SHARPE & SHARPE
[2010] FamCA 250
•26 March 2010
FAMILY COURT OF AUSTRALIA
| SHARPE & SHARPE | [2010] FamCA 250 |
| FAMILY LAW – PROPERTY – Childless marriage of medium duration – Contributions |
| Family Law Act 1975 (Cth) |
| Biltoft & Biltoft (1995) FLC 92-614 Blanks & Blanks [2006] FamCA 354 Bushby & Bushby (1988) FLC 91-919 Chorn & Hopkins (2004) FLC 93-204 Collins& Collins (1990) FLC 92-149 Farmer and Bramley (2000) FLC 93-060; 27 Fam LR 316 GBT & BJT [2005] FamCA 683 Harrington & Harrington (2007) FLC 93-317 Kennon v Kennon (1997) FLC 92-75 McMahon & McMahon (1995) FLC 92-606 P & P [2002] FamCA 1006 Rosati v Rosati (1998) FLC 92-804 |
| APPLICANT: | Ms Sharpe |
| RESPONDENT: | Mr Sharpe |
| FILE NUMBER: | SYF | 3826 | of | 2006 |
| DATE DELIVERED: | 26 March 2010 |
| PLACE DELIVERED: | Sydney |
| PLACE HEARD: | Sydney |
| JUDGMENT OF: | Watts J |
| HEARING DATE: | 24 - 26 June 2009 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr O'Gorman |
| SOLICITOR FOR THE APPLICANT: | David H. Cohen & Co |
| COUNSEL FOR THE RESPONDENT: | Mr Richardson, SC |
| SOLICITOR FOR THE RESPONDENT: | Barkus Doolan Kelly |
Orders
Pursuant to s 79 Family Law Act, an order be made in the terms of paragraphs 2 to 10 below.
Within 60 days of the date of these Orders, the husband pay to the wife an amount of $287,816.00.
Within 60 days the husband remove the Bose audio system from his business premises and deliver it to the wife together with a used fishing rod with pink line, the wife’s university text books and jackets.
Except as any paragraphs of this Order provide to the contrary, as against the wife, the husband is solely entitled to and the wife has no interest in any assets of whatsoever nature and kind presently in the name, ownership or possession of the husband.
Except as any paragraphs of this Order provide to the contrary, as against the husband, the wife is solely entitled to and the husband has no interest in any assets of whatsoever nature and kind presently in the name, ownership or possession of the wife.
Except as any paragraphs of this Order provide to the contrary, each of the husband and the wife release each other from all debts owing from one to the other.
Except as any paragraphs of this Order provide to the contrary, the husband shall indemnify the wife from and in respect of all actions, claims, suits and demands as may be made against the wife in relation to any liability in the name of the husband.
Except as any paragraphs of this Order provide to the contrary, the wife shall indemnify the husband from and in respect of all actions, claims, suits and demands as may be made against the husband in relation to any liability in the name of the wife.
In the event the husband fails to make the payment referred to in paragraph 2, he will do all things and sign all necessary documents to cause S Construction Pty Limited and E Pty Limited (“the companies”) to sell … (“the P property”) and to distribute the net proceeds of sale as follows:-
9.1.Payment of sale costs;
9.2.Discharge of any encumbrance on the property;
9.3.Payment to the wife of the sum referred to in paragraph 2 together with any interest in accordance with the Family Law Rules; and
9.4.Balance to the company.
Any prior order in relation to the payment of valuation fees by the wife is discharged.
Either party have liberty on 7 days notice to make an application in relation to the implementation of this order.
If either party refuses or neglects to sign (within fourteen (14) days of a written request to do so) any documents necessary to affect the terms of these Orders, the Registrar of the Sydney Registry of the Family Court of Australia is hereby appointed pursuant to the provisions of Section 106A of the Family Law Act to execute such documents on behalf of such party.
IT IS NOTED that publication of this judgment under the pseudonym Sharpe & Sharpe is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth)
| FAMILY COURT OF AUSTRALIA AT SYDNEY |
FILE NUMBER: SYF 3826 of 2006
| MS SHARPE |
Applicant
And
| MR SHARPE |
Respondent
REASONS FOR JUDGMENT
INTRODUCTION
This matter involves competing applications for property settlement under s 79 of the Family Law Act 1975 (“FLA”).
The wife filed an Application for Final Orders on 11 September 2006. The orders she now seeks have not changed since the filing of that document. The husband filed a response to the wife’s application on 16 November 2006. The orders now sought by the husband are contained in his case outline.
ORDERS SOUGHT BY THE PARTIES
The wife
In her Application for Final Orders filed 11 September 2006 the wife seeks orders in the following terms:
1That within 21 days of the date of these orders, the husband pay to the wife by way of bank cheque an amount such that the wife retains 37% of the value of the total net property of the parties.
2That in order to secure the performance of the husband’s obligations pursuant to Order 1;
2.1 [S Construction] Pty Limited and [E] Pty Limited (“the Companies”) be joined as parties to this application.
2.2 Within 14 days of the date of orders, the husband charge in favour of the wife until the date of compliance by the husband with Order 1, all his right, title and interest in:
2.2.1each of the Companies; and
2.2.2any real property owned by him, whether solely or jointly at the date of orders;
and at the request of the wife and production to the husband of documents for that purpose, the husband shall forthwith execute such further document that may properly be required for the purposes of that charge.
2.3 Pending the husband’s compliance with Order 1, the husband, other than by written consent of the wife, be restrained from:
2.3.1the sale or disposition of his legal or beneficial interest in shares in, or loans to, each of the Companies;
2.3.2moving or voting in favour of any resolution of any of [sic] each of the Companies which has the intention or effect of varying the existing rights of shares in each of the Companies or allotting further shares or doing any act or thing which would have the effect of diminishing the value of the husband’s shares in each of the Companies or diminishing or diluting the present relative voting control referrable to those shares; or
2.3.3doing or causing or permitting to be done, any act or thing having as its intention or effect to otherwise charge, encumber or increase any borrowings secured by any real property owned by him or by the shares or any other asset of each of the Companies.
2.4 Within 14 days of the date of orders, each of the Companies charge in favour of the wife all their respective rights, title and interest in all real property owned by each of them at the date of these orders and shall forthwith execute any further document as may properly be required for the purpose of that charge and that the husband do all acts and things necessary, including forthwith move and vote on a resolution of the each of the Companies, to charge its real property as required in this Order;
2.5 The wife be entitled to lodge a caveat over any real property the subject of a charge pursuant to this order at her expense and the husband provide his consent if required to the Caveat upon tender of a caveat to him for that purpose.
3That simultaneously with the husband’s compliance with Order 1, the wife provide to the husband a properly executed withdrawal of caveat and lodgement fee in relation to any caveat over property and do all acts and things and sign all documents necessary to discharge the charges.
4That within 7 days of the date of these Orders, on a date and time agreed between the parties and failing agreement on the Saturday following the date of these orders at 10:00am, the husband allow the wife to collect from the husband’s residence the following items:
4.1 Bose system (located in the office during the marriage); and
4.2 Large television (located in the main bedroom during the marriage).
5That subject to any other order to the contrary, the parties be solely, legally and beneficially entitled to all other real and personal property of whatsoever nature and kind in their respective ownership, possession or control as at the date of these Orders, including but not limited to, money on deposit, shareholdings, insurance policies, motor vehicles, furniture, furnishings and effects.
6That each party be otherwise solely, legally and beneficially entitled to all superannuation funds being in their respective names.
7That subject to any order to the contrary, each party mutually releases the other from all debts or claims owing from one to the other.
8That in the event that all or any of the amount payable pursuant to Order 1 is not paid by the due date specified in that Order, interest will be payable on the amount outstanding from the due date until the date of payment at the rate prescribed by the Family Law Rules.
9That each party be at liberty to re-list the matter on 14 days notice in respect of implementation of these Orders.
10That if either or both of the parties fails to comply with these Orders including doing all such things and executing all such documents as may be necessary, within the time provided, a Registrar of the Sydney Registry of the Family Court of Australia or such other person appointed by the Court be authorised to do all such acts and things and execute all such documents on behalf of either or both parties.
11That in the event that either party procures compliance with these Orders pursuant to Order 10 then the party procuring such compliance will be indemnified by the party for his or her costs and expenses incurred in obtaining such compliance.
12That the husband pay the costs of, and incidental to, these proceedings.
The husband
The husband seeks orders in the following terms:
1.That within 42 days of the date of the making of this Order and subject to the wife’s compliance with her obligation in paragraph 2, the husband pay to the wife the sum of $50,673 save that the husband shall be entitled to deduct from such payment the sum of $14,358, being the wife’s equal share of the valuation costs.
2.That simultaneously with the payment referred to in the preceding paragraph of this Order, the wife shall pay all monies, sign all documents and do all acts and things necessary to pay out the personal loan obtained by her from Sydney Credit Union.
3.That except as any paragraphs of this Order provide to the contrary, as against the wife, the husband is solely entitled to and the wife has no interest in any assets of whatsoever nature and kind presently in the name, ownership or possession of the husband.
4.That except as any paragraphs of this Order provide to the contrary, as against the husband, the wife is solely entitled to and the husband has no interest in any assets of whatsoever nature and kind presently in the name, ownership or possession of the wife.
5.That except as any paragraphs of this Order provide to the contrary, each of the husband and the wife release each other from all debts owing from one to the other.
6.That except as the paragraphs of this Order provide to the contrary, the husband indemnify the wife from and in respect of all actions, claims, suits and demands as may be made against the wife in relation to any liability in the name of the husband.
7.That except as the paragraphs of this Order provide to the contrary, the wife indemnify the husband from and in respect of all actions, claims, suits and demands as may be made against the husband in relation to any liability in the name of the wife.
8.In the event that either party refuses or neglects to execute any deed or instrument necessary to give effect to these Orders, then the Registrar of this Court be appointed pursuant to s106A of the Family Law Act 1975 to execute such deed or instrument in the name of the defaulting party and to do all acts and things necessary to give validity and operation to the deed or instrument.
9.That the wife pay the husband’s costs of and incidental to this application.
SHORT HISTORY
The respondent husband, Mr Sharpe, was born in 1964 and is 45 years of age. He is employed as a company director.
The applicant wife, Ms Sharpe, was in 1973 and is 36 years of age. She is not currently in paid employment and receives a Newstart allowance of approximately $250 per week, or $13,000 per year.
The parties commenced cohabitation in December 1997.
The parties married in 2001.
The parties separated on 15 May 2005 after having been in a relationship for 7 years and 6 months.
There were no children of the relationship.
The marriage was formally dissolved on 6 March 2007.
The current proceedings were commenced by the wife by way of an Application for Final Orders filed 11 September 2006. The husband filed a response on 16 November 2006.
CREDIT
The wife’s credit
Parts of the wife’s affidavit cannot be relied upon and I refer to them in detail below. My impression of the wife in the witness box was someone who had a degree of mental impairment. At the end of the first day the wife became somewhat bewildered saying that a document, upon which she recognised her signature, may not have been her affidavit.
Senior counsel for the husband submitted that the wife’s evidence ranged from “careless to unreliable to exaggerated and, at worst, false and misleading”. He referred to the following statements in the wife’s affidavit:
14.1.In paragraph 4 of her Affidavit the wife claims an income of $40,000 though when pressed, she admitted she didn’t actually know.
14.2.When asked about paragraph 9 of her Affidavit, the wife admitted that she may have exaggerated when she said laundry took her an hour each day to complete.
14.3.In paragraph 13 of her Affidavit the wife claims that she bought all the groceries. She agreed that the husband would sometimes do this, and also bought meat in bulk. For some period, grocery shopping was done by using the internet site greengrocer.com.
14.4.The wife asserts at paragraph 20 of her Affidavit that she was instrumental in the book-keeping of one of the husband’s businesses. While true, this contribution was only for a short period.
14.5.The wife states that she bought all of her husband’s clothes at paragraph 26 of her Affidavit. The husband’s credit card and bank statements show that she did not buy them all.
14.6.In paragraph 32 of the Affidavit the wife states that she had difficulty ironing because there were simply not enough hours in the day. The wife agreed the local Laundromat did ironing.
14.7.In paragraph 46 of her Affidavit the wife states that she paid for herself on holidays. That was not an accurate statement.
14.8.In paragraph 50 the wife states that the husband had never organised a birthday for her, yet he had organised a holiday for her 30th birthday.
14.9.The wife states at paragraph 52 that the husband only paid for his own breakfast and drinks when they went out, otherwise the wife would pay. That statement was not accurate.
14.10.In paragraph 61, the wife claims she took only clothes when she left the home. I find she also took a computer, kitchen appliances and linen.
14.11.The wife also stated that she owned her car at the commencement of the relationship, when she actually had taken out a loan over the car and had almost the entirety owing.
14.12.The wife claimed credit card debts of $34,000 at the time of separation, though these debts were closer to $15,000.
14.13.The wife also conceded that evidence in her affidavit about the infrequency with which she and her husband went out to restaurants, was exaggerated.
14.14.The wife stated that her second job was a full time position over two years, yet her records show a gross income over that period of only $1,000.
As is clear from what is set out above, senior counsel for the husband did demonstrate during cross examination of the wife with reference to documents that some of what appeared in the wife’s affidavit was inaccurate. However, when the wife was presented with documents, on the whole she readily conceded what they said. I am unable to say why it might be that the wife’s affidavit contains so many loose statements. The wife’s mental health, as evidenced by her psychotic episode at the end of 2008, may provide some explanation.
I find the wife was not a dishonest person. Much of her oral evidence was given quickly and in a forthright manner. She willingly made concessions and in general, she gave responsive answers, regardless of whether or not they were against her interest. For example, when she was given an opportunity to discuss her involvement in the selection of the P property at the time of cohabitation she did not attempt to associate herself with the acquisition of the property which was the matrimonial home of the parties throughout their time together. Her oral evidence was in my view quite reliable.
Husband’s credit
Counsel for the wife submitted that husband’s manner in the witness box indicated he was not forthright, he had responded to some questions by asking questions, wasn’t forthcoming and did not frankly respond to questions he did not like. Counsel for the wife also submitted that the husband was selective about what facts and figures he remembered, giving as an example the husband’s failure to be able to remember the profit/loss of his business in the first year.
To some degree, I accept those submissions. Whilst the husband’s demeanour in the witness box was at times confident and assertive, there were times when what he said and the manner and tone in which he said it, did not ring true. For example, I did not accept the husband’s evidence about his gift buying. It sat uneasily with his earlier evidence that he didn’t like to shop. I accept that the wife was a good shopper and her evidence about gift buying is inherently more probable.
The husband protested that it would be an inconvenient and costly exercise to remove a sound system, which the wife seeks, from his offices. I was unimpressed by the manner in which the husband gave that evidence. I infer from the fact that the husband has a thriving construction business which he jointly controls, that the husband’s protestations were without foundation. I find that he would have connections with electricians and other trades people such that the cost or inconvenience of moving the sound system would not be of any great moment to him. He conceded that when he moves from the P property he would remove the other (more expensive) sound system installed in the home.
In item 17 of the husband’s financial statement, the husband is asked to give evidence about his current partner and his knowledge of her financial position. He indicated that he did not know what her average weekly income was. I find that that piece of sworn evidence by the husband was disingenuous. The husband had been living with Ms K at the time his financial statement was sworn for 13 or 14 months. At that time, Ms K was working in the husband’s business.
I find that the husband did know information about Ms K’s income at the time he swore the financial statement but chose not to disclose any details about the role she played in the husband’s business or her level of remuneration.
The husband seemed to be in control of most of the documents and filed two extensive tender bundles of documents that related to financial dealings during the cohabitation and marriage. In the affidavit prepared by his lawyer, the husband had attached a schedule which he said he had prepared, identifying payments of various items. Items 40 and 41 in that schedule related to groceries and indicated that with credit cards he paid groceries totalling $7,818 over a seven and a half year period. The amount for purchasing of clothing (items 48, 49 and 50) totals $6,686.37.
The husband made payments during the relationship as follows for his clothing:
27.05.98 – 24.06.98
$413.90
3 purchases 2 days incorrect date given
24.09.98 – 26.10.98
$583.75
4 purchases 1 day incorrect date given
24.12.99 – 27.01.99
$145.00
1 purchase incorrect date given
26.01.00 – 23.02.00
$246.00
1 purchase incorrect date given
26.07.01 – 24.08.01
$288.16
1 purchase
22.12.01 – 24.01.02
$79.95
1 purchase
15.05.02 – 11.06.02
$230.00
1 purchase
14.08.02 – 15.09.02
$997.85
1 day 5 purchases
14.11.02 – 15.12.02
$738.00
1 day 2 purchases
14.01.03 – 13.02.03
$252.75
1 purchase
14.03.03 – 13.04.03
$124.96
1 purchase
14.04.03 – 13.05.03
$200.00
1 purchase
15.09.03 – 14.10.03
$1000.00
1 cash withdrawal
14.10.03 – 13.11.03
$149.00
1 purchase
15.01.04 – 14.02.04
$1000.00
1 cash withdrawal
15.03.04 – 13.04.04
$44.95
1 purchase
14.09.04 – 13.10.04
$191.40
1 purchase
The husband made payments during the relationship as follows for groceries through ‘Franklins Big Fresh’ and greengrocer.com [Other smaller payments for groceries were made at various convenience stores and Harris Farm etc]:
Franklins
01.05.98
$121.55
29.06.98
$76.80
30.09.98
$159.20
07.12.98
$353.00
10.02.99
$314.45
| Greengrocer.com | |
| 03.05.99 | $47.69 |
| 12.05.99 | $106.10 |
| 18.05.99 | $2.29 |
| 27.05.99 | $29.70 |
| 07.06.99 | $37.25 |
| 30.06.99 | $34.88 |
| 02.08.99 | $53.45 |
| 11.08.99 | $36.62 |
| 23.08.99 | $54.09 |
| 06.09.99 | $60.90 |
| 07.09.99 | $79.25 |
| 11.10.99 | $83.96 |
| 20.10.99 | $76.22 |
| 09.11.99 | $77.34 |
| 22.11.99 | $74.74 |
| 03.12.99 | $88.60 |
| 24.12.99 | $168.49 |
| 17.01.00 | $77.21 |
| 01.02.00 | $97.05 |
| 11.02.00 | $123.79 |
| 07.03.00 | $196.89 |
| 22.03.00 | $108.92 |
| 10.04.00 | $98.13 |
| 03.05.00 | $104.69 |
| 19.05.00 | $116.63 |
| 01.06.00 | $108.43 |
| 20.06.00 | $113.27 |
| 04.07.00 | $148.49 |
| 18.07.00 | $130.26 |
| 25.07.00 | $72.48 |
| 31.07.00 | $165.46 |
| 06.09.00 | $149.77 |
| 29.09.04 | $40.26 |
| 08.10.04 | $40.94 |
| 22.10.04 | $53.37 |
The husband said that the relatively small amounts on groceries and purchases of clothing in his analysis of his credit cards did not necessarily mean the wife was correct in her contention that she spent her money on those items to make up what you would otherwise expect expenditure to be over a seven and a half year period. Instead he points to cash withdrawals which he made and said that he paid for food and clothing with cash. The husband’s bank account statements for the St George savings account show frequent transactions of approximately $500 or more per week over the period of the relationship.
The records of the husband do not support his evidence that he did an annual shop for clothes, although his infrequent purchases seem to be for a quantity of clothing.
The records are only of limited help to determine which party is giving an accurate account about the purchase of groceries. Overall I find the records of the husband are corroborative of the wife’s version that she spent some of her income on buying most of the food and household supplies for the couple and buying clothing for the husband than of the husband’s version and I make that finding notwithstanding the gloss the husband puts on his analysis of his records as being conservative and not being a full analysis of where he spent his cash.
Conclusion on credit
I have difficulty in choosing between the two parties on credit. Whilst there are considerable problems with the wife’s affidavit, I was generally impressed with her oral evidence. The husband worked long hours but claims that he equally shared in household duties. I find the wife’s version in respect of the fulfilling of the role of homemaker inherently more likely. Where the parties are in conflict in their evidence about the wife’s role as homemaker, I generally accept the version of the wife.
CHRONOLOGY
In May 1994 the husband incorporated N Management Pty Ltd (“N Management”), a building business of which he was the sole director and shareholder. This company did not employ anybody other than the husband. The husband has not provided any evidence that would indicate that it had any value at the date of cohabitation.
When the parties commenced cohabitation in December 1997, the husband was working in N Management. The wife also was in paid employment at the commencement of the cohabitation. At the time the parties commenced cohabitation in December 1997 the husband was 33 years old and the wife was 24 years old.
In March 1997 the husband had incorporated S Constructions Pty Ltd (“S Constructions”), with himself as the sole director and shareholder. Through S Constructions, the husband purchased a property at P (“the P property”) for an amount of $425,000. This was the home the parties moved into when they commenced living together and where they lived throughout their relationship. Settlement took place on 23 December 1997. The purchase was financed in part with a loan from M Finance Pty Ltd in the amount of $200,000. Whilst the husband did not provide records demonstrating he or one of his companies had $225,000 in cash at the start of the cohabitation, I have been given the transfer and the mortgage (not the title search). On the evidence I have, including the husband’s oral evidence, I conclude he contributed $225,000 to the purchase.
In March 1998 a set of renovations to the P property was carried out. The husband states that he or his company paid between $15,000 and $16,000 for the renovations.
In 1998 N Management ceased trading and the husband ceased working within that corporate structure. The husband was subsequently employed as a project manager for a large company and was in receipt of a salary for a period of approximately 18 months.
The wife fell pregnant when the parties first moved in together. The evidence is unclear about how the baby was lost. The wife later refers to her ‘second abortion’ so I infer the pregnancy was terminated.
According to the wife, the first purchase of furniture for the P property occurred during the period from June to August 1998. The husband asserts that furniture costing $32,164 was purchased before June 1998.
In 1998 the wife traded in a Daihatsu motor vehicle and purchased a Honda Civic motor vehicle for the amount of $23,190. The husband paid stamp duty on this purchase in the sum of $3,400. The wife obtained a personal loan from the Sydney Credit Union for the remainder and the husband acted as guarantor for that loan. The wife admitted that the Daihatsu still had money owing on it at the time of cohabitation.
In November 1999 the husband refinanced the mortgage over the P property, borrowing $200,000 from the St George Bank and paying out the loan from M Finance.
In 2000 the wife underwent surgery for the removal of a tumour in her breast and was hospitalised for four days. The husband accepted this was an anxious time for both of them.
In late 2000 the husband ceased working as a project manager.
In October 2000 E Pty Ltd (“E Pty Ltd”) was incorporated, with the husband and his business partner, Mr B, each acting as a director and holding one of the two issued shares.
In October 2000 the Sharpe Family Trust was established, with S Constructions as the trustee.
On 10 October 2000 the E Unit Trust was established by deed, with E Pty Ltd as the trustee. The Sharpe Family Trust held 50 of the 100 units in the E Unit Trust. The husband and Mr B operated a construction business through the E Unit Trust. The trust deed is in evidence, and will be referred to in the discussion about the value of the business.
In 2001 the wife obtained a Bachelor Degree.
In February 2001 the parties married. While on her honeymoon, the wife states that she became pregnant for the second time. The wife subsequently had a miscarriage. The husband asserts he was unaware of this pregnancy.
On 29 June 2001 the husband resigned as director of N Management, transferring his share to Mr B.
In 2002 the wife commenced working with M Company. She continued working for this firm until 2007.
In 2002 the husband payed $7,000 to discharge the wife’s credit card debts.
On 24 May 2002 the husband became a member of the Universal Super Scheme.
According to the husband, in 2003 the loan to the St George Bank was repaid. So the P property was unencumbered by 2003. There is a disagreement between the parties as to how the repayments were made. The husband claims they came entirely from his personal exertion through the company. The parties were together at the time and little turns on that matter.
On 7 May 2003 S Construction and N Management purchased Lots 51 and 102, O (“the O property”) for the sum of $325,000. The funds were borrowed and the P property was used as collateral security. The husband is not sure from which institution the funds were originally borrowed (possibly M Finance) but the loan was later transferred to St George Bank.
In approximately June 2003 a partnership was established between S Constructions and N Management, with both companies acting as trustees for the Sharpe Family Trust and the B Family Trust respectively. The partnership’s principal purpose was to purchase and hold real estate for rental income.
In 2004 a second set of renovations to the P property was undertaken. The husband states that he paid between $80,000 and $100,000 for these renovations. According to the wife, the purchase of furniture took place during period from July to August 2004. The husband states that he purchased furniture in May 2004 for an amount of approximately $47,000, as well as a bed for $14,000 and a painting for approximately $1,000.
In June 2004 S Constructions and N Management purchased a property at Y (“the Y property”) for an amount of $650,000. An amount of $500,000, secured over the former matrimonial home, was borrowed from St George Bank.
The husband states that on 17 August 2004 he signed an agreement with Technology Leasing Ltd to lease a plasma television and a Bose Lifestyle System, for which he made all the payments. At the date of separation there were two sound systems in the matrimonial home. The husband has since had the one that the wife wants (the less valuable of the two) installed in his business premises.
In August 2004 the wife organised a surprise 40th birthday party for the husband at the P Hotel, as well as a night at a Hotel. The husband had asked the wife not to do this as he said finances were tight. He apparently otherwise enjoyed the night.
The parties planned to have a child. The wife fell pregnant in April 2005. The husband subsequently accompanied the wife while she underwent an abortion. The wife states this to be her second abortion, though as I have said, the details of the first are unclear.
On 15 May 2005 the parties separated after having been in a relationship for 7 years and 6 months. The husband continued living in the P property, while the wife moved to rental premises. The husband states that he loaned the wife $500 to pay her share of a rental bond, an amount that she has not repaid.
As at 31 May 2005 the husband’s savings with the St George Bank amounted to $77, 603.
As at 30 June 2005 the Sharpe Family Trust was valued in Mr G’s report at $100,000 and S Constructions was valued at $560,000. There was also a loan owing by S Constructions to the husband in the sum of $136,851.
On 25 November 2005 S Constructions and N Management purchased Lot 135, O (“the O car space”) for an amount of $48,000. The husband drew on his loan account with E Unit Trust to pay for his share.
On 11 September 2006 the wife filed an Application for Final Orders for Property Settlement.
The husband states that in 2006 he replaced the glass sliding doors between the main bedroom and the ensuite at the P property as well as replacing the shower screens to the ensuite. The husband paid the total costs of approximately $2,900.
The parties were divorced on 6 March 2007.
In 2007 the body corporate of the former matrimonial home issued a levy to the special fund and S Constructions was required to pay $3,000.
On 5 April 2007 S Constructions (as trustee of the Sharpe Family Trust) and another entity jointly purchased Lots 50 and 128, O (the second O property) for $300,000. S Constructions borrowed funds from St George Bank to pay its share. S Constructions’ borrowing was secured over the P property.
On 14 May 2007 an order was made for Mr G of G Firm to be appointed as the single expert to value the company and trust. An order was made that the parties be equally responsible for all the single expert’s costs, save that the husband shall meet all costs in the first instance and the wife’s share of such costs shall be deducted from or set off in favour of the husband against any entitlement the wife has pursuant to s 79 or otherwise.
On 20 September 2007 C Valuations Pty Ltd issued a tax invoice for $4,070 (inclusive of GST). The husband paid that tax invoice. I infer that C Valuations valued the P property in the sum of $550,000 as at 2007. The parties agreed, for the purposes of Mr G’s valuation, to adopt the value of $550,000 as the value of the former matrimonial home, both as at the date of separation in May 2005 and as at 30 June 2008.
In approximately December 2007 the husband commenced living with Ms K in the P property. Ms K is employed currently in the husband’s business on an income of approximately $50,000.
On 12 February 2008 G Firm issued a tax invoice for $2,481.82; on 28 April 2008 G Firm issued a tax invoice for $9,250.46; and on 18 February 2009 G Firm issued tax invoices for $12,914. These invoices have been paid by the husband.
The wife was admitted to a psychiatric unit and was an inpatient under the care of Dr W, consultant psychiatric from 26 September 2008 to 20 December 2008. The wife suffered a psychotic episode as reported by Dr A in a document dated 20 February 2009 (Exhibit A).
The wife has had one period of employment since her discharge from hospital. That employment lasted approximately one month. The wife was unable to give me any comprehensible reason as to why her employer had terminated her employment.
On 24 October 2008 an order was made appointing the wife’s mother as case guardian for the wife. That order was discharged on 10 February 2009.
THE LAW
The approach taken in these reasons for judgment
In this matter my task is to:
73.1.Identify and value the property, assets, financial resources and liabilities of the parties;
73.2.Identify relevant contributions and assess them;
73.3.Consider relevant matters referred to in Section 79(4)(d) – (g) FLA;
73.4.Ensure my order adjusting the property assets and liabilities of the parties is just and equitable.
The parties have invited me to adopt a global approach to the consideration of the asset pool and I agree that is an appropriate approach.
Legal principles or themes
Senior counsel for the husband referred to my decision of Blanks & Blanks [2006] FamCA 354 as providing a convenient summary of some of the authorities dealing with issues arising out of marriages which are of short to medium duration and are childless. As I have said in that case, no single case provides an exact template for what should happen in another case. They demonstrate themes rather than binding principles. In cases of this nature, there is a higher level of scrutiny made of financial contributions than would otherwise be the case of a longer marriage. The cases referred to in Blanks provide guidance as to the range in which discretion might be exercised in cases which have similar features.
There are however some factual differences between this case and some of those referred to in Blanks. For example, Guest J in P & P [2002] FamCA 1006 says that there was no evidence in that case that there had been any effect or impact of the cohabitation upon the pool of assets and that that was an important thing to take into account when assessing the wife’s contribution pursuant to s 79(4)(a) - (c) FLA in that case. In this case, apart from the husband’s initial cash contribution, which is acknowledged by the wife, there were no other assets of any significance at the commencement of the cohabitation. The husband brought with him his experience but the parties were basically receiving income as a result of their personal exertion (and not from any business asset) in the early part of their cohabitation.
Some of the cases suggest the striking of a dollar figure rather than the use of percentages. Whilst senior counsel for the husband did not suggest a dollar figure in this case, he did suggest 5 percent, if 2005 values are taken as the appropriate figure to place on the balance sheet and 2 percent if figures at the date of hearing are placed on the balance sheet. A dollar figure can be calculated from the percentages suggested. Unlike cases such as Bushby (1988) FLC 91-919 and McMahon (1995) FLC 92-606, the P property had only just been acquired with the assistance of borrowings to fund just under half of the acquisition costs and the husband’s business did not exist. The business was of substantial value (in the context of the assets in this case) as at the date of separation, although it has grown by about 44 percent from the base figure at the date of separation as at the date of hearing (a further period of approximately four years).
In Blanks I also discuss the relevance of a disparity in financial circumstances and the duration of the marriage (ss 75(2)(b) FLA and ss 75(2)(k) FLA) to adjustments made at the third stage.
In the marriage of Farmer and Bramley (2000) 27 FLC 93-060; Fam LR 316, Guest J and Kay J adopted different positions. Guest J’s position was that there had to be a connection with the disparity of financial circumstances and the life of the marriage and that s 75(2)(b) was not designed to “even up” in some way the financial positions of the parties. Kay J referred to the earlier discussion by Nygh J in Collins (1990) FLC 92-149 and concluded that the disparity in capital positions of the parties reached as a result of the distribution of contributions (at step 2) is a matter that can be taken into account (by inference under s 75(2)(b)). Kay J disagreed with Guest J’s proposition that there had to be a connection between the capital position of the parties and the life of the marriage before weight could be placed upon a disparity of financial position of the parties in the balancing exercise.
In GBT & BJT [2005] FamCA 683 (Kay, Holden, Warnick JJ) the Full Court concluded that Strickland J had given insufficient weight to the brevity of the marriage (relevant under s 75(2)(k)) and to the minimal nature of the wife’s contributions, particularly having regard to the fact that such contributions as she did make were mainly in the homemaker sphere, the husband paid for the provision of a great deal of domestic assistance, and there were no children of the parties (relevant under s 75(2)(j)). In GBT & BJT, the parties were together six and a half years. The age difference was 18 years (the parties were 54 and 36). The pool of assets was $3,000,000. Strickland J gave 12.5 percent at stage 2 and 5 percent at stage 3, a total of 17.5 percent. The Full Court found that that was manifestly excessive and re-exercised their discretion giving 7.5 percent at stage 2, 2.5 percent at stage 3, a total of 10 percent.
Some differences between this case and GBT & BJT which are in the wife’s favour are that in GBT & BJT the husband paid for a great deal of commercial domestic assistance during the marriage. In this case there was no commercial assistance provided until towards the end of the cohabitation (apart from the husband getting his shirts ironed externally). The wife in GBT & BJT conceded she used very little of her own income for the joint benefit of the parties. That is not the position in this case. The wife in BGT & BJT was found at the date of hearing to be in a comfortable financial position. She had formed a new relationship. She was living in a house owned by her father and she had entered into an agreement to purchase a new home jointly with her partner for $400,000. The wife in this case has no assets and owes money on credit cards and money to her mother. The wife in GBT & BJT was found to have not made a full and frank disclosure of her financial arrangements with her new partner. There is no such suggestion made against the wife in this case.
In Kennon (1997) FLC 92-757 (Fogarty & Lindenmayer JJ) when dealing with 75(2) factors said of the facts in that case at page 84,303:
“On the one side, there are circumstances that this was a relatively short marriage, with no children, and the wife is able to continue employment of the type which she had previous to cohabitation….On the other hand, there are huge differences between the parties’ incomes, assets, future income-earning capacities and superannuation benefits. His Honour pointed out on a number of occasions that these differences existed at the time the parties commenced to live together and that if their paths had not crossed and if they had not lived together for five years it is likely that that difference would have remained the same. However, we are not persuaded that that is the beginning and end of the issue. Whilst we acknowledge that Section 79 is not a source of social engineering or as a means of evening up of the financial positions of the parties to the marriage, (see, for example Clauson & Clauson (1995) FLC 92-545; Waters and Jurek (1995) FLC 92-635 and Lyon and Bradshaw (Full Court 16 May 1997, not yet reported)), nevertheless the fact is that these parties were married for a not insignificant period, each made contributions which we have discussed and their obligations to each other do not cease on separation. Their marriage carried with it advantages and obligations and, so far as the settlement of their property on separation or divorce is concerned, those obligations are to be determined in accordance with the detailed provisions of s 79.”
The “not insignificant period” of the Kennon marriage was seven years.
In this case I will take into account both the disparity of the financial circumstances of the parties after my assessment as to how assets should be divided based upon the contributions of the parties at step 2 and the length of the marriage as part of the mix of things I consider under s79(4)(d) - (g) FLA.
BALANCE SHEET
Should assets be valued at the date of separation or at the date of hearing?
Senior counsel for the husband made the following points in support of a contention that I should adopt the date of separation in respect of valuing the assets of the trust and the company (which include the P property):
85.1.The time between separation and the hearing exceeds 50 per cent of the time the parties cohabited.
85.2.There cannot be said to be any continuing contribution by the wife post separation pursuant to s 79(4)(b) and (c) given that there are no children.
85.3.That if the liabilities were valued at the date of the hearing, the value of the property pool would decrease by $80,000 due to the wife’s debts. This would not be just and equitable when by comparison, the husband had made significant positive contributions in that time.
85.4.The wife had made no contribution since separation to the assets held by the husband. Only the husband had improved upon their value.
I do not accept these as reasons for valuing items on the balance sheet at the date of separation. The husband still operates a business which was created from scratch when the parties were together.
Also, the argument does not really have any great relevance to the valuation of the P property (which is an asset of S Constructions) given that the parties have agreed to adopt the same value for the home as at date of separation and as at date of hearing. Whether or not the full a mount of the wife’s current debts are added to the balance sheet is an issue that I will consider below and is not a reason for generally accepting the date of separation as the date at which assets and liabilities should be assessed.
The facts in this case are not ones that would cause me to depart from the usual course of taking values as at the date of hearing and then moving on to assess contributions made to the development of those assets.
Prior to final submissions, the parties provided a joint balance sheet. Most items were the subject of agreement. Those determined by me, for reasons set out below, are marked in bold:
| Item no. | Description | Owner | Wife | Husband’s values at DOS | Husband’s values at DOH | Values agreed or determined |
| Assets | ||||||
| 1. | St George Bank #...437 | H | $135,496.00 | $77,603.00 | $135,496.00 | $135,496.00 |
| 2. | Sydney Credit Union Account #...075 | W | $325.00 | $325.00 | $325.00 | $325.00 |
| 3. | Sydney Credit Union Account #...850 | W | $33.00 | $33.00 | $33.00 | $33.00 |
| 4. | IAG shares | H | $1,299.00 | $1,299.00 | $1,299.00 | $1,299.00 |
| 5. | Furniture and contents | H | $12,596.00 | $12,596.00 | $12,596.00 | $12,596.00 |
| 6. | Furniture and contents | W | $6,000.00 | $6,000.00 | $6,000.00 | $6,000.00 |
| 7. | Jewellery and wedding rings | W | $5,000.00 | $5,000.00 | $5,000.00 | $5,000.00 |
| 8. | E Pty Limited - 1 share | H | $0 | $0 | $0.00 | $0 |
| 9. | S Constructions Pty Limited - 2 shares | H | $1,140,000.00 | $560,000.00 | $1,140,000.00 | $1,140,000.00 |
| 10. | Sharpe Family Trust | H | $245,000.00 | $88,500.00 | $212,000.00 | $245,000.00 |
| 11. | Loan to S Constructions Pty Limited | H | $0 | $136,852.00 | $0 | $0 |
| 12. | Add back: legal costs and disbursements | H | $143,081.00 | $0 | $0 | $143,081.00 |
| 13. | Add back: legal costs and disbursements | W | $12,173.00 | $0 | $18,000.00 | $18,000.00 |
| Gross assets | $1,701,003.00 | $888,208.00 | $1,530,749.00 | $1,706,830.00 | ||
| Liabilities | ||||||
| 14. | Loan to S Constructions Pty Limited | H | $238,794.00 | $0 | $238,794.00 | $238,794.00 |
| 15. | ANZ Visa #...7231 | H | $0 | $0 | $0 | $0 |
| 16. | Personal loan from Citibank | W | $35,000.00 | $0 | $0 | $0 |
| 17. | American Express | W | $14,122.00 | $3,019.00 | $0 | $3,019.00 |
| 18. | Westpac Mastercard | W | $12,360.00 | $0 | $0 | $0 |
| 19. | HSBC Visa | W | $6,789.00 | $0 | $0 | $0 |
| 20. | David Jones | W | $9,992.00 | $3,986.00 | $0 | $3,986.00 |
| 21. | Virgin credit card | W | $0 | $8,062.00 | $0 | $8,062.00 |
| 22. | Diners Club | $0 | $0 | $0 | $0 | |
| 23. | BMW | W | $29,500.00 | $0 | $0 | $0 |
| Gross liabilities | $346,557.00 | $15,067.00 | $238,794.00 | $253,861.00 | ||
| 24. | MLC Masterkey business super | H | $58,869.00 | $58,869.00 | $58,869.00 | $58,869.00 |
| 25. | Colonial First Super | W | $36,500.00 | $36,500.00 | $36,500.00 | $36,560.00 |
| 26. | SGC | W | $500.00 | $500.00 | $500.00 | $500.00 |
| 27. | Hesta | W | $3,000.00 | $3,000.00 | $3,000.00 | $3,000.00 |
| Total superannuation | $98,929.00 | $98,929.00 | $98,929.00 | $98,929.00 | ||
| Description | Wife | Husband’s values at DOS | Husband’s values at DOH | Values agreed or determined |
| Summary | ||||
| Gross assets | $1,701,003.00 | $888,208.00 | $1,530,749.00 | $1,706,830.00 |
| Gross liabilities | $346,557.00 | $15,067.00 | $238,794.00 | $253,861.00 |
| Net assets | $1,354,446.00 | $873,141.00 | $1,291,955.00 | $1,452,969.00 |
| Total superannuation | $98,929.00 | $98,929.00 | $98,929.00 | $98,929.00 |
| Net assets and superannuation | $1,453,375 | $972,070.00 | $1,390,884.00 | $1,551,898.00 |
Item 10 - Sharpe Family Trust
The main trading entity (in respect of which the husband has a one half interest) is the E Unit Trust. E Pty Ltd is the trustee of E Unit Trust. The units in E Unit Trust are held equally by two family trusts: The Sharpe Family Trust which is solely controlled by the husband and the B Family Trust which is solely controlled by Mr B, the husband’s long time business associate.
E Pty Ltd operates a construction business, dealing with projects primarily throughout Sydney. The market in which the business operates is highly competitive. The business tenders for projects with clients including large businesses, government agencies and others, as well as a number of architectural and project management firms. As at February 2009, there were between 500 and 1,000 contracts with subcontractors and suppliers. Subcontractors are usually placed on back to back contracts in accordance with a head contract.
The husband and Mr B run the business. The husband and Mr B jointly make decisions in relation to the business and are required to jointly sign all cheques and negotiable instruments. The business employs two project managers, a business development manager, an estimator, an office manager, three foreman, two carpenters and one labourer. The husband’s current partner, Ms K, is one of these employees and is currently paid $50,000 a year.
The husband indicated in his oral evidence that he had considerable plans for expansion of E Pty Ltd and intended to position the business to take advantage of what he believed would be an upturn in business within the next twelve to eighteen months. The husband was very bullish about the prospects of growing and expanding the business in the future. A business development manager was employed during 2008 as part of a plan to expand the business and increase its turnover. The husband will move into the position of general manager with Mr B becoming construction manager.
Mr G has capitalised earnings before interest and tax. He has used an earnings multiple of 1.75 (a capitalisation rate of 57.1 percent).
The husband asked the single expert questions in letters dated 28 May 2008 and 9 June 2009. The single expert answered those questions on 13 August 2008 and 22 June 2009.
The method to establish maintainable earnings was average adjusted EBIT over the full financial years leading up to June 2008.
The earnings multiple of 1.75 which was adopted is justified by the factors set out by the single expert at note 2 to schedule F2 on page 23 of Mr B’s report.
The husband argued that E should be valued at market value not value to the husband.
In response to a question by the husband, Mr G indicated there should be a 10 percent discount if the court considered market value rather than value to the husband was the appropriate method of valuation.
The husband referred to E Unit Trust Deed which is in evidence. In particular he pointed to paragraphs 9(2)(a), (b), (c), (e) and (f) to demonstrate the restrictive provisions that exist in the event the husband wished to dispose of his interest in the business with Mr B remaining in the business. It was argued that this lack of negotiability would see a discount and that the appropriate method of valuing the business was market value as opposed to the method originally adopted by Mr G which was value to owner.
In the letter dated 22 June 2009 Mr G indicated that while he would not consider the provisions of 10(2) of the E Unit Trust Deed irrelevant, these provisions are common in agreements governing the ownership of shares and units in privately held companies and trusts. It is clear from Mr G’s answers (and he was not tested orally on his answers) that he had a copy of the relevant trust deed at the time of his original valuation (that is clear from his report) and that he took it into account when reaching a discount factor of 15 percent.
Mr G was of the opinion that in the event the Sharpe Family Trust wished to sell the units which it holds in E, then the most probable outcome would be that Mr B would buy them. Conversely, if Mr B wanted to get out, the provisions allowed for the husband to acquire them.
It was conceded by senior counsel for the husband that should Mr B want to get out of the business and the husband remain, the clauses in the agreement would be an advantage to the husband in those circumstances.
Senior counsel for the husband invited me to find that Mr G’s opinion was too simplistic and that the various provisions in the trust deed were so convoluted that they placed significantly more fetters on the ability of the husband to dispose of his interests in E than Mr G had allowed for. I find there is nothing in the face of the trust deed that creates a particularly onerous provision in relation to sale. The realty is in these circumstances that given the close connection between Mr B and the husband over the years, it is likely they will reach some agreement to accommodate one another if one of them wants to get out. If both of them want to get out, the business would be marketed in an orderly way and in those circumstances the discount factor would not have any relevance at all (the discount factor being referrable to the fact that one party does not control the company; a factor which is irrelevant if both parties are of one mind in respect of any decision for sale which is taken).
Mr G says that if fair market value were adopted then the same methodology of valuation would be adopted except that there would be a higher discount rate (25 percent instead of 15 percent). Mr G’s justification as to that further discount factor would be on the basis that Mr B may be willing to purchase the shares at a value close to a pro rata value but may not be in a position to do so. In the event that Mr B couldn’t take the business over as a whole a new purchaser would need to be found. That might take a period of time and it would need to probably have somebody of the husband’s talents as an acceptable purchaser. A 10 percent increase in the discount factor would be a $33,000 decrease in the value of the company.
Mr G initially in his first report indicated that he believed that value to the party was the appropriate method. Mr G correctly opined that in most family law situations that is a preferred method. In the circumstances of this case the husband has given a clear indication that not only does he wish to maintain his continued involvement with the business, he hopes and anticipates that the business will move into a further period of expansion and profitability.
Mr G already in his original valuation, discounted the husband’s interest by 15 percent because the husband did not have majority control of the business. The husband is a 50 percent owner however and as the future managing director of the company obviously has considerable say in what happens on a day to day basis with the company in consultation and in joint decision making with Mr B.
On the husband’s evidence there is no indication, at the present time, that either partner wishes to do anything other than see that the business is successfully moving forward. I do not accept that it is appropriate to value the company at fair market value in circumstances where the husband has no intention of disposing his interest in the company and I find value to the party is the appropriate basis upon which a valuation should be conducted. Given the facts in this case, I find that Mr G has adopted the correct valuation methodology. I adopt the figure of $245,000 as the value of the Sharpe Family Trust.
Items 12 and 13 - Add back of legal fees
The husband’s paid legal fees are $143,081. The wife, in final submissions, said her paid legal fees are $12,173. The husband says if they are to be included, the figure should be $18,000.
Senior counsel for the husband argued that neither of the amounts for paid legal fees should be added back onto the balance sheet. It was argued that payment of legal fees by the husband came from monies earned or borrowed after the separation. It is the wife’s case that the husband had paid his legal fees from income generated through E or dividends or salary he received as a result of his involvement with its business. The wife argues that given the business was developed during the marriage, payment of legal fees came from more than just the husband’s personal exertion earnings.
Counsel for the wife referred to the decision of Harrington & Harrington (2007) FLC 93-317 where the Full Court referred to the fact that O’Ryan J doubted the correctness of Chorn & Hopkins (2004) FLC 93-204 and had expressed the view that it is plainly wrong to say (as the Full Court did in Chorn & Hopkins at para 58) “if funds used to pay legal fees have been generated by a party post-separation from his or her own endeavours or received in his or her own right (for example, by way of gift or inheritance), they would generally not be added back as a notional asset”.
Although the Full Court in Harrington did not find that His Honour’s departure from the Chorn & Hopkins non-binding guideline was fatal, I will follow the guideline in this case. However, as was the case in Harrington, there are features of this case which would provide adequate reasons for adding back both lots of legal fees. The husband has not precisely pointed to the source of funds from which he has paid his legal fees. I infer however that given the assets that he had at the date of separation, the source of the legal fees came in part from his personal exertion earnings since separation and in part as a result of dividends that he received from the business that existed as at the date of separation. It cannot in my view be said, as was submitted by senior counsel for the husband, that payments were made from assets to which the wife had made no significant contribution. Part of the business assets were built up during the marriage for reasons that I discuss elsewhere in the judgment.
In those circumstances, it is safer in my view to add back the husband’s legal fees and deal with the payment of those fees when considering stage 2 contributions.
It might be argued that the wife’s legal fees are in a slightly different category. Given that she had no assets at the date of separation, one can only assume that the payment of legal fees came from personal exertion earnings post separation or monies borrowed on credit cards or from her mother since separation. However, it was the position during submissions of her counsel that both lots of legal fees should be added back onto the balance sheet and given that that is what counsel for the wife asserted should happen, I will also add the wife’s legal costs back onto the balance sheet and take the source of those funds into consideration when considering contributions at step 2.
As to the quantum of the wife’s legal fees, item 53 in the wife’s financial statement states that legal fees paid are in the sum of $18,000. This is also the figure in the wife’s summary document asset table. In a letter from the lawyers (Exhibit M) dated 25 June 2009 the fees paid are stated to be $12,173. This is the figure the wife’s counsel puts forward at trial. There was no testing of this discrepancy during the hearing and it is appropriate that the husband should be allowed to rely upon the wife’s sworn evidence. I accept $18,000 as the appropriate figure.
Items 16 – 23 Wife’s debts
The wife’s debts as asserted by her are set out in items 16, 17, 18, 19, 20 and 23 of the balance sheet add to $107,763.
I was comfortably satisfied as a result of the answers given by the wife in cross examination when presented with various bank and credit card statements that the amount of the wife’s credit card debts as at the date of separation totalled the sum of $15,067 (husband’s value for items 17, 20 and 21).
The balance of the wife’s debts has been accumulated since the separation.
The balance of the Diners Club of $5,189 is not included as this relates to expenses for which the wife’s then employer was responsible.
The question arises as to whether or not the wife has established on the evidence that the post separation debts were incurred by her in the normal course of living (in a non extravagant way).
The summary document gives a total of $101,369 by way of post-separation debts incurred by the wife. In her Affidavit of 12.06.09 the wife does not directly address in detail how the debt has been incurred by her, but does refer to details which may go some way to explain the debt. In the years since separation she had moved house on five occasions. The husband’s contribution to the cost of these moves seems to be payment of the bond when the wife first moved out. The sum paid by the husband was $500. At the time of the trial the wife was living alone in a flat in Sydney. The wife asserts that the husband kept most of the household items, excluding some towels and personal belongings, so presumably the wife would have had to set herself up with household items. Her summary document states that the wife earns $250 per week, however has expenses of $693 per week.
On the other hand, I am confident that the husband will be able to continue his earning capacity and probably improve it. I have no doubt that the husband’s ability to regenerate his capital into the future is far greater than the wife’s.
As mentioned above, I have some regard to the current debts which the wife carries (that part of the debts which was not added back onto the balance sheet).
Taking into account as a 75(2) factor, capital gains tax and selling costs if the property had to be realised
Mr G, in his letter of 13 August 2008, says that capital gains tax on the sale of the P property would be in the sum of $26,511 and that the total cost to the company of selling the property including legal fees and agent’s fees would be $39,511 (inclusive of the $26,511).
In addition, he says that if the company had to declare a dividend to get the sale proceeds to the husband the company would pay an additional level of tax of $117,330. That tax would be payable at the husband’s current level of earnings.
The principles in Rosati v Rosati (1998) FLC 92-804 apply. I have the discretion to take into account actual capital gains tax if I thought there would be a need for a sale as a result of orders that I made and I could take into account as a s 75(2) factor future capital gains tax in the event that there is some indication that the husband had some intention to dispose of the property at some time in the future. He said he intended to retain all assets.
In relation to his needing to sell the former matrimonial home in order to satisfy any order that was made in these proceedings, I do not have any evidence as to the husband’s ability to borrow. In relation to the husband’s borrowing capacity, the husband has $135,496 in the bank. He has an assumed income of $120,000. In addition, the husband will retain a share in a business which has an annual income earning capacity before interest and tax of $400,000 (the husband’s share of that is $200,000 per annum).
The husband does have a debt to S Constructions in the sum of $238,000 (see his financial statement item 53). S Constructions is the husband’s alter-ego. There is no indication in the husband’s financial statement that that debt is currently being repaid by him to the company. Item 21 of the financial statement provides for the payment of rent at $337 per week. The husband was unable in the witness box, when asked on a couple of occasions, to say how the accountant had accounted on an annual basis for payments that he made by way of “rent”. Item 21 in the husband’s financial statement shows that the debt owed to the company is covered by the value of the asset of the debt which is held in the company (the husband’s alter-ego). There is no indication that the husband would have to raise finance to repay S Constructions.
I conclude therefore that the husband has a borrowing capacity which is underpinned by an income of $120,000 per annum together with potential longer term dividend stream of $200,000 per annum.
I acknowledge that there is some evidence that that dividend will not be paid for the most recent financial year as a result of difficulties in respect of a defalcation, but that is a one off event. The husband and his business partner have dismissed the office manager for cause. Given the method of the valuation, it was agreed between the parties in these proceedings that any loss incurred for the misfeasance and any claim against a bank arising from it, are matters of irrelevance in the context of considering the balance sheet and are not matters on which any weight should be placed overall.
I find that the husband is not likely to be forced to sell the P property as a result of any order I am likely to make to pay the wife money. I will weigh the potential capital gain tax on the P property on that basis.
Considering how property would be divided based upon my findings in respect of contributions, the income earning capacity, property and financial resources of the husband greatly exceed those of the wife.
Conclusion about s 79(4)(d) – (g) FLA adjustment
I find that it is appropriate to make a 5 percent adjustment in the wife’s favour for matters arising under s 79(4)(d) – (g) FLA.
JUST AND EQUITABLE
Wife’s overall claim
On the basis that assets are valued as at the date of hearing, the wife’s claim based on contributions and s 75(2) factors is between 37 and 40 percent.
Overall position of the husband
At paragraph 12 of the case outline the husband submits contributions should be 92.5/7.5 to the husband and with a 2.5 adjustment that led to the 90/10 % split. This was based upon an analysis of values at the date of separation. I am not entirely clear as to what the husband’s final submissions were in relation to contributions and s 75(2) matters, the main confusion being as to whether or not the husband concedes any adjustment for s 75(2) matters at all. Senior counsel for the husband in final submissions said that “if I adopted the values as at the date of hearing…then recognising those items identified in our case outline that would point to a significant post-separation contribution of the husband, it simply leads to a modification of how we’d put our case as to the contributions in 75(2) and we’d put it – the wife’s position in that event at about 5% of the first point and 2% at the second which arrive at pretty much the same conclusion at the end of the day”. I took that to mean the husband sought, at the end of the hearing, a 93/7 percent split in his favour, of net assets valued at the time of hearing.
Conclusion
Based on findings of contributions and s 79(4)(d) to (g) matters, the result would be a 77.5 / 22.5 per cent split in the husband’s favour. I find that this is a just and equitable division of the parties’ assets.
That proportional division of assets could be achieved by distribution in the following way:
H gets 77.5%
Assets
Item No.
Description
Percentage
Value
1
St George Bank #...437
100%
$135,496
4
IAG shares
100%
$1,299
5
Furniture and contents
100%
$12,596
8
E Pty Limited - 1 share
100%
$0
9
S Constructions Pty Limited - 2 shares
100%
$1,140,000
10
Sharpe Family Trust
100%
$245,000
11
Loan to S Constructions Pty Limited
100%
$0
12
Add back: legal costs and disbursements
100%
$143,081
24
MLC Masterkey business super
100%
$58,869
Liabilities
Item No.
Description
Percentage
Value
14
Loan to S Constructions Pty Limited
100%
$238,794
15
ANZ Visa #...7231
100%
$0
Husband pays Wife
$294,826
Net Assets to H
$1,202,721
W gets 22.5%
Assets
Item No.
Description
Percentage
Value
2
Sydney Credit Union Account #...075
100%
$325
3
Sydney Credit Union Account #...850
100%
$33
6
Furniture and contents
100%
$6,000
7
Jewellery and wedding rings
100%
$5,000
13
Add back: legal costs and disbursements
100%
$18,000
25
Colonial First Super
100%
$36,560
26
SGC
100%
$500
27
Hesta
100%
$3,000
Liabilities
Item No.
Description
Percentage
Value
16
Personal loan from Citibank
100%
$0
17
American Express
100%
$3,019
18
Westpac Mastercard
100%
$0
19
HSBC Visa
100%
$0
20
David Jones
100%
$3,986
21
Virgin credit card
100%
$8,062
22
Diners Club
100%
$0
23
BMW
100%
$0
Wife receives
$294,826
Net Assets to W
$349,177
Each party would retain the assets they have and be responsible for their respective liabilities. A payment would be made by the husband to the wife in the sum of $294,826 (with an adjustment for valuation fees paid by the husband as detailed below).
Standing back, I find that this distribution of assets in those proportions and in the way set out in the above table, produces a just and equitable distribution as between the parties pursuant to s 79 FLA.
PROPOSED ORDERS
Application for the husband to deliver a sound system
It has always been part of the wife’s application that the husband delivers to her a Bose system (now at the husband’s business premises). There were two such sound systems owned by the parties during the marriage. The husband does not wish to give either of them to the wife. He says both are currently installed and it would be some trouble to him to remove them from their current installations. Having said that however, he agreed he intended to move the one in the former matrimonial home when he moves from that home to new premises shortly. I have said above that I do not accept the husband’s evidence in relation to the difficulty he would have in respect of removing the system. The husband has retained other valuable items from the marriage, including a bed imported from Italy and the lounge. It is the wife’s evidence that the stereo system in the office is the less valuable of the two systems. I will make an order a sought by the wife in relation to the Bose system.
I note that the husband also agreed to deliver to the wife items that he has located in his storage area at home, including a used fishing rod with pink line, the wife’s university text books and jackets.
Valuation fees
The existing order 4 of 14 May 2007 requires the wife to be responsible for one half of the valuation fees. These fees have been paid by the husband.
The cost of the valuations were as follows:
Valuation of furniture (Exhibit C, H Affidavit 2) $2,750.00
C Valuations 20/9/07 (H Affidavit 1) $4070.00
G Firm Valuation 12/2/08 (H Affidavit 1) $2481.82
G Firm Valuation 28/04/08 (H Affidavit 1) $9250.46
G Firm Valuation 18/02/9 (H Affidavit 3) $12,914.00
Total valuation fees $31,466.28
Consistent with my other findings as to the proportion in which the assets and liabilities of the parties should be divided, I find it is equitable that the wife pays 22.5 percent of these fees. That is a sum of $7,010.
The amount the husband is to pay the wife will be adjusted to $287,816 ($294,826 - $7,010).
I certify that the preceding one hundred and ninety three (193) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Watts.
Associate:
Date: 26 March 2010
0
2
1