Stanton and Stanton

FAMILY COURT OF AUSTRALIA

STANTON & STANTON

[2007] FamCA 222

FAMILY LAW - PROPERTY – Final – Relevant assets – Notional add-backs

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

Omacini v. Omacini (2005) FLC 92-218;
Clauson and Clauson (1995) FLC 92-595

HUSBAND:

Mr Stanton

WIFE:

Mrs Stanton

FILE NUMBER:

MLF

1251

2004

DATE DELIVERED:

20 March, 2007

PLACE DELIVERED:

Melbourne

JUDGMENT OF:

Brown J

HEARING DATE:

22, 23, 24 January, 2007

REPRESENTATION

THE HUSBAND:

In person

COUNSEL FOR THE WIFE:

Mr Davis

SOLICITOR FOR THE WIFE:

Webb Korfiatis

Orders

That on or before 13 July, 2007 the husband :
(a)pay the wife the sum of $54,000; and
(b)do all such acts and things as may be required to transfer to the wife, at her expense, all of his right, title and interest in the real property situated at and known as K in the State of Victoria, being the whole of the land more particularly described in Certificate of Title Volume … folio … (“the [K] property”); and
(c)do all such acts and things as may be required to transfer to the wife (at her expense) the Nissan Nomad vehicle in the wife’s possession, free of encumbrance

That in addition to the payment pursuant to paragraph (1) hereof, the husband pay to the wife the sum of $19,428 in four equal payments of $4,857, as follows (subject to paragraph (8)(c) hereof) :
(a)the first payment on or before 1 August, 2007;
(b)the second payment on or before 1 October, 2007;
(c)the third payment on or before 1 December, 2007; and
(d)the fourth payment on or before 1 February, 2008.

That as and from this date the husband shall indemnify the wife and forever thereafter keep her indemnified in respect of all or any liabilities of the wife in respect of :
(a)(i) the mortgage registered over the C property;
(ii)S Services;
(iii)S Lease Pty. Ltd.;
(iv)S Family Trust;
(v)S Pastoral Co. Limited;
(vi)S Pastoral Unit Trust;
(vii)J Co. Superannuation Fund; and
(viii)S Partnership;
including any liability of the wife to the Commissioner of Taxation, howsoever such liability arises; and
(b)the sum of $5,000 owed by the husband to his son, J, and any other sum allegedly due by the husband and/or wife to any adult child of the husband or any partner of an adult child of the husband.

That upon payment of the sum due to the wife pursuant to paragraph (1) hereof :
(a)the wife do all such acts and things as may be required to transfer to the husband at his expense all of her right, title and interest in the real property situated at and known as C in the State of Victoria, being the whole of the land more particularly described in Certificate of Title Volume …folio … (“[C]”); and
(b)the wife indemnify and keep indemnified the husband in respect of all sums due pursuant to the mortgage registered over the K property.

That pending payment pursuant to paragraph (1) hereof (or completion of a sale pursuant to paragraph (7) hereof) :
(a)the husband have the sole right to occupy the C property and that during such right of occupation he pay all instalments pursuant to the mortgage and all rates and taxes and apportionable outgoings of the C property as they fall due;
(b)the parties hold their respective interests in the C property upon trust pursuant to these orders; and
(c)neither party encumber the C property without the consent in writing of the other party, save that the husband may so encumber it for the sole purpose of borrowing funds to pay sums due pursuant to paragraphs (1), (2) and (14) hereof.

That as and from this date :
(a)the wife have the sole right to occupy the K property and the wife pay all instalments pursuant to the mortgage and all rates and taxes and like apportionable outgoings of the K property as they fall due;
(b)the parties hold their respective interests in the K property upon trust pursuant to these orders; and
(c)neither party encumber the K property without the consent in writing of the other party.

That in the event the husband defaults in making a payment due to the wife pursuant to paragraph (1) or (2) hereof, the C property be sold altogether out of Court (“the sale”) and the husband and wife forthwith do all acts and things and sign all necessary documents to effect the sale of the C property and by way of consequential arrangements that shall be made for the purpose of effecting the sale :
(a)the listing price for the C property shall be as agreed between the parties and if there is no agreement shall be as advised by a valuer (who is also a practising real estate agent) appointed by the President of the Victorian Division of the Australian Property Institute;
(b)the C property shall be listed for sale by private treaty by an agent agreed to by the parties and if there is no agreement with the agent nominated to advise the value pursuant to the preceding sub-paragraph; and
(c) in the event the C property has not been sold within three months of the date of default of the payment the husband and wife shall make all such arrangements and do all such acts and sign all such documents to procure a sale by public auction of the C property without reserve, such auction to take place within a further period of three months by an agent to be agreed and failing agreement to be nominated by the wife.

That upon completion of the sale the proceeds of the sale shall be applied as follows :
(a)first, to pay all costs, commissions and expenses of the sale and to pay any council and water rates and maintenance levies outstanding in respect of the C property;
(b) second, to discharge the mortgage and any other encumbrances affecting the C property;
(c)third, to pay to the wife :
(i)the sum due to her and unpaid pursuant to paragraph (1) hereof together with compound interest thereon at the rate of 10 percent per annum adjusted monthly from the due date to the date of payment;
(ii)the balance then outstanding of the total sum of $19,428 referred to in paragraph (2) hereof, together with compound interest at the rate of 10 percent per annum adjusted monthly on such part of that sum as is then due and unpaid pursuant to paragraph (2) hereof; and

(d)fourth, the balance to the husband.

That in the event the husband refuses or neglects to comply with a provision of these orders :
(a)the registrar of the Family Court of Australia in Melbourne is hereby appointed to execute all deeds and documents in the name of the husband and do all acts and things necessary to give validity and operation to these orders; and
(b)the husband in default is ordered to pay any and all foreseeable damages to the wife caused by his default; and
(c)the husband in default is ordered to pay all reasonable costs incurred by the wife for the purpose of enforcing this order and proving her damages.

That it shall be sufficient authority for the registrar to act pursuant to paragraph (9) hereof to have before him or her an affidavit sworn by the solicitor for the wife in which the solicitor deposes that the husband has refused or neglected to comply with a provision of this order, and detailing the provision, the acts undertaken to have him comply and his response (or lack of a response).

That in the event the husband fails or refuses to comply with a provision of these orders and an application is made pursuant to paragraph (9) hereof, the sum referred to in paragraph (8)(d) hereof shall be held by the solicitors for the wife in trust pending the determination of an application for damages or costs made pursuant to paragraph (9) hereof.

That in the event an order is made in the wife’s favour for damages or costs pursuant to paragraph (9) hereof, the sum held in trust pursuant to paragraph (11) hereof shall be forthwith disbursed as follows :
(a)to pay the whole (or, if inadequate, part) of the sum the husband was ordered to pay by way of damages or costs pursuant to paragraph (9) hereof; and
(b)the balance (if any) to the husband.

That unless otherwise specified in these orders:
(a)each party be solely entitled to the exclusion of the other to all property and chattels of whatsoever nature and kind in the possession of such party as at the date of these orders and that for this purpose bank accounts are deemed to be in the possession of the person whose name appears in the bank's record thereof; insurance policies are deemed to be in the possession of the beneficiary thereof; superannuation entitlements are deemed to be in the possession of the person who is named as the worker whose age or work in future produces the condition for the payment out of such entitlements; and the chattels in the K property are deemed to be in the possession of the wife and the chattels in the C property are deemed to be in the possession of the husband;
(b)each party be solely liable for and indemnify the other against any liability encumbering any item of property to which that party is entitled pursuant to these orders.

That the husband pay to Mr F, chartered accountant, the sum of $1,826 due to the chartered accountant pursuant to tax invoice no.5489, dated 24 January, 2007 (a copy of which is annexed to this order) and that such sum be paid within sixty days hereof) and the husband shall indemnify and keep indemnified the wife and the wife’s solicitors in respect of all liability to the chartered accountant in respect of the said invoice, and in the event it remains unpaid or has been paid by the wife or her solicitor at the time of settlement of a sale pursuant to the provisions of paragraph (7) hereof, and without prejudice to any other right of the wife, the wife’s solicitor, or the chartered accountant to enforce payment, the sum then due to the chartered accountant shall be paid from the balance remaining after funds have been disbursed pursuant to the provisions of paragraph (8) (a), (b) and (c) and (if applicable) paragraph (12) hereof.

That each party be at liberty to file and serve any written submission in relation to the costs of the applications for final property orders within 28 days hereof, and :
(a)each party have a further 28 days in which to file and serve any written submissions in answer to any submissions filed by the other party; and
(b)each submission have endorsed on the cover sheet the date on which a copy of that submission was served on the other party.

That within 24 hours of the filing of any submissions pursuant to this order, the party filing it fax a copy to the associate to the Honourable Justice Brown on facsimile number … .

That all extant applications be otherwise dismissed.

That these proceedings be removed from the List of matters awaiting finalisation.

That pursuant to Rule 19.50 of the Family Law Rules 2004 this matter reasonably required the attendance of counsel.

FAMILY COURT OF AUSTRALIA AT MELBOURNE

FILE NUMBER: MLF 1251 of 2004

Mr Stanton

Husband

And

Mrs Stanton

Wife

REASONS FOR JUDGMENT

The parties married in August 1989, after living together for a couple of years. They separated in tempestuous circumstances in June 2003, after an incident in which the wife threatened the husband with a knife. A subsequent attempt at reconciliation failed and their final separation was in October 2003. The Court is asked to determine their competing property applications.

The parties have six children, aged between five and 19; C 19, B and Y both 16, T 13, R 9 and A 5. Applications for parenting orders were resolved by final orders, made by consent, on 4 September, 2006. They provide for the two younger children, R and A, to live with the wife during school terms for two out of three consecutive weekends from Friday to Tuesday and for half school holidays. Otherwise, all six of their children live with the husband. An application filed by the husband on 16 October, 2006, in which he sought to vary those orders, was dismissed by Senior Registrar FitzGibbon on 13 November, 2006. Although no applications in relation to the children were before me, the husband made it clear that he does not see the existing orders as viable, and envisaged further proceedings.

These proceedings commenced in the Federal Magistrates’ Court in October 2003; the parties have thus been embroiled in litigation for some years. The husband was legally represented until the final parenting orders were made in September 2006, after which his solicitors filed a notice of ceasing to act.

PROPOSALS

By her amended application filed 30 August, 2006 the wife sought that the husband pay her $500,000 and in exchange she transfer to him real properties in C (the former matrimonial home) and K. In final submissions her counsel sought the transfer of the K property to her, unencumbered, plus a lump sum of between $180,000 and $274,000.

In an amended response sworn on 31 August, 2006 and served by fax on the wife on 1 September, 2006 (but apparently not filed) the husband sought that the K property be sold and from the proceeds the wife be paid the sum of $168,000. Otherwise, he sought to retain the C property and that each retain all other property in his or her possession. In final submissions he sought that K be sold, that the mortgage over C be discharged from the nett proceeds and the balance (which would be less than $75,000 after selling costs) be divided as the court determined but (it seemed) with a greater percentage going to him.

EVIDENCE

Findings are made on the balance of probabilities having regard to the evidence and my observations of the demeanour of witnesses. In what follows, statements of fact constitute findings of fact.

The husband relied on an affidavit and statement of financial circumstances filed 26 April, 2006 (when he was legally represented) and a second affidavit and amended financial statement filed 17 January, 2007 (when he acted for himself). He adduced no evidence from his brother, with whom he operates a farming venture. At my request he prepared a list of relevant assets and liabilities; a copy of that handwritten list is annexure A to this judgment. The inclusion of an item on that list could not be taken to be an admission that it should form part of the pool for distribution; the list needs to be read in conjunction with the husband’s affidavits and the summary of argument he filed on 17 January, 2007.

The wife relied on an affidavit and financial statement sworn by her and filed on 26 April, 2006. The case summary filed by her included a list of assets and liabilities on which she relied; a copy of the relevant part of the document is annexure B to this judgment.

Pursuant to orders, a number of valuations were undertaken by single expert witnesses. The following sworn valuations were in evidence :
a.valuation of the chartered accountant in relation to S Services and J Co. Superannuation Fund;
b.valuation of Mr D of C property;
c.valuation of Mr E of L property;
d.valuation of Mr K of K property; and
e.valuation of Mr J of 2 parcels of land in A.

Early in the trial I granted the husband’s application to give the chartered accountant the 2006 financials for S Services and have him review his valuation in the light of it. The chartered accountant was cross-examined later in the trial.

The husband served a subpoena to appear and produce documents on Mr W, the wife’s de facto husband. Counsel for the wife called the wife’s de facto husband, thus allowing the husband to cross-examine him rather than call evidence in chief from him.

The husband is 54. He presented as an intelligent, forceful and articulate man who found it almost impossible to give responsive answers to questions, so focussed was he on his distrust of the wife and her lawyers, and his desire to tell his side of the story. It is clear he engaged in considerable correspondence with the solicitor for the wife, and in the course of the trial he made a number of intemperate accusations against him and against counsel for the wife. His anger and scorn for the wife and her legal advisers permeated his affidavit material. In the affidavit he drew himself he often referred to the wife as “Mr Korfiatis’ client”. It was difficult to contain him to relevant material or to get him to focus on the substance of the case.

Cross-examined, the husband agreed he brought his second eldest daughter B (who is very hostile to her mother) to Court and that she sat in the courtroom until the court officer asked her to leave, as she is only 16. His assertion that she came to go shopping (despite then remaining within the court building) was not convincing.

The husband has three adult children from his first marriage, being D, H and J. He has an adult daughter, K, from his second marriage.

The wife is 47. In the witness box she seemed anxious and overborne, almost resigned to the husband’s view (made very clear in his tone and, expressly, in final submissions) that she was responsible for her own poor financial position and deserved little of their property.

The wife and her partner have lived in a house owned by him at W since March 2005. They hope to marry in May 2007. She has some phone contact with her daughter, C, but no contact at all with B, Y and T. She has not been in paid employment since C’s birth. She receives a Centrelink carer’s allowance with relates to care provided for her ill mother. She is otherwise financially reliant on her partner and ad hoc financial assistance from her father.

The mother’s partner impressed me as a straight forward, decent man, who gave responsive answers and said or did nothing to indicate hostility to the husband. He conducts a home maintenance business which brings in a modest income. His 8 year old son, E, lives with him and the wife at W. His daughter, M, lived with them for a while but moved to live with her mother at U so she could attend U High School. His 17 year old son is self-supporting, and working as an apprentice roof-tiler.

CHRONOLOGY

When the parties married the wife had no assets of substance and the husband owned a property at O. They initially lived in rented accommodation, until buying a property at K. The family lived there until 1993, when they bought the property in which the husband and children still live, at C property.

The wife’s evidence was that until shortly prior to separation she knew nothing of any assets other than the husband’s business, and the O, K and C properties. She had attended a property at L, but accepted what she was told, which was that it was owned by D, and the husband rented a room there from which to conduct his business. Her evidence was that when she became aware (through correspondence in 2003) that he was the proprietor of the L property and rural property at A, he denied ownership of these properties. I accept that evidence.

It is probable that during the marriage the wife had little knowledge of the family’s financial position. Although a notional partner in the business run by the husband (S Services), she was not actively involved in it and had no knowledge of its financial affairs. Only after separation did she learn of the husband’s interest in two superannuation funds and his small interests in AXA.

The wife ceased paid employment shortly prior to C’s birth and remained out of the paid workforce from then to date. Her evidence was of being the primary care giver and homemaker, evidence challenged by the husband. It must be said that the admitted circumstances in which the parties separated on 8 June, 2003 provide some corroboration of the husband’s allegations of earlier erratic outbursts from the wife. He may well have played a more significant role in parenting and homemaking than she now recalls and had to deal with crises arising from her behaviour. But the reality is that he was involved in running the business, and the care of their children and maintenance of the family must have been left in her hands for far more significant periods than he now recalls.

The husband made it very clear how onerous are the practical and emotional (as well as financial) responsibilities of looking after six children. His voice had a desperate edge to it when he spoke of those aspects; the change from his previous domestic circumstances was made very clear. That alone suggests that he was not responsible for the whole of the children’s care and maintenance of the home prior to separation; if he had been, the wife’s departure would not have resulted in him having to shoulder a much higher burden than before.

The husband’s father died in June 2003. Annexed to the husband’s first affidavit (annexure L) and also tendered as exhibit H3 was a copy of the administration account of the estate. It notes (without a date) an interim payment to the husband of $55,000 and a final payment of $13,314.37. The husband’s evidence was that the interim payment was received on 11 March, 2005 and the final payment on 14 October, 2005. The first was “largely contributed to the farm” and the second “used to cover living expenses for me and the children”.

Police removed the wife from the family home in early June, 2003. She was charged and subsequently pleaded guilty to a number of criminal offences. Interim intervention orders to protect the husband and the children of the marriage were made in June, but the order in respect of the children did not remain on foot past early July, 2003. Until she returned to the family home in late July 2003, the wife lived with her mother in M and all children remained in the family home. When the parties separated again on 6 October, 2003 T, R and A moved to live with the wife in rented accommodation in M, the older three children remaining with the husband. The husband had regular contact with the three younger children; the wife had some contact with C, less with B and very little with Y.

Proceedings were issued in the Federal Magistrates’ Court on 4 December, 2003 and on 10 December, 2003 T returned to live with the husband. From about that time B, Y and T refused to have any contact with the wife. In April 2004 the wife and the two youngest children moved to the K property, where she remained living until moving to her partner’s property in March 2005; she has paid the mortgage and outgoings since about April 2004.

On 13 April, 2004 orders were made in the Federal Magistrates’ Court (on an application filed by the husband) restraining the wife from changing the children’s residence and R’s school. At that time a child representative was appointed and the proceedings transferred to this Court. On 29 April, 2004 the husband filed a notice of child abuse or risk of child abuse alleging that the wife had previously attempted to suffocate the children and that R and A had said she had threatened them with physical violence should they leave their room while she was entertaining male visitors in her bedroom. Subsequently a report was prepared by Ms C.

R and A were not returned to the wife at the conclusion of a contact period and in December, 2004 an interim order was made providing for them to live with the husband and for the wife’s contact with them to be supervised by her sister. Mr P then prepared another report, dated 6 June, 2005, and on 22 July, 2005 orders were made (after a contested hearing) providing for R and A to have contact with the wife on two consecutive weekends out of each three, without supervision. Mr P then prepared a second report, dated 7 March, 2006. Although the various reports were not in evidence before me, reference is made to them in the affidavits of both of the parties.

In early October 2005 the wife moved briefly to live with her parents in W, as her mother was very ill and required a level of attention which her elderly and unwell husband was unable to provide. Her parents then bought a property close to that of the wife’s partner and the wife returned to live with him in December 2005. She continues to provide care for her mother, in respect of which she receives a carer’s pension.

Affidavits were prepared for a trial in September 2006. On 4 September, 2006 Watt J. made final parenting orders, by consent. Pursuant to the orders R and A live with the wife for two out of three consecutive weekends, from the conclusion of school on Friday until the commencement of school on Tuesday, and for one half of holiday periods. Watt J referred the property applications to a judicial settlement conference. The matter did not resolve at that conference and was then listed for hearing before me.

LEGAL PRINCIPLES

I propose to adopt the now well established approach to the exercise of the discretion under s.79. It is appropriate for the judge to identify the assets to be divided between the parties, identify the liabilities to be taken into consideration and then to determine the manner in which the assets ought to be divided having regard to s.79(4)(a), (b) and (c) considerations. Then having considered (d) to (g) of s.79(4) the court should determine what further adjustments should be made having regard to s.75(2) considerations, and consider whether the outcome is just and equitable.

FINANCIAL ENTITIES

To make sense of the parties’ evidence and assess the relevant assets and liabilities, it is necessary to identify a number of businesses and other entities, and detail real property owned by them.

S Services

The husband runs a business known as S Services. The business name was registered in 1990 but he has run his own business since he was 22. The chartered accountant was engaged to value the business.

In his summary of argument filed 17 January, 2007 the husband submitted the business should not be brought into account in the asset pool.

The chartered accountant’s evidence in his report dated 22 June, 2006 was that no goodwill could be ascribed to the business and the nett assets were worth approximately $47,446. The accountant noted that care should be taken to ensure the assets and liabilities in Schedule 1 to that report were not included in the husband’s financial statement. After the husband showed him unaudited financial accounts for 2006, the accountant provided an updated report showing the business to be $10,586 in deficit, that being the amount by which liabilities exceeded assets. The wife maintained her submission that the business should be valued at $47,446 and included in the asset pool.

In his amended financial statement the husband showed this business at a deficit of $99,601, that apparently being the loss shown in his capital account, a figure he reduced to $84,302 in the table of assets and liabilities on which he relied. Although he successfully sought leave to have the accountant review the valuation in light of the 2006 unaudited figures (produced by his accountants, based on trial balances provided by the husband), the husband maintained his submission that the relevant deficit was $84,302, not (as reported by the accountant) $10,586. This submission was first expressed prior to obtaining leave to obtain a review, and was not supported by anything in the accountant’s additional report. In the light of the maintenance of the submission, the husband’s repeated assurances of confidence in the accountant, and the failure to rely on the accountant’s evidence in the second report, I am satisfied the husband should bear the costs of that second report, being $1,826.

While the nett business assets approach was no doubt the appropriate valuation method, for a business of this sort it must have some limitations. The husband works for himself; he is the business. Were it to be wound up, the price obtained would depend on the debts which could be collected, and the price obtained for completed work and plant and equipment. The plant and equipment includes six vehicles, minimal office equipment and (presumably) tools in noted “workshops”. Given the husband’s own evidence of sums going into and out of the business, the cash at bank (which at 30 June, 2005 was $10,890 and at 30 June, 2006 $3,629) could fluctuate markedly.

The husband did not rely on the second report, which places the Court in a quandary. On the one hand, the first valuation has been superseded. Whatever challenge might reasonably be made to the figures the husband gave the accountant during the trial, a valuation at June 2006 would inevitably give rise to a different figure than the earlier one; the additional written down value of plant and equipment alone was some $10,000. On the other hand, I am concerned at the potential unfairness to the wife of relying on a supplementary report admitted into evidence on the basis (certainly the assumption) that the husband would adopt its finding, in circumstances where he then elected not to rely on the accountant’s conclusion, and where the figures on which that valuation was based were unaudited trial balances provided by the husband.

The evidence of the accountant was that in the 2006 year the husband effectively drew $72,763 when the profit of the business was only $42,000; he described it as a $30,000 (in round figures) overspend plus a non-cash item of depreciation. His evidence, put simply, was that the diminution in value since 2005 is due to the fact the husband withdrew more funds than the business could sustain. Issues in relation to that (particularly the need to “tip” money into the farming venture) could be considered when determining contributions and an equitable outcome.

All liabilities were up from 2005 (from $28,712 to $50,938) and assets down (from $76,158 to $40,352). The main decreases in assets were cash at bank, trade debtors and the written down value of plant and equipment (from $16,601 to $6,780). Notwithstanding the diminution in the bottom line, revenue increased by about $10,000. Cash at bank was down from $10,890 to $3,629 but, as the accountant noted, that is just a balance on a particular date for which there could be many explanations. The Court cannot say if the final 2006 figures will be identical, so cannot have confidence in the figures on which the accountant’s second valuation were based.

There is force in the husband’s submission in his summary of argument, which was that the value of the business is as an income source, rather than a specific commercial value. Its nett assets, he submitted, were effectively his tools of trade, and should “not be brought into account in the asset pool”. It is tempting to rely on the first valuation; after all, the valuation of the former matrimonial home is also not current, and may well benefit the party who keeps it. However, the obligation to do justice between the parties does not favour that approach. In these circumstances I adopt the husband’s submission; I do not include the business in the pool but will consider it as an income source, and when looking at the husband’s general financial circumstances.

S Lease Pty. Ltd.

This company was incorporated on 5 June, 2001; the husband is the sole director. He holds 22 A class shares. His evidence was that the four children of his first two marriages (D, H, J and K) each hold 12 B class shares, which entitle them to ownership on the husband’s death. That company is the trustee of the S Family Trust and the J Co. Superannuation Fund. There was no evidence it owns any assets in its own right.

S Family Trust

Established in February 2003, the beneficiaries include the wife and the husband’s ten children. At 30 June, 2004 its nett assets were $20. The accounts then noted an investment of $138,079 in S Pastoral Unit Trust, receivables of $56,207 (loan to S Pastoral Co. Pty. Ltd.) and an unsecured liability to the husband of $194,286.
S Pastoral Co. Ltd.
This company was incorporated on 6 November, 2002 and changed its name on 23 January, 2003. The husband and his brother are directors and each holds one share. It is the trustee of the S Super Fund Unit Trust and the S Pastoral Unit Trust. It is the registered proprietor (as trustee) of a parcel of land (164 hectares, described in four Certificates of Title) in A (the family farm) and a smaller parcel of land (just under 30 hectares and described in two Certificates of Title) in N and Z).
A (family farm)
The family farm was purchased by the husband and his brother from their mother for a theoretical price of $965,850, which was discounted to $689,893 pursuant to a special condition in the contract of sale. The discount of $275,957 was an estimate of the value of the two brothers’ interest in their mother’s estate, she wishing to make provision for them while she was alive, and they wanting to take over the running of the farm. The husband’s evidence was that they borrowed the whole of the purchase price. Their mother gave them the plant and equipment. The brothers had commenced the farming business shortly prior to acquiring the real property, paying their mother to agist cattle on it.

The husband’s evidence was that S Pastoral Co. Pty. Ltd. became the registered proprietor on 16 June, 2003. That is probably the date on which the transfer was registered. Annexure B to the husband’s first affidavit notes the settlement date as 21 May, 2003, although the contract of sale (annexure 6 of the same affidavit) is dated 10 January, 2003 and required payment of the residue by 28 February, 2003 “or earlier by agreement”.

The beneficial owner of the family farm is the S Pastoral Unit Trust.

The husband’s mother died fairly soon after the sale of the family farm. The husband denied he had any expectation of receiving any funds from his late mother’s estate or of telling anyone he had such an expectation.

S Pastoral Unit Trust

The unit trust was established in 2003. 138,079 units are held by S Lease Pty. Ltd. and the other 138,079 by G Nominees Pty. Ltd., a company of the husband’s brother. The trust is the beneficial owner of the family farm, which is its only asset of substance.

Although the family farm is an asset of the S Pastoral Unit Trust both parties included it as a separate item in its own right in their statements of assets and liabilities (“husband’s interest in [the family farm]”) rather than attributing a value to his interest in the Unit Trust itself. A good deal of evidence went to the value of the husband’s interest in the family farm.

In his first affidavit the husband deposed (at paragraph 51) to the family farm having a value of $4,300 per acre, a total of $1,750,000; he said it was subject to a mortgage of $790,000 (the figure in the balance sheet of S Pastoral Unit Trust at 30 June, 2006) and his 50% interest was thus worth $480,000. In the table in which he set out his interest in various assets (at paragraph 58) he estimated his 50% interest in the S Pastoral Unit Trust to be $875,000, with a note “valuation pending”. That may not have taken account of the mortgage liability.

By the time the husband swore his second affidavit on 17 January, 2007 (less than nine months after the first and less than a week before the trial ) the single expert witness valuation of Mr J was before the Court, it having been filed on 29 June, 2006. Mr J valued the family farm at $1,600,000. In the second affidavit the husband deposed to a belief that the family farm was worth $2,950 per acre, giving a total value of $1,197,000. His explanation for the change was that the farm accountants had given information that his brother had contributed work and improvements to the value of $411,000 for pasture renovations since 2003 to 30 June, 2006, covering a total of approximately 60 acres, together with the provision of some fencing and a dam. Further, he deposed to a belief that the small fee charged by the valuer must have meant the valuation was inadequate and it did not show any acid mat or salt affected areas. In his second affidavit, the husband said that the property is subject to a mortgage of $950,000, and his 50% interest was thus worth approximately $123,500 ($1,197,000 minus $950,000, divided by two).

In the handwritten statement of assets and liabilities prepared on the first day of the trial the husband included his interest in the family farm at $237,021. The explanation for this figure can be found on the last page of the husband’s second financial statement, as follows : “My share of equity $375,000 less $137,987.50 gifted at purchase my alledged (sic) share $237,021.50”. While he did not specify how he reached the figure of $375,000, it is consistent with deducting the current figures due on the mortgages (not including the overdraft) of $850,000 (see paragraph 113 of this judgment) from a valuation of $1,600,000 and dividing the balance of $750,000 in half. Thus, the husband adopted Mr J’s valuation as his starting point.

The chartered accountant was not engaged to value the S Pastoral Unit Trust or the husband’s interest in it; he was instructed to value the business of S Services and “the self managed Superannuation Funds of which the husband is a member.” He included some limited information in relation to S Lease Pty. Ltd. and what he referred to as “[S] Pastoral Trust” (in fact, S Pastoral Unit Trust) as a matter of record, but undertook no valuations of them. Attached to his report (as part of Schedule 5.1) is the balance sheet for S Pastoral Unit Trust at 30 June, 2003, some 14 days after the brothers bought the family farm.

In that balance sheet the family farm is valued at $1,024,818.57. The nett assets of S Pastoral Unit Trust were $276,157. The balance sheet shows a loan from a loan company of $700,000 and a loan from the S Family Trust of $56,206.93. As earlier noted, the accounts of the S Family Trust at 30 June, 2004 noted a loan to S Pastoral Co. Pty. Ltd. (the trustee of the S Pastoral Unit Trust) of $56,207. That suggests that funds from the S Family Trust went into the acquisition of the family farm, contrary to the husband’s evidence that the whole of the necessary funds were borrowed, but without source documents one cannot be certain. The balance sheet of S Pastoral Unit Trust also shows a loan from the parties of $1,384.64, but little turns on that.

Thus, on the balance sheet of S Pastoral Unit Trust at 30 June, 2003, the husband’s interest in the unit trust which owned the family farm was one-half of $276,157.

The husband annexed to his second affidavit financial statements for S Pastoral Unit Trust to 30 June, 2006, as part of a bundle of documents under the annexure “D”. The balance sheet shows figures for the preceding year in the left column. The 2006 figure for the farm land is $967,690.37. The loan to the loan company is shown as $790,000, up from $606,660 the previous year. The loan from the parties (noted at $90,311 in the previous year) no longer exists as a non-current liability. There is a loan to the parties of $94,774.63 shown as a non-current asset. The end result is that the nett assets of S Pastoral Unit Trust remained $276,157, the same figure as at 30 June, 2003, a fortnight after the real estate was acquired.

The wife attributed $405,000 as the value of the “husband’s interest in [the family farm]” in the list of assets and liabilities which formed part of her case summary and on which she relied. It is clear this was reached by taking Mr J’s valuation of $1,600,000 and deducting the non-current liabilities of $790,000 shown in the balance sheet of S Pastoral Unit Trust at 30 June, 2006, leaving $810,000, of which $405,000 is half. The process (deducting the loan from the value) is that used by the husband in his own affidavits, and to reach the figure of $375,000 referred to in paragraph 52. That would be a rough and ready way to formally value a Unit Trust but in the context of this case I accept it would be a reasonable way to value his interest in the family farm, the method of analysis being common to both parties.

The real question is whether the husband’s interest in the family farm should be included as a relevant asset. Acquired very late in the marriage, the wife must be said to have made little or no contribution to its acquisition. The discount the husband’s mother gave her sons was some 29% of the notional full price; if that is extrapolated to its current value, 29% would represent $464,000. Most of the funds were borrowed. There is no doubt family funds have gone into that property, through the sale of the O property; other funds have come from the husband’s inheritance (received in 2005, well after separation) and the automotive business.

The husband submitted that the wife had made no contribution to the property and it should be excluded from the pool.

In my judgment, the family farm (and farming business) should be quarantined. A consequence may be a weighting against the husband for matrimonial funds used in what he insisted was a venture which had nothing to do with the wife, or their notional inclusion in the asset pool. The Court must be careful not to “double dip” by, for example, notionally adding back the whole of funds expended on the farming venture and then considering that expenditure again when assessing the husband’s contributions.

Z Property

In Mr J’s valuation this property is described as being near the family farm, as it also has a frontage to the same road. The husband and his brother bought it for $174,235. The transfer was probably registered on 2 June, 2003, but the settlement date was almost certainly earlier in that year. The contract of sale of the family farm was conditional on the purchase of Z property (at a figure of $173,900), to be settled on 28 January, 2003 or earlier by mutual agreement (see special condition 5). S Pastoral Co. Pty. Ltd. owns it as trustee for the S Super Fund Unit Trust; the husband’s superannuation fund (J Co. Superannuation Fund) owns just under 40% of the units (67,500 of a total of 179,379). The balance are held by the self-managed superannuation fund of his brother. The land is the only asset of the Unit Trust.

The husband’s evidence (in his second affidavit) was that the funds to complete the purchase (I assume he meant his share of the funds) were obtained as follows :
·$16,537.60 from MLC policy … , owned by him prior to the marriage;
·$25,781.82 from MLC policy … , owned by him prior to marriage;
·a $15,000 loan from his son J, of which $10,000 has been repaid;
·$7,000 from his own funds; and
·$1,000 from S Mechanical Services.
These figures total $65,319.42, consistent with him being responsible for about 38% of the purchase price. There is no evidence of a mortgage on this property. Without the loan from J, the husband could not have paid the deposit.

Mr J valued this property at $400,000. In his first affidavit the husband estimated the value of the property at $272,000 and thus his share (rounded up to 40%) at $108,800, noting that there was “however a formal valuation pending which has not yet been finalised”.

In the husband’s second affidavit, filed on 17 January, 2007, he deposed to Z having an estimated value of $233,100 (at $3,150 per acre) and that his 40% share was therefore worth $139,860. He made no reference there to Mr J’s valuation.

I find no reason not to accept Mr J’s valuation and find the value of Z property to be $400,000. As noted below, the value of his superannuation fund on which the husband relied, is premised on Z property having a value of $400,000.

I treat Z property differently to the family farm because funds were not borrowed (save $15,000 from J) for its acquisition, it is not individually mortgaged and it is the sole asset of J Co. Superannuation Fund, which both parties included as a relevant asset. The parties’ respective contribution to it can be weighed when determining all contributions.
J Co. Superannuation Fund
Established on 22 November, 2002, its trustee is S Lease Pty. Ltd. The husband’s evidence is that he and his four older children are members and the children of his marriage to the wife are nominated beneficiaries. The chartered accountant’s evidence (see Schedule 3 to his first report) is that the husband is the “sole member of fund”. Its only assets are the units held in the S Super Fund Unit Trust, which is the beneficial owner of the family farm.

The value attributed to the J Co. Superannuation Fund by both parties takes account of the adjustment in value of the units held by J Co. in the S Super Fund Unit Trust resulting from Mr J’s valuation of Z at $400,000. His interest in that land is thus reflected in J Co.’s value.

Including Z property at a value of $400,000, the chartered accountant valued the nett assets of S Super Fund Unit Trust at $402,358 and the husband’s unit holding through J Co. at $151,407 (see Schedule 2A of his first report). Using that figure Mr. F calculated the nett assets of J Co. available to pay the husband (being the sole member of the fund) at $146,658. That is the figure relied on by the wife; the husband rounded it down to $146,650.

The Farming Business Partnership

The husband’s evidence was that this partnership (the farming business) was formed by him and his brother in 2002 when they determined to buy the family farm, which they did by contract dated 10 January, 2003. The partnership owns the plant and equipment used to run the farm. The 2005 accounts were annexed to the husband’s first affidavit; he tendered the 2006 accounts during the trial. The latter show a deficit of $61,457 in his capital account (down from a credit of $29,558 in the previous year) which he sought to include in the pool of assets and liabilities.

On the one hand, the husband sought that the diminution in his capital account be taken into account. On the other, cross-examined about cash flow and the farming venture, he retreated to assertions about mere book entries and was adamant the wife had no entitlement of any sort arising from his interest in the farm and the farming business.

In 2006 the partnership recorded a loss of $185,019. The 2006 balance sheet records the loan of $94,774 from S Pastoral Unit Trust, to which I earlier referred.

This partnership was never valued and, in my judgment, that was appropriate. I do not find it appropriate to include the deficit in the husband’s capital account as a relevant liability. The partnership once owned cattle but sold the last of them prior to trial, the farming business now fattening heifers for the local trade; the 2006 livestock trading account showed no stock, down from $114,293 in 2005. Primary production losses are set off against income from the business; the husband’s 2006 taxable income was nil.

The farming business, like the family farm, will be quarantined.

S Super Fund

In the husband’s first financial statement he attributed a gross value of $1,700 to this superannuation fund. I can say nothing further about it. Both parties included the figure in their list of assets and liabilities.

OTHER REAL PROPERTIES

It is convenient to deal now with the acquisition of four real properties and other evidence relating to them.

O Property

The husband bought this property for $40,250 during his first marriage, settling the purchase on 6 May, 1978. He said he paid $42,000 and the mortgage was “around $30,000”. He took it into and out of his second marriage, and brought it to his third marriage, to the wife in this case. His evidence was that it was worth about $198,000 at the time of separation. It was sold in May 2004 for $255,000; there was no expert evidence of its value when they commenced living together or at separation. The wife did not agree that she consented to the sale; it is probable it was discussed but she said she wanted legal advice, seeing it as part of their overall financial arrangements post-separation.

The husband’s evidence was that selling and other costs totalled $8,705. $34,062.58 was paid to discharge the Commonwealth Bank mortgage and another $70,532.85 to discharge a CBA Capital Equity mortgage. That liability (essentially a line of credit up to $70,000) arose very late in the marriage. The husband’s evidence in his first affidavit was that it accrued as a result of the need for a deposit on another property (L, bought in 2003), cattle purchases for the farming business (which only began in 2002) and “ensuring the ongoing viability of S Services”; he thought he took it out in about March 2002. He deposed to using a further $38,753.23 of the nett proceeds of sale to pay out S Services’ overdraft, and that he was left with approximately $103,000 after all these payments were made.

The husband set out the disbursement of those funds in a letter to a previous solicitor of the wife, which is undated but sent in response to a letter of 19 August, 2004, and is annexure B to his first affidavit. In that letter he referred to then remaining funds of $10,286.40, of which $8,389.24 was in S Services account … and the remaining $1,897.16 in account … . Matching these to the husband’s amended financial statement sworn 17 January, 2007, the first is the account of S Services and the second his personal account. When he swore that financial statement he estimated there was some $1,000 in the former and $15.00 in the latter.

An analysis of the husband’s list of payments in annexure B shows that significant sums from the balance went towards the farm; for example, $19,007.38 was spent on farm interest payments, $663.35 to the loan company, $624.50 to Mr B, $1,215.14 to M Stock Feeds Pty. Ltd., $15,736.78 to A Solutions, and $299.75 to a transport company. Other sums went on purchasing a motor bike for his son, Y ($5,083 all up), accountants’ fees, legal fees ($4,638), school fees and general living expenses. Funds also went into the business, noted as “solvency requirements”. Cross-examination showed up some inaccuracies in the figures in annexure B.

In his second affidavit the husband deposed that it had always been his intention that this property be held for the benefit of his four eldest children and that he had communicated that intention to them and to the wife. Further, he deposed that for 15 years before it was sold, his sons D and J looked after the property, arranging for it to be rented and doing all maintenance work (for which they “got some nominal payment”) on the basis they would ultimately be the beneficiaries. In support of those propositions he annexed to his second affidavit an affidavit of Ms B, who he described as a former partner, and an affidavit of his daughter, K.

Ms B’s affidavit was sworn on 12 December, 2003 and noted the husband’s wish to bestow the property on the four children and discussions to that effect over 22 years; the second, also sworn on 12 December, 2003, recorded that the husband told K the property in O would be given to the four older children. Also annexed was a statutory declaration from J describing work he had done on the O property and the farm, and stating that “this assistance will always be available in the future”. Those affidavits and statutory declaration were annexed to an affidavit filed five days before the hearing and, in any event, take the matter little further. The husband may have intended to leave this property to some of his children by will, but nothing in the evidence satisfies me that any of the husband’s children acquired any beneficial interest in that property prior to, or after, separation. Some work done by some of them could be a contribution made on the husband’s behalf, but I do not find it to be a significant contribution. None sought to intervene in these proceedings. The husband clearly felt free to spend the proceeds of sale himself, rather than hold them in trust or give them to his adult children.

The wife initially sought that the whole of the proceeds be included in the pool but amended that to a submission that between $125,000 and $130,000 of these funds be notionally added back, a concession that some expenditure from then was legitimate. The husband submitted that no part of these funds should be included. In final submissions he said he “did not disagree” that the wife had some interest in it but, from his perspective, her interest was not substantial and, in any event, he had not frittered away the nett proceeds but used them to keep the automotive business, the farming business and the family afloat.

The selling costs and CBA mortgage totalled $42,770.98. The property was sold soon after separation in October 2003; it is reasonable to assume a significant part of the S Mechanical Services overdraft accrued prior to separation and I find it reasonable to have repaid it to lessen the debt burden. Allowing that $38,753.23, the then balance would be $173,478. If the Capital Equity mortgage is included, the balance would be about $103,000.

I will consider the submissions relating to a notional add back after considering the circumstances surrounding the purchase of a property in L and the husband’s disposition of the proceeds of the sale of his interest in it, as the wife claimed a notional add-back in respect of those funds, too.

L Property

The husband purchased this property in 2003 with his son, D, and D’s partner, as tenants in common in equal shares; see paragraph 46(b) of the husband’s first affidavit, reiterated in his second affidavit. The settlement was on 18 June, 2003. The purchase price was $266,000 plus acquisition costs, including stamp duty of $30,400. The husband’s share of the purchase price was $98,800. His share of the deposit ($26,000) came from the Capital Equity account secured over the O property (which was repaid when that property was sold in 2004) and his share of the loan was $72,800.

Well after separation, the husband sold his share of the property to D and his partner for one-third of (it seems) an agreed then current value of $355,000; the settlement took place on 17 February, 2006. His evidence was that after repaying his share of the mortgage, he had $47,000, applied as follows :
·purchase of a family car for $10,000;
·part-payment of legal fees of $10,000;
·part repayment of the loan from D, $5,000;
·P Partners for accounting fees, $5,000;
·S Services to pay creditors, $6,000;
·school fees at M College, $1,500;
·balance on general creditors and living expenses (around $9,500).

As exhibit H8, the husband tendered a list he had made of payments from the sum of $47,142. It includes $10,679 for a car, $10,000 to Ms K, solicitor, $1,420 to M College, $4,985 to “[D] return of loans and vehicle invoices”, and $5,500 to S Lease (the trustee of the Family Trust and J Co.) for accountants’ invoices. Six thousand dollars went to S Services on 23 February, 2006 and another $2,000 on 16 March, 2006. These figures total $40,584. The cheque for $47,142 was deposited on 17 February, 2006; by 29 March, 2006 the sum (and another $1,408) had been expended, the balance over $40,584 going on numerous small items and bills. As the husband admitted using funds from S Services to pay sums required for the farming venture, the Court cannot know if all or part of the $8,000 which went to the business stayed there, or was tipped into the farm.

Add-backs

I am mindful of the need for caution when considering whether to add back to the pool funds which have been disbursed; see Omacini v. Omacini (2005) FLC 92-218. I have no doubt the sale of O was a premature distribution of a matrimonial asset. The husband’s interest in the property at the time the parties began living together in about 1987 cannot be quantified. It was mortgaged (putting aside the Capital Equity mortgage) when they separated some sixteen years later but his evidence was that this was a “refinancing loan” taken out “4, 5, 6 or 7 years ago”. He had reduced their equity in it by $70,000 in about the last year of their marriage, $26,000 of the borrowed funds going into a real property investment he did not discuss with the wife and much of the rest to buy cattle for another venture which, he was keen to assert, had nothing to do with her. Cross-examined, it transpired some $46,500 of the $70,000 went on the farm. If they had separated prior to the husband drawing large sums against the Capital Equity mortgage (probably in 2002, as that is when he and his brother began agisting cattle on his mother’s farm) and the property had been sold by agreement in May 2004, some $212,233 would have been available after selling costs and discharge of the first mortgage.

When assessing post separation spending the Court must consider its reasonableness. In addition to cattle purchases drawn against the Capital Equity mortgage, at least $37,546 of the $103,000 balance went into the farm (see paragraph 81 of this judgment). The business overdraft was discharged but further funds from the $103,000 went into it, plus some unspecified part of the Capital Equity mortgage.

Until acquisition of the farming interests just prior to separation, the family managed to live on the husband’s reasonably modest income. The O and K properties were probably self-supporting; their financial position was such they would have had trouble affording obligations outside those necessary to support two adults and six children. The business had an overdraft facility but the mortgages on the three real properties were all modest. Since separation, the apparent equilibrium of their financial circumstances has radically changed and significant additional sums have gone into the business and on the husband supporting the family. The pattern is one in which the husband has been content to spend far more than previously in these respects.

On the debit side, K property was no longer rented, so that income source was not available. However, the wife took over responsibility for mortgage repayments and outgoings, previously met (if in excess of rent) by the husband. There may have been a nett diminution of funds in the husband’s hands as a result. The O property was sold meaning that rental was forgone but that may well not have exceeded the mortgage liabilities, once the Capital Equity mortgage was drawn.

The wife had not been in paid work for many years so her departure did not result in income loss. Such part of the family income specifically referable to her support (food, clothing, personal items, etc.) was no longer expended. No spousal maintenance was paid. Yet in the years since separation significant sums (well over the husband’s acknowledged earnings) were, he deposed, necessarily expended on the family (being him and the children).

For example, the whole of the final payment from the husband’s father’s estate ($13,314) went on living expenses for the husband and children. There was a $30,000 overspend from the business in 2005/2006, some part attributable to these expenses, some to the farm. Save for items like legal fees of $4,638 and some accountancy fees, the balance of the $103,000 from O property (after the $37,546 specified which went into the farm) went on expenditure for the children and the husband. So did part of the proceeds of sale of the L property. Thus a family which had lived (doubtless, this had required the exercise of significant economic restraint) on the husband’s modest income and rental (over and above outgoings) from two properties, suddenly “required” (in the husband’s terms) the injection of substantial sums just to get by.

One could speculate that the wife had been a better manager of day-to-day expenditure, or more able to say no to overseas travel for the children or the purchase of a motorbike for a then 14 year old, but that is not established by the evidence. What is established is that, in circumstances where the husband maintained his own income earning activities, he has spent every cent of funds realised by the sale of O property and the subsequent sale of L property. Even taking into account a diminution in his income due to more onerous parenting obligations (albeit inconsistent with aspects of his own case of being the primary parent for most of the marriage) and the loss of income (unquantified) from K and O properties, it cannot be just and equitable to deny the wife’s legitimate interest in matrimonial assets; the husband’s blithe assertion that “the money I spent was my own” is not an accurate statement.

The Court cannot conduct an audit of every dollar spent by the husband from the proceeds of the O and L properties. The nett proceeds of L property were $47,142; the husband thus made a profit on the investment, although without knowing whether the mortgage payments outstripped rental and of other costs, the Court cannot specifically quantify it. Those of O were $103,000 but a good deal of the Capital Equity mortgage went into the farm.

In her list of assets and liabilities the wife included $47,000 as the figure for the husband’s interest in the L property, an implicit acceptance of the transactions detailed by the husband. The property was bought in the last months of the marriage. The funding reduced the parties’ equity in O property, as the deposit of $26,000 was borrowed and secured against that property and discharged when it was sold. I find it appropriate to include one half of the husband’s “interest” of $47,000 in the pool, noting that at paragraph (1) on page 4 of his summary of argument filed 17 January, 2007 he conceded adjustment should be made in respect of a number of assets, including the L property. The figure is $23,571.

In relation to the O property proceeds, I am satisfied it is appropriate to notionally add two-thirds of $103,000 to the pool. The add-back figures total $92,238, being $23,571 (L property) and $68,667 (O property). In those figures I do not include sums paid by the husband on legal costs, for reasons explained elsewhere.

K Property

The husband and wife bought this property in joint names in 1989 for $82,950, with a mortgage of $73,500. The husband’s evidence in his first affidavit was that its current value was “approximately $200-225,000 (valuation pending)” and was subject to a mortgage of $54,000. In his second affidavit he deposed to it being worth approximately $200,000 and being subject to a mortgage of $54,000. A valuer valued it at $195,000, a valuation adopted by both parties in the list of assets and liabilities relied on. The mortgage liability remains at about $54,000.

Some time after separation the wife moved into this property, before moving to live with her partner at W. She still lives at the property during periods in which R and A live with her during the school term. She has made the mortgage payments and outgoings on that property since moving there in April 2004; a tax refund received in 2004 (presumably for income sharing under the earlier partnership with the husband) went into the mortgage, and she and her partner have made some modest improvements to it.

C Property

The parties bought this property in 1993 in joint names for $118,000, with a mortgage of $102,500. Mr D valued it at $215,000, a valuation accepted by both parties. The mortgage presently stands at $64,500. The husband and children continue to live in it.

City Property

The husband asserted that the wife and her partner had bought an apartment in the city and failed to disclose it. It is probable that the wife and the partner inspected an apartment and toyed (perhaps fantasised would be a better word) with the idea they could own one but I am satisfied it went no further than that.

It will be clear from this summary that the entities that relate to the farming ventures, the real estate of the farm and the L property came into existence or were purchased very late in the marriage. In his evidence the husband dated the separation from 8 June, 2003 although he conceded the wife’s return some seven weeks later with “a view” to reconciliation, and a final separation on 6 October, 2003. His decision (with his brother) to buy the family farm was (he said) the fulfilment of a childhood aspiration; challenged about its viability he said : “It’s an investment, for God’s sake” but also said that “mum wanted to keep it going”. The farming business may yet prove viable and the farm real estate has appreciated significantly since acquisition. However, that has been balanced by a significant escalation in indebtedness and the need to “tip” money from other sources (including the automotive business, the O property and an inheritance) into the farm. A year prior to separation the parties’ asset position was modestly secure and their financial structures simple; now the structures are complex and, according to the husband, they are in a parlous financial state. Further, his evidence was of three years of losses and “for the next ten years, losses will be greater”.

On the one hand the husband submitted that the wife had made no contribution to the farm properties or L property and none of those assets should be relevant. On the other, he saw it as reasonable to use matrimonial funds to pay off debt and prop up a business which has (on his evidence) little prospect of being financially viable for years, and wanted the Court to take into account indebtedness arising from his unilateral decisions to invest in the farming venture. Having regard to my decisions about the relevant items in the asset pool, other assets in which he has an interest (particularly the appreciated family farm) will be considered when determining any relevant adjustments pursuant to s.75(2).

ASSETS AND LIABILITIES

The following are agreed or admitted by the party who holds the relevant asset. I am satisfied this is a case where superannuation can safely be included in the pool, having regard to the nature of J Co.’s only asset of worth and the size of the other fund. No splitting order was sought by the wife.

C Property 215,000
less mortgage 64,700 150,300

K Property          195,000
            less mortgage       54,000  141,000
         AMP shares (H’s estimate)   1,542
         AXA shares (H’s estimate)   5,633
         AXA life policy   2,000
         J Co. Superannuation Fund  146,658
         S Superannuation Fund      1,700

The husband included his Ford Territory vehicle at $28,000, noting a debt to Esanda finance of the same figure. The balance of the purchase price of $39,863 (this is the figure in paragraph 58 of the husband’s first affidavit) came from the proceeds of L property; this is the $10,000 referred to in paragraph 46(b) of the same affidavit. Half of the $47,142 is included in the pool, so any equity in this vehicle should not appear as a separate asset.

In her list of assets the wife included her Nissan Nomad at $5,000 and another Nissan Maxima at $8,000. The husband denied any knowledge of the Nissan Maxima, which does not figure in the wife’s financial statement. The husband listed three Mitsubishi vans at a value of $1,500, asserting one was with the wife.

The depreciation schedule of S Mechanical Services (at schedule 1.3 of the chartered accountant’s second report) lists the Nissan Nomad and four Mitsubishi vans, plus a Nissan van; I cannot say if that is the vehicle the wife called the Nissan Maxima. The two Nissans and one Mitsubishi van are depreciated to nil; the total depreciated value of the other three vehicles is $4,903.

On the evidence adduced it is not possible to make firm findings about the value of cars in the parties’ respective possession. None will be included in the pool.

To these figures must be added $68,667 from the sale of O property and $23,751 from the sale of L property, a total of $92,238.

Liabilities

The husband sought the inclusion of a number of liabilities, in addition to the deficit in the S Services account, with which I have dealt. I include no liabilities (by way of deficits in capital accounts) of that business or the partnership with his brother, or the trustee company, S Pty. Ltd.

Attached to the husband’s statement of assets and liabilities was an internet printout (dated 19 January, 2007) of the amounts allegedly due to the loan company by the farming partnership. It shows four accounts in the name of the farming business partnership, as follows :
Account 1  - 86,029.20
         Account 2  - 360,000.00
         Account 3  - 490,000.00
         Account 4  1.00

These total $936,030 and the husband claimed 50% or $468,015. This is consistent with oral evidence he gave. There is no explanation as to why the loan has blown out some $173,030 since 30 June, 2006. The $86,029 relates to an overdraft; that much is clear from the husband’s oral evidence. That may fluctuate depending on cash flow.

The loan company’s mortgage would have been taken into account when fixing the value of the husband’s interest in the family farm, however as I have accepted the husband’s submission that the asset should be quarantined, that is no longer relevant to the asset pool. The mortgage and overdraft on the farm cannot stand as a separate, additional liability. The Court can take account of the husband’s own liabilities when considering his present financial circumstances.

The husband disclosed a personal loan from Lombard in his second financial statement, of $9,3129. His earlier financial statement referred to a $10,000 loan from AXA, described as “loan against life insurance”. I cannot find a reference to either loan in the two affidavits filed concurrently with the respective financial statements. However, in oral evidence he explained that the AXA loan related to borrowings to put into the business, which were secured against a life policy, and then repaid. As the Lombard loan did not appear in the earlier financial statement it may have been borrowed very recently and I do not include it as a relevant matrimonial liability.

The husband then sought that dental and orthodontic expenses (prospective) of $18,120 be added as a liability. There is a reference to this in a letter from the husband to the wife’s solicitor, dated 5 January, 2007, which forms part of a document headed “Affidavit of [the husband] for trial Hearing 22^nd January 2007”, which itself forms part of his second affidavit. In the letter (in which he repeats paragraphs from an earlier letter of 7 November, 2006) he advised that three of the children require urgent dental treatment, and the total cost quoted is $21,000. He advised he had paid approximately $4,400 and asked “Given the new Joint Parental Responsibility legislation of 1 July 2006, is not your client’s responsibility to contribute towards payment?”

A property application cannot be a vehicle by which to claim child support, and the dental costs will not be included as a liability. Nor will the sum of $30,000 claimed as a liability on the last page of the husband’s amended financial statement as “councelling (sic) fees for traumatised children”. I note that in the body of the second affidavit he sought that $30,000 be set aside for counselling of all the children. The liability is contingent, and, in any event, not one that would be included when determining the asset pool in this case. The costs of parenting the children can be considered when assessing the husband’s financial circumstances and the limited nature of the wife’s current child support.

Early in the trial the husband referred to a tax liability of some $11,000, but it does not appear as a liability in the list he tendered. In his first financial statement sworn on 26 April, 2006 he included $8,000 as tax assessed and unpaid in previous financial years. In his second, sworn 17 January, 2007, the figure is $11,438.

In a letter to the wife’s solicitor, dated 5 January, 2007 (part of a bundle annexed to his second affidavit) the husband asserted that the ATO “is to bring bankruptcy proceedings against me at the commencement of March 2007 if the full amount owing is not paid”. He said the tax debt was “another omission” by the chartered accountant in his affidavit sworn 21 July, 2006. Notwithstanding that, the husband did not cross-examine the chartered accountant about this and, on a number of occasions, stressed his confidence in the accountant’s evidence. In these circumstances I do not find the tax debt (whatever is the exact figure) to be a relevant matrimonial liability given the paucity of the evidence and the period which has elapsed since separation.

I do include as a relevant liability the $5,000 still owed to J from the $15,000 lent to the husband to buy the Z property. It was not taken into account when valuing J Co., as it was a personal loan which formed part of the funds advanced by the husband.

The husband claimed solicitors’ fees of $59,800 as a liability; this figure appeared in his second financial statement under item 53. No legal fees were shown as a liability in his first financial statement. Cross-examined, the husband said he had paid $27,000 to three solicitors, “all up”. In most cases that sum would be notionally added back as an asset but I do not find that to be appropriate in this case. Fees of $10,000 were paid from the proceeds of L property, but only half the balance has been included in the asset pool and I do not include the legal fees paid as part of the $23,571; nor do I include the smaller payment for legal fees in the two-thirds allowance for the O property. It is impossible to find when all the alleged fees were paid, or from what source, and I have little confidence in the final figure. Any outstanding legal fees of the husband are certainly not a relevant liability.

The wife’s evidence was of unpaid legal fees of $15,338 due to Mr H, of an estimate of $50,000 for costs not yet rendered and of securing recent borrowings to fund legal costs against Mr H’s house. The wife has not had access to matrimonial funds since separation. As with the husband, those matters will be taken into account when assessing her financial circumstances; I do not add back to the pool costs paid to date.

ASSET POOL

Based on these findings, the pool is as follows :
Assets
C property  $215,000
   less mortgage                  64,700  $ 150,300
K property                       195,000
   less mortgage                  54,000   141,000
AMP shares  1,542
AXA shares  5,633
AXA life policy  2,000
J Co. Superannuation Fund   146,658
S Superannuation Fund     1,700
Proceeds of O property      68,667
Proceeds of L property       23,571
  $ 541,071
Liabilities
Balance due to J           5,000
Nett Assets  $536,071

SECTION 79(4)(a) to (c)

I turn to the second of the steps in the exercise under s.79, namely an assessment of the parties contributions within the context of s.79(4)(a) to (c). These provisions are as follows :

79(4)In considering what order (if any) should be made under this section in proceedings with respect to any property of the parties to a marriage or either of them, the court shall take into account -
(a)the financial contribution made directly or indirectly by or on behalf of a party to the marriage or a child of the marriage to the acquisition, conservation or improvement of any of the property of the parties to the marriage or either of them, or otherwise in relation to any of that last-mentioned property, whether or not that last-mentioned property has, since the making of the contribution, ceased to be the property of the parties to the marriage or either of them;

(b)the contribution (other than a financial contribution) made directly or indirectly by or on behalf of a party to the marriage or a child of the marriage to the acquisition, conservation or improvement of any of the property of the parties to the marriage or either of the, or otherwise in relation to any of that last-mentioned property, whether or not that last-mentioned property has, since the making of the contribution, ceased to be the property of the parties to the marriage or either of them;

(c)the contribution made by a party to the marriage to the welfare of the family constituted by the parties to the marriage and any children of the marriage, including any contribution made in the capacity of homemaker or parent;

The husband brought his business to the marriage but that is not a contribution on which significant weight could be placed. It is unlikely it was ever a marketable commodity; it was and remains a vehicle of his earning capacity. His contribution of the O property must be given weight, although his equity cannot be quantified. The C and K properties were bought when the parties were together and each contributed, albeit in different ways. The husband has paid the mortgage and outgoings on C property since separation and the wife those relating to the K property. She and her partner have made some minor improvements to the K property.

The sole asset of J Co. is Z property bought in the year the parties separated; it represents 27% of the nett asset pool. $42,319 came from two MLC policies; there is no evidence of their value at cohabitation and (in the absence of evidence to the contrary) I must assume they were maintained throughout the marriage. The husband has successfully claimed the balance due to J as a matrimonial debt, meaning the wife has made a contribution to it. Seven thousand dollars of matrimonial funds and $1,000 from the business went into it, both matrimonial sources. The wife has made no contribution to it since separation; the increase in the Fund’s worth relates to capital increases in the value of the Z property. The husband’s contribution to this asset must be assessed as higher than the wife’s.

L property was bought shortly prior to separation and settled after the parties first separated in June 2003. However, the funds for the deposit were borrowed and secured against O property, and repaid when that property was sold. The wife’s contribution to this property is thus higher than her contribution to J Co.

I take into account the wife’s significant contributions as home maker and parent until separation, and the husband’s own contributions during that period, particularly at times of stress, as well as his significant contributions in that respect since separation, and her much more modest one.

I note the inheritance received by the husband and that the final payment went to support the family; the bulk of that inheritance went into the farm.

I take into account the husband’s significant financial contributions as the family breadwinner throughout the marriage, and since separation.

Balancing all contributions I find they should be assessed 40% by the wife and 60% by the husband.

SECTION 79(4)(d) to (g)

I turn to the matters referred to in s.79(4)(d) to (g).

(d)the effect of any proposed order upon the earning capacity of either party to the marriage;

The husband has maximised his earning capacity, but it remains modest. He is optimistic about the long term viability of the farming venture.

I will consider issues relating to the wife’s earning capacity in the context of s.75(2)(h) and (k). In her case it is important that orders made do not detract from her present earning capacity and foster, so far as is practicable, her future earning capacity.

(e)the matters referred to in sub-section 75(2) so far as they are relevant;

I will consider each of the relevant paragraphs :

(a)the age and state of health of each of the parties;

The wife is 47 and the husband 54. Both enjoy reasonably good health.

(b)the income, property and financial resources of each of the parties and the physical and mental capacity of each of them for appropriate gainful employment;

The evidence was that the husband’s business had the capacity to generate some $56,000 as drawings in 2004 and 2005. On the 2006 figures the husband gave the chartered accountant, the profit of the business was only $42,000 but the accountant could not say whether credit card expenses were proper business debts, as the husband asserted, and made it clear his evidence was only as good as the updated figures the husband gave him. For example, there was no American Express card debt until 2006. Cross-examined, the husband agreed his gross receipts had increased in 2006.

I do not doubt the husband’s parental obligations have impacted on the time he has available for the business. It was hard to make sense of the evidence of the time he spends at the farm; its gist was that he goes there infrequently, so that obligation is unlikely to impact on his capacity to work in the business. According to him, interest on the farm loans totals some $7,000 per month; at another time he said it was $72,000 per annum. On the husband’s own figures, it is hard to see how he can sustain his interest in the farm now he has no further capital sums to expend. Whatever his liabilities there, he also has an interest in real property which has appreciated very significantly since its acquisition (even disregarding the discount) in 2003 and maintains his optimism about the long term investment. I do take account of his liabilities arising out of the farming venture.

The wife is on a Centrelink carer’s benefit and is paying back some part of the family allowance credited to her after separation. She has been out of the paid workforce since shortly before C’s birth. Pursuant to the current orders the two younger children are with her for 8 nights out of each 21 during school terms, and half school holidays, which may impact on her earning capacity.

The wife left school after form three (year nine) and worked for a chemist and then at Coles. She then obtained work as a kitchen hand at SSW, where she remained for seven years. It was there she met the husband. Her evidence was that she hoped to look for work in a shop, or house-cleaning, once the case was over. She hoped she would be less stressed, would not need to travel to Melbourne and so could at least work part-time, consistent with obligations to her mother. She might also help her partner in his business. The reality must be that her options will be limited by her age and her lack of experience and qualifications.

The wife recently borrowed $10,000 to pay legal fees and has the obligation referred to earlier for outstanding fees. To keep up the mortgage payments in K property the wife has needed ad hoc assistance from her father.

(c)whether either party has the care or control of a child of the marriage who has not attained the age of 18 years;

The husband has the bulk of this responsibility, and will continue to do so for many years.
(d)commitments of each of the parties that are necessary to enable the party to support :
(i)himself or herself; and
(ii)a child or another person that the party has a duty to maintain;

The parties each have the usual commitments to support themselves. The wife fulfils her legal obligation to support the children when not with her by paying child support as assessed; unsurprisingly, it is assessed at the minimum rate. The husband carries the significant responsibility for the children’s support, including responsibility for necessary dental care and counselling.
(e)the responsibilities of either party to support any other person;

Neither party has a responsibility to support anyone save the other party (to the extent required by law) and the children. If the wife and her partner marry, they will have responsibilities to support each other.
(f)subject to subsection (3) the eligibility of either party for a pension, allowance or benefit under -
(i)any law of the Commonwealth, of a State or Territory or of another country; or
(ii)any superannuation fund or scheme, whether the fund or scheme was established, or operates, within or outside Australia;
and the rate of any such pension, allowance or benefit being paid to either party;

I have referred to the wife’s carer’s benefit.

(g)where the parties have separated or divorced, a standard of living that in all the circumstances is reasonable;

Neither party is living in lavish comfort. It is probable they struggled financially at times when they were together, and they continue to do so.
(h)the extent to which the payment of maintenance to the party whose maintenance is under consideration would increase the earning capacity of that party by enabling that party to undertake a course of education or training or to establish himself or herself in a business or otherwise to obtain an adequate income;

Whilst this factor is also referable to spousal maintenance it can be considered as relevant to the property application. The wife did say (when asked about future plans) that she might “do a course of something”. Her working aspirations were modest – a shop, or house-cleaning. In the absence of any specific evidence I cannot find that her earning capacity would be increased by undertaking a course.

(j)the extent to which the party whose maintenance is under consideration has contributed to the income, earning capacity, property and financial resources of the other party;

The wife’s acceptance of the primary role of home-maker and parent enabled the husband to maintain the family business. It is clear his job is no sinecure. He has had to work long hours and the pressure he has felt since separation indicates the extent of the parenting and home-making role undertaken by the wife.
(k)the duration of the marriage and the extent to which it has affected the earning capacity of the party whose maintenance is under consideration;
The husband was able to maintain his business during the marriage. The wife has been out of the paid workforce for almost two decades. However critical the husband may have been of her role as a parent and home-maker, I am satisfied they agreed on that division of roles, and have no doubt that her earning capacity has been adversely affected by being out of the workforce for so long.

(l)the need to protect a party who wishes to continue that party’s role as a parent;

The husband has assumed the major parenting role, which he must juggle with income-earning activity. Estranged from some of her children, it is understandable that the wife is keen to maximise her time with the younger ones.

(m)if either party is cohabiting with another person - the financial circumstances relating to the cohabitation;

The wife’s partner owns the property in which he and the wife live, which was valued at about $240,000 in mid 2006 and has a mortgage of $144,000. His income in the 2006 financial year was about $30,000 and he receives a Centrelink payment for E, who lives with them.

(na)any child support under the Child Support (Assessment) Act 1989 that a party to the marriage has provided, or is to provide, or might be liable to provide in the future, for a child of the marriage; and

As found, the wife pays the minimum child support. If she can obtain paid employment, that may increase. But it is unlikely that assessed child support will ever provide anything other than a small addition to the husband’s family budget.

(f)any other order made under this Act affecting a party to the marriage or a child of the marriage; and

There are no other relevant orders, save the parenting orders made by consent and the order I will make requiring the husband to pay the chartered accountant’s fee for the second report.

(g)any child support under the Child Support (Assessment) Act 1989 that a party to the marriage has provided, or is to provide, for a child of the marriage.

The provisions of s.79(4)(g) have been considered in relation to s.75(2)(na), a course referred to as “generally convenient” by the Full Court in Clauson and Clauson (1995) FLC 92-595 at 81,911.

CONCLUSION

Taking all of these matters into account, it is my view that a just and equitable result requires no adjustment from the contribution figures.

Forty percent of the asset pool is $214,428. The K property has a value of $195,000. The mortgage stands at $54,000. Were it to be discharged, and the property transferred to the wife, the wife would have an additional entitlement of $19,428.

The husband’s evidence is of an inability to service any more debt. The mortgage over the C property (at $64,700) represents some 30% of the property’s value. Were it to be increased by $54,000, it would represent about 55%. While that suggests the property would provide sufficient equity for a further loan (borrowed to discharge the mortgage over K property), the Court could not be confident a bank would approve such refinancing.

Assuming for the moment that approval was given, the husband would retain an equity of about $96,000 in C property, plus the small parcels of shares, the life insurance policy and the very small superannuation fund, plus his interest in Z property through J Co. He would have his interest in the family farm (even on his own figures, that had a value) and the farming business and might have to decide (as he may whatever the outcome of these proceedings) to rethink that investment and either renegotiate it with his brother or take steps to liquidate it. And he would have had the benefit of the funds notionally added back to the pool. He would continue to work in his business. He would also retain the contents of the C property and the cars and other assets of the business. Responsibility for the $5,000 owed to J would be his, together with responsibility for the other debts to which I have referred.

The wife would have an unencumbered property which would probably need to be encumbered again to borrow funds to pay her substantial legal fees. She would retain the car she drives and responsibility for the $10,000 borrowed against her partner’s home. She would also be entitled to another $19,428, which would obviously reduce the husband’s entitlement.

Balancing all the evidence, I find such a division just and equitable.

The Court cannot conjure funds from thin air. Its obligation is to do justice between parties according to law which, in the context of these proceedings, means dealing with the assets as found. The husband’s wish to retain the C home is strong and explicable; it provides a secure base for him and the children. However, that wish cannot deprive the wife of her entitlement. Orders will provide a reasonably long period in which the husband can refinance to raise funds to pay the wife $54,000 to pay out the mortgage on K property. If that is not done, the C property will have to be sold. The $19,428 is to be paid in instalments. If the husband were legally represented I would have suggested the parties might consider negotiating a child support agreement in which that sum, due to the wife pursuant to these orders, be paid as lump sum child support to discharge 100% of her liability. Given the very low assessments which are likely to issue in the future, that could be a sensible outcome. It is not one I can impose on the parties.

Although the evidence does not establish any liabilities of the wife in respect of the various businesses, companies and trusts, orders will provide that she be indemnified, in case any such liability exists. Orders will also provide for the filing of written submissions in the event a party seeks costs.

I certify that the preceding
163 paragraphs
are a true copy of the reasons for
judgment herein of the
Honourable Justice Brown AM.

Dated the day of 2007.

…………………………………………
Associate

IT IS NOTED that this judgment for all publication and reporting purposes be referred to as STANTON & STANTON

Annexure B

FINANCIAL CIRCUMSTANCES

Assets :

Property situated at C $215,000.00
Property at K 195,000.00
Husband’s interest in L 47,000.00
Husband’s interest in the farming business 405,000.00
Proceeds of sale of O property 221,000.00
1990 Nissan Nomad motor vehicle 5,000.00
1998 Nissan Maxima motor vehicle 8,000.00
Ford Territory motor vehicle 39,863.00
Husband’s AMP shares (153) 1,350.00
Husband’s AXA shares (799) 5,150.00
S Services 47,446.00

Liabilities :

ANZ Bank (matrimonial home) 65,000.00
Hopper’s Crossing 54,000.00
Esanda Finance (Ford Territory) 29,863.00

Financial Resources :
Husband’s Superannuation

J Co. Superannuation Fund 146,658.00
S Super Fund 1,700.00

[2007] FamCA 222

20 March 2007

Key Legal Topics

Areas of Law

Family Law

Property Law

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