Sandstrom & Sandstrom
[2025] FedCFamC1F 209
•3 April 2025
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 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.
IT IS NOTED that publication of this judgment by this Court under the pseudonym of Sandstrom & Sandstrom has been approved pursuant to subsection 114Q(2) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
McGUIRE J:
APPLICATIONS
Ms Sandstrom (“the wife”), is the applicant for property settlement orders. She seeks an overall division of the parties’ net property as to 60 per cent to her and 40 per cent to the respondent, Mr Sandstrom (“the husband”), based on a loading of 10 per cent on her asserted superior financial contributions.
The husband proposes orders which would give him 55 per cent of the pool where he argues 2.5 per cent superior contributions by him and an adjustment of 2.5 per cent to him by reason of the factors under s 75(2) of the Family Law Act 1975 (Cth) (“the Act”).
Where the property pool and values in their current form are mostly agreed between the parties, the thrust of the dispute here is on the husband’s claim that the wife has removed some $495,000 from E Business operated by her in the five or so years following separation by way of “drawings” and has been either unable to satisfactorily explain the expenditure of these monies or has “wasted” the monies where there are substantial liabilities of the parties to which those monies could have been put. In that sense, the husband effectively argues for “add‑backs” to the pool of the E$495,000.
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.
In 2006 the parties purchased a business in Suburb K known as “D Business” for $600,000. The acquisition was financed through two loans from Westpac Bank being $200,000 interest-only and $400,000 being principal and interest. At this stage the parties on accountants’ advice established the Sandstrom Family Trust and the N Unit Trust with a trustee company O Pty Ltd with the parties appointed as directors.
In 2007 the mortgage loan on the J Street commercial property was discharged using funds from the larger of the Westpac business loan which carried an overdraft facility. At the end of the 2016 financial year the D Business bank loans totalled $561,845.
In mid-2016 the parties purchased an investment property in Town B, New South Wales for $295,000 plus stamp duty and fees. The purchase was funded by way of mortgage loan and $29,500 deposit by redraw on the business loan.
Also in mid-2016 the parties paid a deposit of $15,000 for four vehicles from P Business with a view to commencing a sales business and with the wife registering the business name “E Business” in October 2016. The business operated from the F Street home. The business model appears to be one of maintaining a small number of display vehicles but with purchases made on order, build and provision to specifications.
The parties agree that the wife’s inheritance of $248,070 was deposited into the D Business business loan and essentially using that account with its overdraft facility to operate the vehicle sales business and to purchase stock.
A general decline in the businesses saw D Business ultimately close in 2020 after a sale could not be made. Losses of $244,714 accrued during the last three years of the operation of the business.
Upon the parties’ separation and the wife assuming total management of E Business, the husband retained residence of the F Street property and the wife relocated the stock from the business to a property at Town Q in 2021. At that time she established R Pty Ltd to secure a lease for the site and later in 2023 acquired a site office for $39,000 financed through a loan.
Contemporaneously in 2021 the wife negotiated an exclusive dealership with S Business with the first vehicle purchased in early 2021. The evidence is clear that the wife has operated the business without contribution by the husband at least from 2021.
The husband in his evidence concedes that he has made no direct contributions to the remaining business loans since separation save and except that he has not taken his 50 per cent entitlement from the net profits of the continuing positively geared J Street commercial properties. He concedes that no foreclosure has been made by the Bank against securities for any loans with the inference that the wife has maintained payments on the loans since separation. Similarly, the husband concedes that he has not paid or contributed to the shortfall on the negatively geared Town B property since 2021 when he ceased contributing his wages to a joint bank account.
In late 2021 the wife purchased a property at H Street, Suburb G for $380,000 with the assistance of a mortgage loan of $280,000. She says that the deposit of $100,000 was paid from her salary savings. The wife retains that property and it is now tenanted since the wife has taken up residence with Mr L.
The wife says that she has met the interest payments on the remaining D Business in a quantum of some $50,000 per year with the only contribution being the husband’s unclaimed entitlement from the positively geared J Street properties. Similarly, the wife says that she meets the shortfall on the negatively geared Town B property.
The parties have had the E Business valued. The valuation was done on an asset basis where it is agreed that there has been a downturn in the caravan sale market and that the assets of the business will be sold.
ISSUES
The primary issue between the parties appears to be how the Court considers and deals with the drawings taken by the wife in her operation of the E Business since 2020/2021. The thrust of the husband’s argument is that these “drawings” are unaccounted for and should therefore be “added-back” to the property pool on the wife’s side of the ledger.
The wife argues that the sales business has been operated solely by her and that, while she concedes net drawings of some $337,000 over the relevant period, they are firstly simply an accounting distribution of “salary and drawings” where she is the sole operator of the business. Secondly, she argues that she has utilised the bulk of these monies for reasonable expenditure including, in particular, maintenance of the joint loans of the parties in a sum of around $50,000 per annum without contribution by the husband.
THE RELEVANT LAW
Section 79 of the Act provides for the alteration of the parties’ interests in property. “Property” includes the assets and liabilities of the parties with amendments providing for superannuation to be “treated as property”. The discretion in the Court to alter property interests is a broad one limited only by the statute itself.
Section 79(2) of the Act provides that the Court should not make an order under this section unless it is satisfied that, in all the circumstances, it is just and equitable to make the order. A renewed focus has been placed in this subsection following the well known decision of the High Court in Standford & Stanford.[1] In this matter I am easily satisfied that the justice and equitable criteria is satisfied. The parties have separated. Their finances of been intermingled. They retain joint liabilities. They retain joint assets.
[1] (2012) 247 CLR 108; [2012] HCA 52.
The course for the Court is first to establish the contents of the property pool and attribute values. Again, there is substantial agreement between the parties here.
Secondly, the Court is then to consider the contributions made by or on behalf of the parties to the acquisition, conservation or improvement of the property. Contributions may be of a direct or indirect financial type or may be of a non-financial type including as homemaker or parent.
There is some dispute between the parties as to the weight to be attributed to their various and identifiable contributions. Specifically, the husband might argue that the wife has made a form of negative contribution or “wastage” to the pool by way of utilising drawn funds from the E Business for her own personal use and thereby devaluing the net value of the property pool.[2] Alternatively, the husband argues that there should be “add-backs” to the pool on the same reasoning of unexplained use of drawings by the wife from the business.
[2] Kowaliw & Kowaliw (1981) FLC 91-092.
The Court then moves to consider whether there should be any further adjustments to either party from the pool on account of the matters under s 79(4)(d) – (g) including relevant factors at s 75(2) of the Act. The wife here argues that there should be no adjustment. The husband argues for an adjustment in his favour of 2.5 per cent of the pool presumably on the basis of an anticipated higher income for the wife based on historical incomes.
The entire process of consideration for the Court is permeated with an understanding of justice and equity.
Where it is generally accepted that the Court is to take the property pool in its content and valuation as at the date of the trial, the notion of “add-backs” as argued here by the husband has been problematic with some argument that it is a proper consideration only under s 75(2) rather than a form of “notional add-back” to the pool of a non-existent “asset”. Alternatively, some courts have taken the latter approach of the notional add-back in identifying an item or asset which no longer exists but should notionally be included in the pool so as to do justice and equity between the parties.[3]
[3] Townsend & Townsend [1994] FamCA 144; (1995) FLC 92-569.
The Full Court in Omacini & Omacini[4] identified common categories from the authorities in three types of add-backs that are commonly observed being:
(i)where the parties have expended money on legal fees and, in particular, where such payment is made from joint assets such as a bank balance existing at the date of separation;
(ii)where there has been a premature distribution of matrimonial assets and that one party has had the benefit of that asset in the period since separation; and
(iii)in the circumstances of one party embarking on a course of conduct designed to reduce or minimise the value of the property pool or has otherwise acted recklessly, negligently or wantonly with matrimonial assets thereby reducing the value.
[4] [2005] FamCA 195; (2005) FLC 93-218.
In this respect the Full Court in Browne v Green[5] observed:
44.We agree with her Honour that the principles stated by Baker J. in Kowaliw certainly do not constitute any form of fixed code. They are no more than guidelines for use in the exercise of the discretionary jurisdiction conferred by s.79 of the Family Law Act 1975. Nevertheless, they have over the considerable period of time since they were enunciated, become a well accepted guideline in this jurisdiction - a guideline the use of which assists in the achievement of the important goal of consistency within the jurisdiction.
[5] [1999] FamCA 1483; (1999) FLC 92-873 at 86,360.
Nevertheless, and importantly, it is generally considered that add-backs remain the exception rather than the rule[6] and should not be made without a consideration of the use of such assets for the reasonable day-to-day expenses of a party and in this sense the general principles of the onus and standard of proof are relevant.
[6] Chorn & Hopkins [2004] FamCA 633; (2004) FLC 93-204.
Whilst the focus of the Court in s 79 proceedings is on justice and equity, it remains that the party asserting a fact has an onus to prove that fact and to do so on the standard of on the balance of probabilities consistent with s 140 of the Evidence Act 1995 (Cth).
It remains an available option for the Court to deal with such matters under s 75(2) of the Act rather than by way of add-backs or perhaps in the more general consideration of contributions.[7]
[7] See May J in Mayne & Mayne (No.2) [2012] FamCAFC 90; (2012) FLC 93-510.
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 EVIDENCE
THE 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.
CONSIDERATION
THE 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:
Property and ownership Value 1. Town B property at C Street (joint) $450,000 2. J Street, Suburb K commercial properties (joint) $600,000 3. H Street property (wife) $380,000 4. F Street Property (joint) $900,000 5. Motor Vehicle 4 (husband) $23,000 6. Caravan (husband) $70,000 7. Motor Vehicle 2 (husband) $28,000 8. Boat (husband) $21,000 9. E Business (joint) (pursuant to valuation) to be sold – (wife) $328,168 10. Plant Hire (wife) $32,000 11. Motor Vehicle 1 (wife) (from wife’s financial statement) $65,000 12. Site Office (wife) $30,000 Total $2,927,168
The liabilities are as follows:
Liabilities and ownership Value 1. Town B property, C Street, Loan (joint) $306,780 2. H Street property Loan (wife) $277,000 3. D Business Loan 1 (joint) $603,895 4. D Business Loan 2 (joint) $165,903 5. Business credit card (wife) $4,960 6. Husband’s caravan loan (husband) $21,345 7. R Pty Ltd investment loans – Motor Vehicle 1 and Site Office (wife) $97,000 Total $1,476,883
The net tangible property pool is $1,450,285.
The superannuation of the parties is:
Superannuation Value 1. Husband Super Fund 1 (as at July 2023) $140,566 2. Wife’s super (as at January 2025) $153,343 Total $293,909
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.
The wife says that she was the sole operator of the E Business. She says that her accountant organised her income into a salary of $100,000 per annum and “drawings”. Importantly, the wife, alerted to the husband’s allegation, says that she herself went through the bank statements of the business for the period 1 July 2020 to 31 December 2024. She agrees that she has had drawings from the business and does not dispute the gross figure asserted by the husband. She says, however, and references on her spreadsheet now in evidence before the Court that there are also credits to the account for the relevant period thereby reducing her net drawings to approximately $337,000 over the period. Armed with the wife’s spreadsheet, counsel for the husband in later cross-examination suggested the gross drawings were $585,095 until December 2024 with credits of $89,008. Where the husband did not adduce evidence from his forensic accountant, the wife’s spreadsheet is the best evidence available. It appears, therefore, that the parties are in dispute as to whether the net drawings for the wife after credits is $337,000 or $495,000 over the period of 4.5 years. Consequently, taking the husband’s case at its highest, the wife’s drawings can be allocated at around $120,000 per annum on average and in addition to her salary of $100,000 per annum. The following are matters which I consider relevant as to whether there should be an “add-back”:
(i)the wife’s total income per annum of $220,00, whether categorised as salary or drawings, is the result of her labours and business acumen in solely operating the E Business for the relevant period without contribution or assistance from the husband;
(ii)relevantly, this issue concerns income rather than the use of assets by the wife;
(iii)it is conceded by the husband that he has made no direct contributions to the parties’ liabilities in the relevant period of 4.5 years. The husband during this period has enjoyed an income of $107,000 per annum;
(iv)the wife’s unchallenged evidence is that she has made consistent payments to the parties’ D Business loans in a quantum of approximately $50,000 per annum. She concedes, however, an indirect contribution by the husband in not taking his one half share of the net profits from the J Street commercial rental properties which I calculate would have brought him something less than $20,000 per annum after consideration of council rates, land tax and insurances all presumably paid by the wife but where she has received the net profits of J Street;
(v)the wife has paid the shortfall on expenditure over income from the Town B property which on the evidence before me might obligate her as to more than $16,000 per annum; and
(vi)it would not be unreasonable, therefore, to allocate more than $225,000 of the wife’s net $495,000 drawings (being the husband’s calculation) over the 4.5 year period towards payment of the parties’ various loans. Even if mathematically close to correct, this would leave an excess of the drawings of $270,000 over 4.5 years or averaged at $60,000 gross per annum which, again and importantly, is income from the fruits of her labour rather than the utilisation of assets, and arguably thereby giving the wife an income of $160,000 per annum against the husband’s $107,000 per annum during the relevant period since separation. Notably, the wife’s spreadsheet and her evidence to the Court is that her net drawings were only about $337,000.
In all the circumstances, and considering the above, I am not inclined to add-back the sum of $495,000 to the asset pool as sought by the husband or at all. Put simply, the wife has worked productively and in a business post-separation without contribution by the husband for the relevant period. She has utilised the income of the business to maintain joint debts without direct contribution by the husband.
The wife claims a taxation liability of $159,957. Where I take into account the wife’s “drawings” as income, it would not therefore be proper or consistent to include this post-separation debt to be a “matrimonial liability”. It does serve, of course, to further reduce the net drawings or income of the wife since separation.
CONTRIBUTIONS
The parties agree that neither of them had any substantial wealth as at the date of commencement of cohabitation. They both worked diligently in employment and in self‑employment in their business. The husband conceded in his evidence in court that the wife was primarily responsible for the care of the young children in addition to her work in D Business.
Relatively late in the relationship and in about 2017 and 2018 the wife received the benefit of an inheritance from her late father’s estate in the sum of $248,070 which she contributed generally to the asset pool as it stands today. I am satisfied in accordance with a long line of authority that this is a contribution by the wife but one to be considered within the myriad of all contributions by an on behalf of each of the parties.
The husband has had sole use of the unencumbered former matrimonial home in the period since separation. He has been responsible for council rates and maintenance only. The wife was initially required to rent a home for herself and the children. As set out above, and where that property is used as security for the business loans, it has been the wife who has maintained the payments on those loans since separation. Contrary to the husband’s argument for “add-backs” of the wife’s post-separation income, I am of the view that she has, in fact, utilised her income as a greater contribution since separation in putting it towards joint debts.
Taking into account the length of the relationship, the circumstances of the children, various contributions by the parties, the value of the property pool set out above, I am of the view that there should be an adjustment to the wife of 10 per cent of the property pool on account of her superior contributions and notably the inheritance, the husband’s use of the former matrimonial home for the period of now some five years since separation,[8] and generally the wife’s contributions from her income in the relevant period since 2021 towards the parties joint liabilities.
[8] MacKinnon & Talbot [2023] FedCFamC1A 156; (2023) FLC 94-161.
SECTION 75(2) FACTORS
The husband continues to enjoy his income referenced in his material at $107,000 per annum.
The parties share jointly the care and financial support of their two children.
The wife’s income has decreased, on her unchallenged evidence, from $100,000 to more recently $50,000 per annum. Realistically, on the sale of the assets of the E Business, she will have no current income. She appears, however, to be a resourceful person and likely to obtain employment. She enjoys some financial benefits by reason of her current relationship.
The evidence suggests that the wife has received the benefit of some taxation credits and perhaps from the demise of the video business. It is suggested that she has used these carried forward losses to her credit in subsequent personal tax assessments. In cross-examination counsel for the husband suggested that the benefit may have been as much as $95,000. Again, I am not provided with accounting evidence over and above the taxation returns and assessments tendered in evidence. Whilst I accept on the balance of probabilities that the wife may have receive such benefits, I am not inclined to make any adjustment under s 75(2) of the Act where currently the husband’s expectation of employment and income is perhaps more secure than that of the wife despite her positive attitude in this respect.
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:
Asset Value Value 1. H Street property $0.00 $380,000 2. Plant Hire $0.00 $32,000 3. Motor Vehicle 1 $0.00 $65,000 4. Site Office $0.00 $30,000 5. H Street loan $277,00 $0.00 6. Business credit card $4,960 $0.00 7. R Pty Ltd investment loans $97,000 $0.00 Total $378,960 $507,000
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.
I certify that the preceding seventy-four (74) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice McGuire. Associate:
Dated: 3 April 2025
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