that I will order the sale of the assets of that business therefore without any goodwill consideration. Prior to any consideration of asserted add-backs, I find the property pool of the parties to comprise the following and generally by agreement between the parties: The liabilities are as follows: The net tangible property pool is $1,450,285. The superannuation of the parties is: The wife claims a further liability of her personal indebtedness to the Australian Taxation Office of $159,957. The issue of whether to include this as a liability of the marriage is dependent, of course, on how I treat the husband’s argument of adding-back the wife’s drawings from the business to the property pool as against the wife’s arguments that her income from her labours and management of the E Business of simply being divided by her accountant into “salary” and “drawings”. Interestingly, whilst the husband argues for inclusion or add-back of the wife’s drawings since separation, he also argues against the inclusion of her taxation liability in the pool. ADD-BACKS The husband asserts that the wife took drawings from the E Business of E$495,000 between July 2020 and June 2024 being a period of four years.