SPENCER & SPENCER

[2012] FamCA 138

FAMILY COURT OF AUSTRALIA

SPENCER & SPENCER [2012] FamCA 138

FAMILY LAW - PROPERTY SETTLEMENT - Future needs – where the wife has not been in paid employment since 1999 and will need to rehouse herself – where the husband will have the benefit of the income of the business, his mother’s financial assistance and the ability to use the assets of the family trust – where the husband has failed to disclose his real income and accurately disclose his interest in the family trust – orders for a 12 per cent adjustment in the wife’s favour

FAMILY LAW - PROPERTY - Value of property - Expert evidence – where expert valued the husband’s business on the basis that the goodwill attaching to the business was commercial goodwill and saleable – where the income derived from the business is substantially larger than that disclosed by the husband to the expert – found that the business should be valued on a net asset backing with the husband’s income earning capacity accounted for as a factor under section 75(2) of the Family Law Act 1975 (Cth)

Family Law Act 1975 (Cth) s 79(4) & s 75(2)

Weir & Weir (1993) FLC 92-338

APPLICANT: Ms Spencer

RESPONDENT: Mr Spencer

FILE NUMBER: SYC 2325 of 2011

DATE DELIVERED: 16 March 2012

PLACE DELIVERED: Sydney

PLACE HEARD: Sydney

JUDGMENT OF: Rees J

HEARING DATE: 23, 24 February, & 8 March 2012

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr Johnston

SOLICITOR FOR THE APPLICANT: Johnston Vaughan Solicitors

COUNSEL FOR THE RESPONDENT: Mr Wheelhouse SC

SOLICITOR FOR THE RESPONDENT: KDB Holmes Solicitors

Orders

1. That the husband be declared the owner, as against the wife of the shares in B Pty Ltd (the property at … W Street, Suburb K).

2. That the husband and the wife forthwith do all acts and things required to sell the property known as … M Street, Suburb P (“Suburb P”) and the furniture and household contents of each of them for a price agreed upon between them and in the absence of agreement for a price determined by a valuer nominated by the President for the time being of the Australian Institute of Valuers and Land Economists.

3. That the proceeds of the sales be disbursed in the following manner and priority:

   (a)       In payment of the line of credit with the National Australia Bank;

   (b)       In payment of the legal costs and commission on the sale of the properties;

   (c)       In payment of the sum of $389,266 to A Pty Ltd;

   (d)       In payment of the sum of $84,490 to the wife;

   (e)       In payment of the balance then remaining to the wife.

4. The net assets of the parties shall be calculated by adding to the amount received by the wife according to Order 3(e) the sum of $106,386 being the assets remaining in the hands of the wife and the sum of $1,949,427 being the assets remaining in the hands of the husband.

5. The husband shall, within 60 days of the sale of Suburb P, pay to the wife a sum calculated to be the difference between 62% of the net assets and the sum of the amount she receives pursuant to Order 3(e) and $106,386.  

6. In the event that the husband has not paid the sum calculated in accordance with Order 5 within three calendar months of the settlement of the sale of Suburb P, then the husband shall do all acts and things required to sell the shares in B Pty Ltd and from the proceeds of sale, to pay to the wife the sum calculated in accordance with Order 5 together with interest in accordance with the Family Law Rules from the due date until the date of payment.

7. That the wife forthwith do all acts and things required to transfer to the husband or his nominee the share held by her in S Pty Ltd (“the Company”) and that the husband indemnify the wife and hold her safe in respect of any and all liabilities occasioned by her having been a shareholder in that company.

8. That the husband pay, forthwith upon the issue of an assessment, any tax liability of the wife caused by his having paid spousal maintenance by way of a dividend from the Company.

9. That each of the husband and the wife, in their capacity as directors of Spencer  Corporate Services Pty Ltd, the trustee of the Spencer Superannuation Fund, do all things necessary to give effect to these Orders.

10. That in accordance with s 90MT(1)(b) of the Family Law Act 1975 (Cth), the value of the wife’s member entitlement in the Spencer Superannuation Fund is an amount of not less that $51,581.

11. That a base amount of $51,581 is allocated to the wife as required by s 90MT(4) of the Family Law Act 1975 (Cth).

12. That pursuant to s 90MS(1) and s 79 of the Family Law Act 1975 (Cth), a splitting order in accordance with paragraph 11 is hereby made in relation to the wife’s member entitlement in the Spencer Superannuation Fund.

13. That pursuant to s 90MT(1) of the Family Law Act 1975 (Cth), the Court orders that the wife is entitled to be paid the sum of $51,583 from her member entitlements and that there be a corresponding reduction in the member entitlements in the Spencer Superannuation Fund.

14. That within 28 days of making these orders, Spencer Corporate Services Pty Ltd, the Trustee of the Spencer Superannuation Fund, shall transfer to a superannuation fund nominated by the wife, the payment referred to in paragraph 13.

15. That Spencer Corporate Services Pty Ltd and the husband and the wife (or their successors as directors of Spencer Corporate Services Pty Ltd) must do all acts and things and sign all documents necessary in accordance with the requirements of the Family Law Act 1975 (Cth) and the Family Law Act (Superannuation) Regulations 2001 (Cth) to make the payment to the wife in accordance with order 13 above, including but not limited to acting upon a request pursuant to reg 7A.06(2) of the Superannuation Industry (Supervision) Regulations 2001 (Cth) for the roll-over or transfer of the transferrable benefits out of the husband’s interest in the Spencer Superannuation Fund to the wife’s nominated superannuation fund, in accordance with reg 7A(12) of the Superannuation Industry (Supervision) Regulations 2001 (Cth).

16. That pursuant to reg 14F of the Family Law (Superannuation) Regulations 2001 (Cth), any payments from the Husband’s superannuation interests in the Spencer Superannuation Fund made after the trustee of the Spencer Superannuation Fund has rolled over or transferred the interest in favour of the wife out of the Spencer Superannuation Fund, as contemplated by paragraph 14, are not splittable payments.

17. That the trustee, Spencer Corporate Services Pty Ltd, of the Spencer Superannuation Fund will be relieved of its obligations to calculate any split payments under paragraph 13 of these orders in the event that the transferable benefits are transferred to the wife’s nominated superannuation fund in accordance with the requirements of the Superannuation Industry (Supervision) Regulations 2001 (Cth).

18. That the husband and wife will do all acts and things to cause the Spencer Superannuation Fund to pay all fees connected with the implementation of these orders.

19. That contemporaneously with the transfer of the wife’s entitlements pursuant to these orders herein:

    (a)       The husband will indemnify and keep indemnified the wife against all liabilities attaching to the Spencer Superannuation Fund;

    (b)       The wife will do all acts and things to resign from the position of director of Spencer Corporate Services Pty Ltd; and

    (c)       The wife will do all acts and things and execute all documents necessary to transfer her one ordinary share in Spencer Corporate Services Pty Ltd to the Husband or as nominated by him.

20. That the wife shall be personally liable for and indemnify the husband for the taxation and other charges arising in respect of the distribution of funds to her from the Spencer Superannuation Fund.

IT IS NOTED that publication of this judgment by this Court under the pseudonym Spencer & Spencer has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).

FAMILY COURT OF AUSTRALIA AT SYDNEY

FILE NUMBER: SYC 2325 of 2011

Ms Spencer

Applicant

And

Mr Spencer

Respondent

REASONS FOR JUDGMENT

introduction

1. The applicant, Ms Spencer (“the wife”), who is now aged 51, and the respondent Mr Spencer (“the husband”) who is now aged 48, were married in April 1990 and separated in November 2010. There are two children of the marriage now aged 21 and 19. After separation the children remained living with the wife until about March 2011 when they moved to live with the husband.

2. There is dispute about whether cohabitation commenced in late 1989 or early 1990 but nothing turns on it.

3. Much of the history of the marriage is uncontroversial. At the commencement of their cohabitation the wife was employed in a service industry and the husband was also employed in a service industry. The wife owned a property at P Street, Suburb Y and the parties initially lived there. The husband, jointly with his mother, owned a property at Suburb C. That property had a mortgage of about $120,000.

4. Their first child was born in October 1990.

5. In 1991, the wife’s Suburb Y property was sold and the wife received $147,000. They purchased a home in Suburb H for $230,000 using the proceeds of sale of the wife’s Suburb Y property and a loan obtained from the wife’s employer at a staff discounted interest rate and renovated the property while living there. The husband’s mother, who worked in this field, designed and installed the kitchen. There is no evidence of the cost of the kitchen but the cost was repaid.

6. Their second child was born in May 1992.

7. In 1994, the husband sold his interest in the Suburb C property to his mother for $189,000. I do not accept the submission of the wife that he received only half of this amount as he was selling a half interest in the property. The transfer states the price clearly. The husband would have received about $69,000 after discharging the mortgage. That money was paid off the mortgage over Suburb H.

8. In 1996 the parties established a service industry business through the medium of a company, S Pty Ltd (“the company”). They each held one share in the company.

9. In 1997 they purchased a home in Suburb N, in the name of the husband, for $122,000, using savings and a bank loan of $95,000. That property was rented out and the rent paid to their joint line of credit.

10. In June 1998 the parties sold the Suburb H property for $417,000 net and purchased at Suburb G for $550,000. They borrowed $240,000 by way of mortgage. They lived in the Suburb G property for six months while renovation plans were approved and then moved into a rental property and proceeded with major renovations to Suburb G. There is a dispute about how the work was done. The wife says they employed a builder who did most of the work. The husband asserts he did more than the wife concedes. However the work was done, it was done while the parties worked (the wife only until the date she left her employment) and cared for two small children.

11. In about April 1999 they borrowed a further sum of $250,000 on a line of credit to finance the renovations and in March 2000 they moved into the completed property.

12. In 1999 the wife ceased employment and received a net sum of $90,832, together with preserved superannuation of $11,125. The superannuation was paid into their self managed fund and the majority of the lump sum was applied to the mortgage.

13. In March 2001 they purchased a property in Suburb Z for $575,000. The purchase was financed by savings and income from the business, a loan from a bank of $240,000 and a loan from the husband’s mother of $100,000. Both signed an acknowledgement of the debt to the husband’s mother and agreed to repay the money with interest.

14. In September 2002 they sold the Suburb G property receiving net $1,552,000.

15. Simultaneously, the parties purchased the former matrimonial home at Suburb P for $2,250,000 using the net proceeds of the Suburb G sale, income from the business of $112,000, and a bank loan of $700,000. They and the children moved into the Suburb P property.

16. The husband negotiated approval for three townhouses to be built on the Suburb Z property and then sold the property for $1,220,000 net. The husband’s mother was repaid $115,000 including interest and $685,000 was paid off the Suburb P mortgage leaving a balance owing of $15,000.

17. In May 2005, the husband purchased in his own name a company title unit at Suburb K for $1,130,000. Including costs and stamp duty, the total cost was $1,181,000. The purchase was financed by a line of credit in their joint names of $1,200,000 secured over the jointly owned Suburb P property.

18. By this time, the wife left financial decision making to the husband and she was not aware of the detail of the financing of the purchase or the funding of the renovations.

19. The Suburb K property was renovated using funds generated by the business. The work was done by the husband assisted by his brother and some design work and management by his mother.

20. The wife was not involved in much of the renovation. Consistently, however, the husband was not involved in the care of the children while he was working on the renovation.

21. In 2006 the husband arranged for an advance of funds from his mother totalling $595,000 and the whole sum was paid into the line of credit. There is considerable controversy about that transaction and it will be dealt with in detail later in these reasons.

Issues

1. At the commencement of the hearing, Counsel identified the issues for determination to be:

2. Whether there should be an adjustment in favour of the wife of 10% because of the disparity in initial contributions. The husband contended not.

3. Whether there should be an adjustment in favour of the husband of 5% because of greater contributions in the improvement of their properties during cohabitation. The wife contended not.

4. Whether the asserted debt to the husband’s mother from A Pty Ltd was repayable, or in the alternate, whether the funds were advanced by an entity controlled by the husband.

5. Whether the business operated by the husband through the company should be valued on the basis of future maintainable earnings as asserted by the Single Expert, Mr MM and the wife, or on a net asset basis as asserted by the husband.

6. The nature and value to be ascribed to the husband’s interest in the Spencer Family Trust.

7. Whether there should be an adjustment in favour of the wife for section 75(2) factors. The husband contended that there should be no adjustment.

8. Some of these issues have to be determined in order to make findings about the asset pool.

the A Pty Ltd loan

1. It is not disputed that on 2 May 2006 the sum of $295,000 was transferred to the parties’ line of credit account from the account of A Pty Ltd. It is not disputed that on 10 July 2006, a further sum of $300,000 was transferred to the parties line of credit account from A Pty Ltd. It is not disputed that on 30 July 2006, the husband signed a letter addressed to his mother acknowledging the debt and agreeing to repay the money “over the next ten years or as you need the funds”.

2. Also not disputed is the fact that the husband’s mother advanced further sums between November 2007 and 5 August 2009 totalling $70,000. There was no written loan agreement in relation to the further advances. The total advanced was $670,000.

3. The wife gave evidence that she was not aware of the transactions. Her evidence was that she left their financial dealings to the husband. The husband’s mother could not recall whether the transactions had ever been discussed with the wife and conceded that this may not have occurred.

4. On behalf of the wife, it is submitted that either the loan is not expected to be repaid or that A Pty Ltd is really an asset of the husband and that he was ‘lending’ his own money to himself.

5. The husband’s mother swore an affidavit and was cross-examined. It was her evidence that she had advanced the money to the husband in the expectation of repayment, as she had made similar advances in the past and been repaid. The undisputed evidence of the husband and his mother is that, since the funds were advanced, sums have been paid to her, commencing with a payment of $25,000 in September 2006. Payments continued throughout the marriage and by the date of separation, a total of $169,191 had been paid to the husband’s mother. Further payments were made after separation. The total paid to her is $275,734 leaving, on her evidence, a balance of $389,266 outstanding.

6. The husband points to an earlier arrangement in 2001 where his mother advanced $100,000 and both the husband and the wife signed a document agreeing to repay the money. The wife accepts that this sum was lent and repaid.

7. The wife relies on the fact that the husband, on a number of occasions, has not mentioned the loan in documents where it was appropriate to do so. The first occasion was in an application for finance to the National Australia Bank completed on 1 August 2007. No mention is made in that application of the alleged debt. After separation, the husband wrote two letters to the wife, proposing a disposition of their assets. In neither letter does he assert that any money was owed to his mother.

8. It is understandable that the wife, being unaware of the transactions until the commencement of the proceedings, should be suspicious. Her suspicions are, no doubt, confirmed by the evidence of the husband and his mother, and the documents produced by Macquarie Bank, that the husband had his mother’s authority to operate on her accounts.  However there is no evidence advanced by the wife to explain how the parties could have accumulated the sum of $670,000 from their own endeavours and in cross examination of the husband’s mother it was not contended that the money in the A Pty Ltd accounts was not hers and I so find.

9. I am satisfied that the husband’s mother expects repayment of the funds advanced and the orders I will make will provide for payment to her of the balance outstanding.

valuation of the business

1. Mr MM was engaged as a single expert to value the business. In his report dated 15 September 2011 he expressed the opinion that the goodwill attaching to the business was commercial goodwill and saleable, rather than personal goodwill of the husband which was unsaleable and he valued the business on the basis of its future maintainable earnings.

2. Although the husband had previously agreed with that approach and that agreement was noted in trial directions made by Justice Johnston, I allowed him to withdraw that concession and to cross examine Mr MM. The husband now asserts that the business should be valued at its net asset backing, an agreed figure of $86,186 and that the income earning capacity of the husband, as the owner and operator of the business should be taken into account as a section 75(2) factor, as should the goodwill ascribed to the business by Mr MM.

3. In my view, to take both the goodwill and the husband’s earning capacity from the business into account would be to double count and I propose to take into account, for the purpose of section 75(2), only the income earning capacity.

4. The wife maintained that Mr MM’s valuation should be adopted.

5. I propose to value the business on the basis of its net asset backing, not because I am satisfied that Mr MM’s methodology is wrong, but because I am satisfied that the income of the business, on which Mr MM’s valuation is based, is understated. Mr MM accepted that the business, in 2011, would have an actual income after tax of $151,908. In arriving at that figure, the business deducted donations of $12,137 and legal costs of $18,919 as business expenses.       

6. Mr MM was not told how the company had incurred legal fees and no explanation was offered by the husband. Mr MM made adjustments to arrive at an average adjusted profit but his calculations assume that the balance sheet provided was accurate. I do not make that assumption.

7. To value the business on the basis of understated income would be a substantial injustice to the wife.

1. The husband swore two financial statements in the course of the proceedings. He was taken to both in cross examination. In the second sworn 27 January 2012, he deposed to a weekly income from the business of $1,374 and income from rents of $950 per week.  That equates to a gross income of $120,848 per annum.

2. In the most recent financial statement, the husband deposed to payment of expenses of $5,373 per week. That amount was incorrect as he also deposed to paying the court ordered spousal maintenance of $1,000 per week to the wife by way of dividends from the company and not from his own income. He conceded, when asked by me, that this had the effect of creating a taxation liability for the wife and reducing the amount he was ordered to pay by the amount of tax she would incur. He conceded that he should indemnify the wife against any liability for tax incurred and I will make that order.

3. I therefore reduce his claimed expenses to $4,373 per week. On that basis he claims to receive $120,848 per annum and spend $227,396 per annum. The discrepancy is not explained by an increase in borrowing.

4. The discrepancy does not stop there. In the financial year ended 30 June 2011, the husband repaid to A Pty Ltd a total of $147,300 to his mother. In the year ended 30 June 2012 he paid a further $12,283 to his mother. He is unable to explain where those funds came from if his stated income is correct. In addition, in the current financial year, he borrowed $81,409 from the company for the purpose of payment of legal fees for these proceedings.  His evidence is that the advance has been brought to account in the Director’s Loan Account. The balance sheet shows a loan owing to the husband by the company of $41,770. I will adjust that figure to take into account the advance for legal fees and the husband will now owe the company $39,639. I cannot assume that the husband will repay that debt and I do not propose to take into account either the debt or the consequent liability in the hands of the husband. Neither will I take into account the asset formerly included in the balance sheet of the debt by the company to the husband.

5. Although the husband gave evidence that he had no credit cards, there were tendered a bundle of credit card statements in his name. He gave evidence that these were the company’s credit card statements but conceded that numerous of the entries were for personal expenses. Indeed, in answer to questions from me, he conceded that for all purposes he treated the company’s bank account as his own. No attempt was made to distinguish between personal and business expenses in the statements although the husband said that his accountant undertook that exercise for the purpose of annual financial statements. In any event, the company paid credit card debts totalling $117,962 in the period from 13 May 2011 to 17 January 2012 which included substantial personal expenditure.

6. The husband’s lifestyle after separation did not diminish. He had holidays to Indonesia and the Whitsunday Islands.

7. These matters lead me to the conclusion that the income derived from the company is substantially greater that that disclosed to Mr MM and that the husband’s income from the company is substantially greater than he admits.

8. In the course of his evidence he revealed that his partner “[L]” who is not mentioned in his financial statement, receives child support from her former husband. He said he did not know her income or if she had any assets but that she had paid in full for airfares for a holiday for both of them. He was less than frank about the financial circumstances of their cohabitation.

9. At the commencement of submissions, I raised with Senior Counsel for the husband, the apparent discrepancy, arising on the husband’s sworn evidence, between his stated income and his stated expenditure. The submissions which were made did not assist me in reconciling the evidence.

the Spencer trust

1. Although the husband disclosed in his financial statement that he was a beneficiary of the Spencer Family Trust (“the Trust”), it was not until he was served with a Notice to Produce that he produced the Trust Deed and the financial statements of the trust up to the year ended 30 June 2010. It was necessary for further time to be allocated at the end of the hearing, which was originally listed for two days and could have been completed within that time, so that he could produce up to date financial statements.

2. The trustee of the Trust is A Pty Ltd, a company of which the husband’s mother is sole director and shareholder. The husband is the Category A beneficiary and thereafter the husband’s children and grandchildren followed by other relatives and corporations. The husband is described as “the Nominator”. By virtue of the provisions of Clause 5 he must give prior written consent to any payment by way of advancement, maintenance, education or benefit to any other beneficiary. By virtue of the provisions of Clause 16(2), the nominator has the power to remove and replace the trustee.

3. I am therefore satisfied that the husband controls the Trust and it is his alter ego. However, if I am to regard its assets as his assets, I would need to know from whence they came in order to give proper credit for any contribution to the assets of the Trust.

4. No attempt was made by the husband to put evidence before the court in relation to that issue. Although his mother swore an affidavit and gave oral evidence, there was no evidence from her in relation to the Trust. On the last (adjourned) day of the trial, the husband tendered the financial statement of the Trust for the year ended 30 June 2011. That document indicated that the trust held cash on hand of $278,333 and had a liability of $279,979 to an unnamed beneficiary loan account.

5. He was cross examined and denied that he was the beneficiary with the loan account. His evidence was that the account was his mother’s but when asked what evidence in the document suggested that to be true he replied “I don’t know”. When asked what enquiries he had made he replied that he had made no enquiries and repeated that he did not know where the money had gone and that it was his mother’s money.

6. I do not know with any certainty to whom the liability is owed. I do not know how the funds in the bank account of the trust have been generated.

7. These are matters on which the husband could have called evidence and did not do so.

8. After I raised these issues with Counsel in the course of submissions, Senior Counsel for the husband sought leave to recall the husband. That leave was granted. The husband then gave evidence that he had not advanced any funds to the trust in the 2010 or 2011 tax years.

9. I am left in the position where I do not know how the Trust’s funds were generated or by whom and I do not know with any degree of certainty to whom the trust has a liability, although I note that the husband’s mother is an eligible beneficiary.

10. It would be unsafe to assume that the funds came from the husband’s mother in their entirety. If they did, then there would have to be some adjustment in his favour to take into account that contribution. I cannot make any assumption about how the bank account of the Trust increased, whether, as an example, it was the husband who conducted, as he has in the past, successful share trading activities so as to increase the assets of the trust.

11. It was at all times open to the husband to put the relevant evidence before the court. The only evidence from the husband in relation to the Trust, apart from his evidence referred to in Paragraph 59 of these reasons is his assertion that the money in the trust is his mother’s money.

12. Because of the way the husband’s case was conducted, I have concluded that the safest course is to treat the husband’s interest in the Trust as a section 75(2) factor.

the assets and liabilties of the parties

1. The value of the real estate is agreed. The parties are agreed that the Suburb P property is to be sold, as are the contents of their respective homes. Both wish to retain the Suburb K property and neither advanced any persuasive argument in support of their proposition.

2. Senior Counsel for the husband agreed in his first submissions that the Suburb K property should be sold. That concession was later withdrawn. Senior Counsel then contended that because Capital Gains Tax would be attracted by any sale of Suburb K, I should allow the husband to retain the property. No evidence was adduced in the husband’s case to establish what the capital gains tax might be. In submissions, Senior Counsel for the husband attempted to put before the court his own calculation but fairly conceded that there was no evidence to support a number of the propositions in that calculation. I am, however, satisfied that on a sale of a property for $1,800,000, a substantial liability would accrue for capital gains tax.

3. Since neither party has persuaded me that he or she should have the benefit of the property, I propose to leave the Suburb K property in the hands of the husband who is the legal owner.

4. However, I must also accept that the wife is left in the position that she will incur stamp duty if she is to acquire a property of similar value. It was agreed that the stamp duty payable on the purchase of a property for $1,800,000 is $84,490. As the husband will retain the Suburb K property the wife must be put in a comparable position and I will therefore make an adjustment in her favour from the proceeds of sale of the Suburb P property of that amount.

5. The husband’s solicitor holds money in trust and that will be added as an asset. The borrowing by the husband of funds for legal fees from his mother will be added as a liability.

6. The only contentious matter that remains is the treatment of legal fees. By virtue of the “dollar for dollar’ costs order, I must assume that one half of the money advanced to the husband from the company (that is $40,705) should be added back to the wife’s assets so as to put them in a position of equality in relation to costs paid from joint assets. Each will then be left to pay the amounts outstanding to their respective solicitors.

7. On the second day of the hearing, there was paid to the wife’s solicitors a sum of $10,000 by the husband’s solicitors. I do not know the source of those funds. It is not disputed that each of the parties should be left to meet their remaining outstanding legal fees from their assets and I propose to discharge the costs order as and from 4.00pm on 24 February 2012.

8. The wife has a Mastercard debt arising from post separation spending. I do not propose to include that debt as a liability. It remains a liability for the purpose of section 75(2) but in an asset pool of this size, would carry no weight.

9. Because the superannuation interests of the parties are in a self managed fund, I include them in the asset pool.

10. I find the assets and liabilities of the parties are as follows:

Assets	Value ($)
M Street, Suburb P owned jointly	4,000,000
W Street, Suburb K (company title – 2950 shares in B Pty Ltd) owned by the husband	1,800,000
S Pty Ltd – net asset value	86,186
Husband’s CBA Smart Access bank account (Acc No …)	517
Household furniture & contents – Suburb K/Suburb LL	To be sold
Household furniture & contents – Suburb P	To be sold
Jewellery - wife	14,100
Wife’s paid legal fees plus half share of expert fees	40,705
Spencer Corporate Services Pty Limited Superannuation Fund – husband’s interest	74,638
Spencer Corporate Services Pty Limited Superannuation Fund – wife’s interest	51,581
Money held in trust by husband’s solicitors	57,362
Total	6,125,089

Liabilities	Value ($)
NAB Line of Credit (secured over Suburb K)	1,428,872
Loan from A Pty Ltd	389,266
Loan from husband’s mother for legal fees	55,000
Total Liabilities	1,873,138

After deducting the adjustment to the wife for stamp duty of $84,490, I find the net asset pool to be $4,167,461.

Section 79(4) contributions to date of separation

Initial Contributions

1. The unchallenged evidence is that the wife brought into the marriage her unit at Suburb Y which was sold a year later for a net $147,000 and savings of $30,000. She had been an employee since January 1980 and therefore brought 10 years of entitlements to superannuation and leave.

2. During the marriage, in 1999, the wife was retrenched and received the sums referred to in Paragraph 12 of these reasons. About half of the amount could be attributed to the period up to cohabitation but there is no evidence about how the entitlement was calculated. This was, however, in this relationship, a significant contribution.

3. The husband owned the Suburb C property jointly with his mother but the whole of his interest was mortgaged. It was ultimately sold in 1994 and the husband realised about $69,000 after discharging the mortgage. It had been purchased in 1989 with a mortgage of $120,000 and there was probably no equity at the commencement of cohabitation.

4. He also deposed to savings of $30,000 and was not challenged.

5. The wife made a superior initial contribution.

Contributions to date of separation

1. The wife contributed the portion of her redundancy payment and superannuation referable to the period of cohabitation.

2. After 1999 she was a mother and homemaker and the husband was the breadwinner for the family. He also increasingly made the financial decisions in relation to both investment and borrowing, and to the manner in which the income from their jointly owned business should be used and distributed.

3. Although he claims to have made superior physical contributions by working on or supervising renovations to their various properties, he did so in circumstances where she cared for the home and the children.

4. I am not satisfied that the husband’s work in the renovation and on-selling of their various properties constituted a special contribution as is urged upon me. There is nothing unusual in the history of the parties’ acquiring and renovating properties to attract such a finding.

5. However, the contribution of the husband’s mother in advancing $670,000 to reduce their line of credit should be acknowledged. The evidence is not sufficient to quantify the saving in interest and some of the funds have been repaid. The advance was on terms that did not require the payment of interest. Having regard to the money advanced by the husband’s mother, the husband made a superior contribution during cohabitation.

Section 79(4) contributions post separation

1. The husband claims to have made a superior contribution after separation in that the then adult children lived with him from about March 2011. However, they were both adults, they each worked and earned some income, the son being employed in the business. Additionally, the husband, during the same period had the advantage of the use of the income of the business. I do not propose to make any further adjustment.

Conclusion based on contribution

1. All in all I assess the contributions of the parties to the acquisition, conservation and improvement of the property of the parties to the marriage of either of them including such property which is no longer the property of the parties to the marriage or either of them to be equal to the date of their separation.

Section 75(2) considerations

1. In considering the appropriate adjustment pursuant to section 75(2), I must take into account what I have found to be the husband’s non-disclosure of his real income and the lack of proper disclosure of his interest in the Trust. The Full Court in Weir & Weir (1993) FLC 92-338 said:

   “This Court has pointed out in a line of cases leading up to the recent decision of the Full Court in Black and Kellner (1992) FLC ¶92-287, that it is the duty of a party involved in property proceedings in this jurisdiction to make a full disclosure of their financial affairs. See also Giunti and Giunti (1986) FLC ¶91-759, and Mezzacappa and Mezzacappa (1987) 11 Fam LR 957; (1987) FLC ¶91-853. It is clear enough from his Honour's findings in the present case that the husband had not done so and had in fact pocketed the proceeds of a substantial number of cash sales. It is obvious that in most cases of this nature it is difficult enough for the other party to establish that fact let alone establish the quantum of what has been taken.

   It seems to us that once it has been established that there has been a deliberate non-disclosure, which follows from his Honour's findings in this case, then the Court should not be unduly cautious about making findings in favour of the innocent party. To do otherwise might be thought to provide a charter for fraud in proceedings of this nature.”

2. The wife has not worked in paid employment since 1999. There is no evidence that she is able to gain highly paid employment. She has worked in a semi-skilled position and in the hospitality industry.

3. The wife gave evidence that she may consider moving to East Timor to live but there is no evidence before me of the relative cost of living or the cost of acquiring property in East Timor.

4. She will need to rehouse herself and supplement her income from modest employment.

5. The husband will retain the business and its assets and will enjoy the income of the business. He has recently undergone a hip replacement but the evidence of his doctor is that his recovery has been uncomplicated. He will require surgery on his remaining hip at some future time but the post-operative period is estimated to be six weeks.

6. He will have the benefit of the income of the business. As I have explained earlier in these reasons, I cannot be satisfied what that income is likely to be except that it will be much greater than the wife could expect to earn and substantially in excess of that which he declares.

7. Since I have no evidence of his partner’s assets or income, I cannot give any weight to his asserted responsibility to re-house her or provide for her.

8. He has the ability to utilise the assets of the Trust, subject to the loan disclosed, by substituting an entity controlled by him as Trustee.  The Trustee has, in the past, made at least one distribution in favour of the Company.

9. He will also have the benefit of his mother’s support which has, in the past been generous. The husband’s mother gave evidence that, if the husband needed money in the future, for example to re-house himself, she would advance money, although she would expect repayment.

Conclusion on section 75(2)

1. For all the reasons referred to above I propose to make an adjustment of 12% in favour of the wife.

Overall division of assets

1. The above determination will see the wife receive 62% of the parties’ assets and the husband receive 38%.

Just and equitable

1. The division of assets would see the wife receive approximately $2,583,825 worth of net assets and the husband receive $1,583,635 worth of assets, although the exact amount will depend on the price realised for the assets which are to be sold.

2. In the circumstances of this case I determine that result to be just and equitable in circumstances where I am satisfied that it is likely that the husband will receive assistance from his mother to pay the required amount to the wife and he is able to spend on his evidence, $227,396 per annum and in addition, repay capital. In circumstances where I do not know what his real income is, I consider that an adjustment in favour of the wife that represents a little more than four years of his spending on recurring expenses (not including repayments of capital) is appropriate.

Orders which should be made

1. I propose orders which will give effect to the following division.

2. The wife will receive:

Assets	($)
Jewellery	14,100
Costs added back	40,705
Her superannuation	51,581
A cash adjustment, depending on sale prices of approximately	2,477,439
Net Assets (including superannuation)	$2,583,825

1. The husband will receive:

Assets	($)
Shares in B Pty Limited	1,800,000
The shares in S Pty Limited	86,186
His bank accounts	517
His superannuation	57,362
Balance remaining solicitor’s trust account after deducting amount payable to his mother	2,362
Total Assets (including superannuation)	$1,946,427
Liabilities
Payment to the wife, depending on sale prices,  of approximately	$362,792
Total Liabilities	$362,792
Net Assets (including superannuation)	$1,583,635

I certify that the preceding one hundred and four (104) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Rees delivered on 16 March 2012.

Associate: 

Date: 16 March 2012