Stoney & Stoney (no. 3)
[2012] FamCA 237
•18 April 2012
FAMILY COURT OF AUSTRALIA
| STONEY & STONEY (no. 3) | [2012] FamCA 237 |
| FAMILY LAW – PROPERTY SETTLEMENT – Property and financial defended hearing – Both parties sought ownership and possession of the matrimonial home – Issues to be evaluated as to ownership of home – Assessment of contribution and s 75(2) factors – Family business had failed – Where it was asserted that the reckless economic conduct of one party had primarily led to the failure of that family business – Alleged excessive financial drawings and lifestyle benefits – Initial contributions – Extended family financial assistance – Unemployment of one party and efforts to obtain gainful employment – Contested travel and other expenses of a personal nature incurred during marriage and immediately after separation – Superannuation splitting orders sought but not granted – De facto relationship with non-Australian resident – Tourist visa issues – Sale of personal assets and liquidation of plant and equipment – Corporate valuations – Just and equitable orders |
| Family Law Act 1975 (Cth) – ss 75(2), 79(2), 79(4) |
| Davut & Raif (1994) FLC 92-503, |
| APPLICANT: | Ms Stoney |
| RESPONDENT: | Mr Stoney |
| FILE NUMBER: | MLC | 7569 | of | 2010 |
| DATE DELIVERED: | 18 April 2012 |
| PLACE DELIVERED: | Melbourne |
| PLACE HEARD: | Melbourne |
| JUDGMENT OF: | Young J |
| HEARING DATE: | 5, 6, 7, 8, 26 and 27 March 2012 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr Wilson |
| SOLICITOR FOR THE APPLICANT: | Clancy & TRiado |
| COUNSEL FOR THE RESPONDENT: | Ms Stoikovska |
| SOLICITOR FOR THE RESPONDENT: | Adrian Abrahams Family Lawyers |
IT IS NOTED that publication of this judgment by this Court under the pseudonym Stoney & Stoney (No. 3) has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
INDEX
ISSUE
ORDERS SOUGHT
WIFE’S SUBMISSIONS
SUMMARY OF ORDERS SOUGHT
PERCENTAGE DIVISION SOUGHT
AFFIDAVITS
STRIKE OUT APPLICATION
ANNEXURES
BACKGROUND FACTS
PREVIOUS COURT ORDERS
ASSETS
LIABILITIES
SUPERANNUATION
SECTION 75(2) FACTORS
MATHEMATICAL APPROACH
OBSERVATION OF WITNESSES
STANDARD OF PROOF
VALUE OF REAL ESTATE
WIFE’S EVIDENCE
HUSBAND
CONTRIBUTIONS IN EARLY YEARS OF MARRIAGE
THE FORMER MATRIMONIAL HOME
CHATTELS AT THE FORMER MATRIMONIAL HOME
THE THREE E UNITS
HUSBAND’S PARTNER, MS L
TRAVEL EXPENSES OF HUSBAND
ADD BACK OF $12,000
SELF-MANAGED SUPERANNUATION FUND
X GROUP
A PAST BUSINESS VALUE WASTED?
MR W – COMPANY VALUATION
PARTIES CONTRIBUTION TO BUSINESS
SN PTY LTD
MITSUBISHI TRUCK
OTHER BUSINESS ASSETS
TELECOMMUNICATIONS SECURITY SYSTEM
ASSESSMENT OF CONTRIBUTIONS
ASSESSMENT OF S 75(2) FACTORS
ASSESSMENT OF PERCENTAGE SUM
MONETARY EFFECT OF ORDER
FOURTH STEP
ASSETS TO BE SOLD
ASSETS TO BE PERSONALLY RETAINED
WIFE
HUSBAND
STRUCTURE OF ORDERS
| FAMILY COURT OF AUSTRALIA AT MELBOURNE |
FILE NUMBER: MLC 7569 of 2010
| Ms Stoney |
Applicant
And
| Mr Stoney |
Respondent
REASONS FOR JUDGMENT
ISSUE
The husband and wife (“the parties”) sought a division of their net property in circumstances where they were largely able to agree upon the net pool of assets but were in significant dispute as to their respective contributions, financial needs, the ownership of the former matrimonial home and the role each of them played in the demise of their family business. Both parties sought, or were advised to seek, final orders that were at the opposite ends of the extended range of likely orders as they each argued for a 60% division of net property in their favour. The final orders reflect a far more appropriate and just and equitable outcome.
ORDERS SOUGHT
WIFE
The wife’s Amended Initiating Application filed 9 February 2012 was the first occasion on which she had instructed her solicitors to detail the specific property and financial orders which she sought and they are contained within paragraphs 1 – 10 (inclusive) of that document.
In summary the wife then sought a transfer to her sole name of the former matrimonial home situate at J Avenue, Suburb M (“the former matrimonial home”) and which is registered in the sole name of the husband. That transfer was to be subject to the existing Westpac mortgage, overdraft and credit card liabilities but those sums were to be offset by a lump sum payment sought from the husband.
If the wife was awarded ownership of the former matrimonial home she initially sought an order that the husband take or retain ownership of the three investment properties in suburb E but subsequently, in answer to a question asked, she said that “I have no objection if the husband wants to sell those three units if I have [the former matrimonial home]”.
The further orders sought as to corporate assets, personal chattels, possessions and payment of liabilities including capital gains tax and costs orders and a division of superannuation by way of an equal splitting order are as detailed in her Amended Application.
Mr Wilson of Counsel appeared for the applicant wife and in his Outline of Case dated 1 March 2012 there are three amendments sought to the earlier Amended Application of the wife and they were that:
(i)the money held in trust by the wife’s solicitors ($40,000) should be order be applied to:
(a)pay and discharge the debt of the D Family Trust to Westpac Banking Corporation in respect of the family trust’s overdraft and credit card accounts;
(b)pay the wife’s and the children’s shares of capital gains tax arising from the sale of Unit 2, F Street, Suburb E (“Unit 2 F Street”); and
(c)permit the balance remaining thereafter to be retained by the wife as her overall entitlement;
(ii)an order should be made for the husband to make a cash adjustment payment to the wife reflecting the ultimate percentage outcome, rather than an order for the husband to be responsible for discharging the mortgage on the former matrimonial home; and
(iii)orders should be made obliging the parties to follow Mr G’s advice and recommendation so as to minimise the capital gains tax arising from the sale of Unit 2 F Street.
During the hearing the parties negotiated and agreed upon orders for the expenditure of the $40,000 held on their behalf in the wife’s solicitor’s trust account. It was agreed, and orders were pronounced by consent in the following terms:
THAT each party forthwith sign all documents and do all things required to apply such of the money presently held in trust for them or the Family Trust by Mr Abrahams, Solicitor, in payment of the amounts required to discharge the:
(a)overdraft account of the [X] Group with Westpac Banking Corporation; and
(b)Mastercard credit card account previously used by the parties as part of the [X] Group business;
and the balance remaining thereafter continue to be held by Mr Abrahams pending further order.
Subsequently the parties agreed that the balance of those monies, estimated at approximately $6,000, be contributed towards the cost of subdivision of the property upon which the parties own the two units in S Street, Edithvale. That agreement is ultimately reflected in my pronounced orders.
For completeness the parties also agreed during the trial, and consent orders were made, pursuant to which each party was to forthwith sign all documents and do all things required to have the taxable capital gain from the sale of the real property at Unit 2 F Street distributed amongst the beneficiaries of the Family Trust (including the children of the marriage) in the most effective tax manner recommended or as may be further recommended by their accountant Mr G.
WIFE’S SUBMISSIONS
As part of the wife’s Outline of Case her Counsel submitted a summary of argument which focused upon the alleged fact that the husband had walked away from the business X Group that had been built up by the parties during the marriage and it was asserted by the wife that the husband’s actions had caused incalculable damage and losses from the forced sale of assets.
It is therefore important to record and carefully evaluate and assess the wife’s evidence and arguments submitted on her behalf within the context of those submissions which were in the following terms:
i)the assessment of the parties’ respective contributions in this case requires an evaluation of the husband’s conduct in dissipating, reducing, wasting and/or abandoning the value, or potential value of the assets of the parties;
ii)whilst an exercise in accounting and adding-back amounts of money can be attempted (for example, the $22,400 improperly withdrawn by the husband from the parties’ bank accounts, or the monies spent on the husband’s new partner of at least $14,400, probably more), such an exercise would not take into account any of the incalculable damage done by the husband in walking away from the business that had been built up during the marriage, and the losses consequentially sustained from having to realise assets and meet debts. Although necessarily imprecise, these matters can only be assessed in a broad way;
iii)by virtue of the matters referred to, an assessment of the parties’ respective contributions should result in findings that the wife has contributed more than the husband to the value of the parties’ assets now available for distribution;
iv)an assessment of the relevant s 75(2) factors favours the wife because her long term financial prospects are inferior to those of the husband. The husband’s capacity to earn income is very different from his present motivation to do so;
v)having regard to the parties’ now much reduced asset pool, and the husband’s conduct in reducing the value of that pool, it is just and equitable that the wife receive 60% and the husband 40% of what remains.
Accordingly the wife’s trial affidavit and her evidence was directed towards highlighting the establishment and success of the business conducted within the X Group, its income capacity and the financial benefits and lifestyle that it afforded the parties. She attributed its collapse solely to the husband and his deliberate actions in terminating its business activities. She asserted, and this was always a matter of real challenge by the husband, that she was financially responsible in her use and withdrawal of monies from the business and that she was not in any way responsible for its financial demise.
HUSBAND
The husband’s Amended Response was filed 27 February 2012. At the outset it is to be noted that the order sought the retention of the former matrimonial home, and for the wife to vacate that property and for him to return to live there, is different to the orders first sought by him when he filed his Response.
In his original response the husband had not particularised his orders sought and thus his amended response seeking retention in his sole name of the former matrimonial home was filed in response to the wife’s amended application when she first raised the issue of ownership of the former matrimonial home.
The amended orders now sought by the husband, and as were confirmed by his Counsel Ms Stoikovska in her Outline of Case document filed with the Court at the commencement of proceedings sought, in summary:
(i)for the husband to retain the former matrimonial home and all liabilities encumbered upon its title and indemnify the wife for all such liabilities;
(ii)for the three investment units in suburb E, including the unit where the husband, his new partner and the son of the marriage, B now live be all transferred to the wife subject to her assumption of all payments and liabilities of the mortgage, rates, taxes and outgoings and capital gains tax owing thereon;
(iii)the sum of $40,000 now invested on trust with the wife’s solicitors be used to discharge corporate and other debts, with any balance to be split between the parties (but that order sought has been overtaken by the consent orders pronounced);
(iv)each party retain their primary motor vehicle with other chattels and possessions to be sold;
(v)each party to retain their superannuation and all work related entitlements;
(vi)the X Group Pty Ltd be wound up at the shared cost of the parties;
(vii)the wife pay the husband’s costs of and incidental to the proceedings.
At the commencement of proceedings the husband’s Counsel advocated that his primary position was to retain the former matrimonial home subject to all of its liabilities and for the three suburb E properties to be sold for the best outcome on a subdivisional basis with all proper debts, liabilities and tax associated with all of the properties be paid and a net amount be ascertained as the basis for the payment out of a cash sum to the wife, adjusted against other assets and liabilities.
If the husband was not awarded ownership of the former matrimonial home he sought in the alternative that that property be sold, together with each of the three suburb E units and that there be a cash sum accumulated and then apportioned between the parties on the percentage division basis sought by him.
Alternatively if the wife was awarded a transfer to her sole name of the former matrimonial home the husband nevertheless sought the sale of the three suburb E units and then for the payment of a cash sum, adjusted by a further required payment from the wife, and other personal property to equate to his percentage division sought.
SUMMARY OF ORDERS SOUGHT
Counsel for each of the husband and wife somewhat refined the ultimate property orders sought by their clients during the hearing, in response to the evidence and issues raised and questions from the Bench. The final position upon which I have carefully considered and evaluated the evidence was that both parties sought ownership and possession of the former matrimonial home, the difference being that the wife preferred, as a second option that the husband retain ownership rather than the property being sold. The wife’s position is to be contrasted with the husband’s second option for a sale of that property and that the property to be transferred to the wife’s name only as a final option.
There was full agreement for the sale of each of the three suburb E units, subject to any continuing lease arrangement with the F Street unit and for the proceeds of sale to be maximised by an appropriate subdivision of the two units at the S Street property at an anticipated cost of approximately $20,000. Further it was agreed that the payment of all capital gains tax associated with the sale of the three remaining units, and Unit 2 F Street which was earlier sold should all be calculated by the parties accountant and paid in the most efficient manner. Likewise all costs and expenses of the sale, advertising costs, subdivisional costs, legal costs and other monies required for the agreed presentation of the properties were all to be properly negotiated and paid from the sale proceeds so that, after discharge of all money owed to Westpac Banking Corporation encumbered against the remaining three units, the net balance was available for distribution between the parties pursuant to the orders and directions pronounced in these reasons for judgment.
Otherwise the remaining property and financial resources, superannuation and personal chattels and motor vehicles remained a matter of dispute between the parties, right up until final submissions by Counsel when there were various consents given on matters that had remained in dispute throughout the hearing. Again my orders and directions reflect the final consent position of the parties or otherwise are the subject of Court imposed orders and directions.
In summarising the final orders sought by both parties it is proper to record that this was a very strongly contested matter on all valuation, contribution and related property and personal issues. I have no doubt that each of the parties sought to employ various tactics on valuation and other evidence issues to promote their own outcomes and frustrate any balanced discussion or consideration of issues in a reasonable and considered manner. The parties have each chosen to spend a very significant sum on solicitors and barristers, valuations, affidavits and the way evidence, and in particular exhibits, were presented to the Court. Subject to any costs application or orders that hereafter may be made each of the parties will have a very significant liability.
PERCENTAGE DIVISION SOUGHT
WIFE
The wife sought a division of all net assets 60% in her favour and 40% to the husband but did not, in her Counsel’s opening and closing address, identify any specific breakdown arising from her contributions assessed pursuant to s 79(4) of the Family Law Act 1975 (Cth) (“the Act”) or the s 75(2) factors relied upon.
HUSBAND
Counsel for the husband initially submitted in her written Outline of Argument that there should be a overall contribution (s 79(4)) assessment of 55% in favour of the husband with a further adjustment of 7.5% for applicable s 75(2) factors, so that the husband would therefore be awarded 62.5% of the net assets, inclusive of him retaining his superannuation.
In her final address, and on instructions then obtained, Counsel for the husband maintained an overall s 79(4) contribution division of 55% in favour of her client but amended the further s 75(2) adjustment to be 5% (rather than 7.5%) and therefore her final submissions were presented on the basis of the husband seeking a 60% division in his favour of the net assets and with him retaining his superannuation.
I record that Counsel’s submissions for the additional 5% for the s 75(2) factors focused primarily upon the husband’s lack of employment, his uncertain future prospects of obtaining employment and his obligation to financially support and maintain his partner. There was some brief reference to his requirement to support his adult son B, but that was hardly pressed and in light of developments late in the trial of which the Court has been advised of had no merit.
Notwithstanding the Response documents filed by the husband and the way in which his case was opened by Counsel under cross-examination he advised the Court that “I wanted to be fair and equal”. He continued “what I want is a 50/50 split down the line…that is what I have wanted from day one…”.
I carefully observed the husband in his giving of evidence and, as was the wife, he was under some pressure and perhaps would consider that he made concessions to which he did not fully agree. I am not bound by the husband’s answers in that regard and I have carefully focused upon the submissions and orders sought. In particular the evidence in the case and the final division of property which I have concluded is just and equitable has not in any way relied upon the husband’s concessions made under cross-examination.
AFFIDAVITS
WIFE
The wife filed and relied upon:
(i)her trial affidavit filed 9 February 2012 and the substantial book of annexures, separately bound and handed to the Court shortly prior to the commencement of the trial, such unbound annexures having earlier been filed with the wife’s trial affidavit (subject to the evidence and documents that were struck out);
(ii)the Financial Statement of the wife filed 9 February 2012;
(iii)the affidavit of Mr W filed 9 February 2012 which I have read and evaluated, notwithstanding that this expert witness was not required for cross examination;
(iv)the affidavit of Mr A filed 2 March 2011;
(v)the affidavit of Mr G filed 9 February 2012.
The witnesses A and G were not required for cross examination but I had read their affidavits and their evidence was before the Court and was considered. Indeed Mr Wilson made reference to the evidence of Mr A in his final submissions.
Additionally the wife’s solicitors filed on her behalf:
(i)a detailed chronology of events;
(ii)an Outline of Argument;
(iii)a list of objections to the husband’s affidavit evidence;
(iv)a single page balance sheet which was received into evidence and marked as exhibit “W1” and thereafter “W7”.
HUSBAND
The husband’s solicitors filed on his behalf:
(i)the husband’s trial affidavit filed 24 February 2012 and the significant bundle of annexures thereto (subject to the evidence and documents that were struck out);
(ii)the Financial Statement of the husband filed 24 February 2012;
(iii)the affidavit of Mr N filed 2 March 2012 and although he was not required for cross examination his valuation of the property at that earlier date was accepted and it is evidence which I have evaluated in the proceedings.
Additionally the husband’s Counsel filed on his behalf:
(i)a detailed chronology of events;
(ii)an Outline of Argument;
(iii)single page balance sheet which was received into evidence and marked was exhibit “H1” and thereafter “H6”;
(iv)a list of objections to the wife’s affidavit evidence.
A single expert had filed a valuation for each of the three E properties and initially both the quantum and the valuation methodology and process were the subject of a challenge and evidence was sought to be given by a shadow expert. Ultimately all of these issues resolved when the parties agreed both to a valuation and then to a sale of each of the three units and the hearing proceeded upon that agreed basis.
STRIKE OUT APPLICATION
Prior to the parties commencing their evidence Counsel for each of them sought to strike out material contained within the trial affidavit of the other. I heard individual submissions and paragraphs, or sentences within paragraphs, in each of the parties’ affidavits were struck out as follows:
WIFE’S AFFIDAVIT
§Material struck from paragraph 18(a), 18(b), 35, 40, 41, 42, 49, 50, 51, 68, 72, 75, 95, 98, 100 and exhibit “i” thereto.
HUSBAND’S AFFIDAVIT
§Material struck from paragraph 58, 59, 60, 91, 93, 105, 106 and the reference to personal assets, jewellery and cash of the wife to a value of $20,000 as outlined on page 12 of his affidavit and “DS 11” to his affidavit.
ANNEXURES
The parties, primarily the wife, were substantially in breach of Family Law Rule 15.12. The wife’s annexures were greater than 7.5 cm in depth whereas the husband’s annexures were borderline by way of compliance with that Rule.
After discussion with Counsel and listening to their submissions I ruled inadmissible and struck out various of the annexures.
For the wife I excised from her annexure book exhibit “B” (pages 69 – 129), annexure “F” (pages 141 – 149), annexure “Y” (pages 248 – 271) and annexure “MM” (pages 354 – 486).
From the husband’s affidavit I excised annexure “DS8” at pages 101 – 125.
BACKGROUND FACTS
The background facts which I have read in the parties’ affidavits and their respective chronologies and upon which I have accepted and relied upon are:
1965 Husband born
1969 Wife born
February 1989 Date of marriage and commencement of cohabitation
April 1991Husband’s parents give to the parties the vacant land at F Street, E
1992Q born
1994B born
Mid 1995Parties purchase vacant allotment at S Street, E
June 2001X Group Pty Ltd (“X Group”) incorporated with wife subsequently appointed as sole director and sole shareholder
2001 – 2002 Parties purchase former matrimonial home
2003F Street properties are transferred to the Family Trust
August 2004 Parties borrow $250,000 to renovate former matrimonial home
Late 2007Husband developed a telecommunications security system and registers SN Pty Ltd
2009Husband travelled overseas and met his new partner whilst in Europe
23 June 2010 Parties separate under the one roof
16 August 2010 Wife initiated Family Court proceedings
24 August 2010 Husband vacated former matrimonial home and removes cash monies from family safe
5 October 2010 Parties sell SN Pty Ltd for $100,000, each receiving $50,000
October 2010 Husband purportedly travelled overseas
December 2010 Contractors of the business seek payment for their services and resignations are threatened
17 January 2011 Husband resigned from D Group
January 2011 B moved from former matrimonial home and commenced residing with his father in one of the E units
21 January 2011 A senior employee, Ms T resigns from X Group
July 2011Husband’s new partner arrived from Europe to visit him in the E unit and B returns to the former matrimonial home
8 October 2011 Parties divorced
27 October 2011 Court ordered sale of Unit 2 F Street is completed at a price of $490,000 with net proceeds applied to reduce the mortgage debt and other business liabilities
November 2011 B left former matrimonial home and returned to live with the husband
November 2011 Husband’s new partner Ms L returns from Europe and commenced to live with the husband and B in S Street E
Mid-March 2012 B returned to live at former matrimonial home with his mother
PREVIOUS COURT ORDERS
The three orders of this Court that are of relevance and which I have read are as follows (in summary):
i)The orders of Senior Registrar FitzGibbon made on an interim basis and by consent on 30 August 2010. These orders provided for the wife to enjoy the sole use and occupation of the former matrimonial home, pronounced various personal restraints and injunctions against the parties from selling or disposing of the business or personal assets, provided a structure for the payment of ongoing household and other expenses and appointed a single expert to value the business and real property;
ii)The order of 1 July 2011 provided inspection and disclosure of business assets, a valuation process and an orderly identification and location of assets prior to sale for the purposes of reduction of company debts;
iii)The order of 28 July 2011 provided for the sale of certain assets including Unit 2, F Street, E and for a continued process of reduction of the debts of the parties personally and of the business and otherwise case managed the proceedings for final hearing.
ASSETS
AGREED
§ Former matrimonial home $1,475,000
§ Units 1 and 2, S Street, E (gross) $935,000
§ Unit 1, F Street, E $430,000
§ X Group Pty Ltd Nil
§ Smorgon Steel shares (de-listed) Nil
§ TAH and Echo shares $2,000
§ Argus Solution shares (not publicly listed) $10,000
§ Ford Trader truck $5,000
§ Kawasaki motor bike $2,800
The parties and their solicitors failed to make proper and reasonable enquiries of the ownership and valuation of the small parcel of shares. Ultimately, and by submissions and not evidence, the Court was advised that as of 1997 the husband held 270 Tabcorop shares in his name. Since then there has been a share split but the parties did not know of that fact, their current shareholdings or the total sum paid as withholding tax as they had not produced a tax file number to the Listed Company. Likewise the family trust owned several years ago 13,663 shares in the unlisted company, Argus Solutions. The parties agreed upon an estimate of $10,000 as its likely value. The wife previously owed 185 shares in Smorgon Steel, a company now taken over and no longer listed on the Australian Stock Exchange. The wife did not know what had become of that share holding though it was most likely taken over by a company currently listed on the Australian Stock Exchange.
To resolve the share holding issues the parties finally agreed and the Court was asked to make Orders requiring each of them to do all acts and things and otherwise cooperate in the sale of all of the shares, with the net proceeds therefrom to be added to the pool of assets and divided equally between the parties. That is a proper outcome and I have so ordered.
IN DISPUTE
§ Holden Commodore motor vehicle, an asset of X Group, but in the possession of the wife and estimated by the wife to be valued at $10,000 and by the husband at $13,500;
§ the Nissan Patrol motor vehicle registered in the husband’s name and in his possession and estimated to be valued by him at $7,100 and by the wife at $10,000;
§ cash, jewellery and assets at the former matrimonial home estimated by the wife to be of a value of $11,000 and by the husband to be valued at $20,000;
§ furniture, possessions and contents in the husband’s residence estimated by him to be of a nominal value and valued by the wife at $5,000;
§ the telecommunications security system said by the husband to be of no value and which he was prepared to transfer to the wife the trade patent associated therewith, but asserted by the wife to be of a value of $27,601;
§ funds allegedly withdrawn by the husband from available line of credit in the sum of $12,000;
§ the Ford performance vehicle, an asset of the company but in the possession of the husband estimated by the wife to be valued at $28,000 and said by the husband to be valued at $20,000.
Ultimately the parties gave instructions, after the conclusion of all evidence for the Ford performance vehicle to be transferred from X Group to the husband at his expense and the Nissan Patrol to be retained by the husband at respective valuations of $20,000 and $7,000 and for the Holden Commodore to be transferred from X Group to the wife at her expense at a valuation of $10,000. I record that the Court had urged Counsel and the parties to either provide evidence of valuation of these three motor vehicles, or otherwise agree upon a valuation throughout the hearing and it was only reluctantly, and eventually leaving tactics to one side, that the parties agreed upon this division of the three motor vehicles and requested the Court to so order.
I therefore require the parties to sign all documents and do all acts and things and in all ways cooperate with the transfers of these vehicles and that procedure should be undertaken and completed forthwith.
LIABILITIES
The following liabilities were greed by the parties:
§ Westpac mortgage / line of credit encumbering title to the former matrimonial home agreed at $250,000;
§ Westpac investment loan encumbering S Street, E agreed in the sum of $215,000;
§ capital gains tax on the sale of Unit 2 F Street agreed at $41,930.
On the last day of hearing, and when only the re-examination of the husband remained, Mr Wilson, on instructions from his client advised the Court that the wife had discovered three additional liabilities which she requested be brought to account in the proceedings being:
§an accounting bill rendered by Mr G in the sum of $3,609;
§an Australian Taxation account BAS payment due in the name of X in the sum of $2,404; and
§arrears of rates owing on the S Street, E units in the sum of $2,385.
By agreement the husband consented to an order for the payment of the Australian Taxation Office liability and, as it is agreed that the S Street, E units are to be sold the parties further agreed that all rates, taxes and other outgoings then owning and the mortgage will be paid upon settlement and that likewise was a matter of agreement.
Ultimately, and only after final submissions from Counsel had been completed, did the parties agree upon the payment of the accounting bill of Mr G. Therefore each of these three recently discovered liabilities are to be paid by the parties as soon as practicable, and most likely upon settlement of the sale of the first of the E units. If further interest is incurred then that sum must additionally be paid but I require the cooperation of the parties, and for them to instruct their solicitors, to cause the payment in full of each of these liabilities.
SUPERANNUATION
The parties agreed upon their respective superannuation entitlements. They were correctly recorded in the balance sheet submitted on behalf of the husband, exhibits “H1” and “H6” and the wife sought leave to adjust her balance sheet to adopt that evidence ad it is now included in “W7”.
The wife has two policies of superannuation totalling $43,517, primarily held in a policy with Westpac Lifetime Superannuation.
The husband has superannuation entitlements totalling $98,488 held in two policies, a Westpac Lifetime Superannuation fund where the majority of his superannuation has been accumulated and a smaller fund with REST Superannuation, of some $14,000.
The husband’s orders sought were for each party to retain their respective superannuation entitlements. The wife’s orders sought were for a split and equal division of superannuation.
I have carefully evaluated the evidence of the parties’ superannuation having regard to their age and future work opportunities and the need for each of them to earn an income and support themselves and their present family.
The husband has approximately $55,000 more in superannuation entitlements than does the wife. He however is unemployed and the wife is in gainful employment and her superannuation is currently increasing by employer contributions. The husband is approximately four years older than the wife and in this background, and with a very careful evaluation of all of the parties evidence of contribution and s 75(2) factors I have concluded that a just and equitable outcome is for each of them to retain their current superannuation entitlements and that there be no splitting order pronounced.
It is difficult to accurately identify the exact pool of total assets net of liabilities but on the basis of the updated balance sheets submitted by Counsel the range of such net property of the parties is approximately $2.3million - $2.4million, or thereabouts.
The husband’s excess in superannuation entitlements of $55,000 thus represents approximately 2.5% of the net asset pool and that financial imbalance in his favour is a matter which I have reflected in my determination of a just and equitable division of property and financial resources. It is almost impossible to be exact in that percentage calculation as the net assets of the sale of the three E units, and the total of liabilities, cannot be known with precision until a much later date. Nevertheless an intended adjustment of 2.5% of the net pool of assets available for distribution represents an adjustment close to $55,000 and the inconvenience of the husband in having those monies beyond his immediate use until he at least attains the age of 55 years or suffers hardship sufficient to permit him to access his superannuation. That adjustment was an option I raised with Counsel during their final submissions and in all of the circumstances on this hearing that is appropriate and best complies with the requirement of s 79(2) of the Act.
FAMILY LAW ACT 1975 (CTH)
The proper approach to determining a section 79 application is now well established, both by the Act and by case law. (See In the Marriage of Davut & Raif (1994) FLC 92-503, In the Marriage of Clauson (1995) FLC 92-595, Mallet v Mallet (1984) 156 CLF 605, Hickey & Hickey (2003) FLC 93-143, In the Marriage of Waters & Jurek (1995) FLC 92-635 and Norbis v Norbis (1986) 161 CLR 513.
Section 79(2) requires that any order made by the Court must be just and equitable and provides that:
[Just and equitable requirement] The court shall not make an order under this section unless it is satisfied that, in all the circumstances, it is just and equitable to make the order.
Section 79(1) of the Act directs a Court to make such an order as it considers appropriate. Such an order must be just and equitable. As has recently been highlighted by Cronin J in Bulleen v Bullen (2010) 43 Fam LR 489 at paragraphs 34 – 45 (inclusive), the process by which the Court determines such an order may appear arbitrary and without any particular arithmetical approach but that is the way in which the Act was drawn, proclaimed and has served our community from 1975. It is discretionary and His Honour has observed that “it is also not governed by morality but fairness”.
It is therefore a balanced and properly explained assessment by a trial judge having heard and carefully evaluated all of the admissible facts and evidence of what division of property and what other orders are to be made between the parties to achieve a just and equitable result. That is the process which I have carefully undertaken and explained within these reasons for judgment.
Section 79(4) involves a four step exercise which I have undertaken in this judgment, namely:
§the identification of the property of the parties, their assets and financial resources and the net of their liabilities;
§the evaluation of the “contributions” and s 79(4) issues;
§the evaluation of the matters referred to in section 75(2);
§a determination as to whether the result is just and equitable by reference to section 79(2) of the Act. In determining whether the outcome is just and equitable it is “the real impact in money terms which is ultimately the critical issue”. JEL v DDF (2001) FLC 93-075 at [140] citing the Full Court In the Marriage of Clauson (1995) FLC 92-595 at 81,911.
In considering the alteration of property interests I have identified the net assets of the parties and then evaluated the very specific contributions, direct and indirect, financial and non-financial, and other contributions including that of homemaker and parent. I have throughout this judgment identified and incorporated within my consideration and evaluation all such issues and findings. The reference point for the just and equitable requirement is clearly emphasised by the decision of the Full Court in Hickey (supra) where it was said:
The case law reveals that there is a preferred approach to the determination of an application brought pursuant to the provisions of s 79. That approach involves four inter-related steps. Firstly, the Court should make findings as to the identity and value of the property, liabilities and financial resources of the parties at the date of the hearing. Secondly, the Court should identify and assess the contributions of the parties within the meaning of ss 79(4)(a), (b) and (c) and determine the contribution based entitlements of the parties expressed as a percentage of the net value of the property of the parties. Thirdly, the Court should identify and assess the relevant matters referred to in ss 79(4)(d), (e), (f) and (g), (‘the other factors’) including, because of s 79(4)(e), the matters referred to in s 75(2) so far as they are relevant and determine the adjustment (if any) that should be made to the contribution based entitlements of the parties established at step two. Fourthly, the Court should consider the effect of those findings and determination and resolve what order is just and equitable in all of the circumstances of the case.
I have emphasised in my approach the overriding obligation upon the Court to evaluate and properly assess all of the evidence for the purpose of pronouncing an order which is just and equitable.
65.There is a very significant obligation imposed upon the Court, in the exercise of its judicial discretion, to assess, balance and evaluate all contributions under the umbrella of s 79(4) and for the exclusive purpose of concluding a just and equitable order.
66.It is necessary for courts to assess both the “value” and “the quality with which any particular role was performed” and a very helpful assessment of this concept is developed by Warnick J in SL & EHL [2005] FamCA 132, in particular paragraphs 233 – 290 (inclusive) and by Cronin J in Bulleen’s supra.
67.The mandatory prescription of the Act is to evaluate contributions. In Pierce v Pierce (1999) FLC 92-844 at [30], the Full Court per Ellis, Baker and O’Ryan JJ said:
There is an obligation on the trial judge not only to identify the relevant contributions but also to assess them.
68.It is not the purpose of the relevant provisions of the Act to “equalise the financial strengths of the parties”, per Wilson J in Mallet (supra). I have carefully safeguarded against utilising the provisions of s 79(4) of the Act as a “source of social engineering or as a means of evening up the financial positions of the parties” per Kennon v Kennon (1997) FLC 92-757 at 84,303.
SECTION 75(2) FACTORS
69.The relevant factors which I have considered and evaluated throughout this judgment are (in summary):
(a)the age and state of health of each of the parties;
(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;
(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;
(e)the responsibilities of either party to support any other person;
(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;
(g)where the parties have separated or divorced, a standard of living that in all circumstances is reasonable;
(m) if either party is cohabiting with another person –– the financial circumstances relating to the cohabitation;
(n)the terms of any order made or proposed to be made under section 79 in relation to the property of the parties; and
(o)any fact or circumstance which, in the opinion of the court, the justice of the case requires to be taken into account.
MATHEMATICAL APPROACH
I am not persuaded to adopt a strict mathematical approach notwithstanding the very focused financial approach of both parties, but in particular the wife with her bookkeeping background and the financial and expenditure documents she prepared and introduced into evidence.
71.In Norbis supra (at 522) in the judgment of Mason and Deane JJ it was said:
In G and G, a case decided after Mallet and the decision of the Full Court in the present case, Nygh J. expressed his agreement with the proposition ‘that it cannot be required of the Family Court that it assesses contributions with mathematical precision with respect to each item’.
. . .
In this respect we agree with the comment of Nygh J in G and G that, although mathematical precision is certainly not required, there is ordinarily a need to know the circumstances in which assets were acquired and the general extent of each party’s contribution to them.
72.In Hunt & Zuryn (2005) FLC 93-226 at [79,730] the Full Court per Kay, May and Boland JJ said:
Such an assessment ought adequately recognise that much of the parties’ wealth can be attributed to the capital growth in the assets introduced by the husband at the commencement of the marriage but at the same time bringing into consideration a myriad of other contributions each made in the course of their relationship.
73.In Clives & Clives (2008) FLC 93-385 at [44] the Full Court said:
We accept that the task to be undertaken by a trial judge in assessing weight to be attached to initial contributions, and other contributions, is not always an easy one and not discharged by a strict accounting exercise.
74.In Garrett & Garrett (1984) FLC 91-539 at [79,372] the Full Court per Evatt CJ, Lindenmayer and Strauss JJ said:
The wide and indefinite terms of para (a) themselves suggest that where appropriate, and certainly in a case like the present, a broad estimate of the financial contribution of each party must be made. Under sec. 79(4)(b) non-financial contribution of each is to be taken into account. This must of necessity be a matter of judgment and not of computation. Similar indications can be found amongst the relevant matters in sec. 75(2). It is also worth noting that para. (a) and (b) refer to the “contribution” and not to the contributions of each party.
In this case it has been possible to determine with some degree of accuracy what the parties brought into the marriage and what they received during cohabitation from their respective families. However, the long term significance of these contributions is not determined as a mathematical exercise. They enhanced the life style of the parties and their children who all benefited from them.
75.Whilst I have carefully evaluated all of the financial evidence and particularly the contributions made by or on behalf of the parties and the s 75(2) factors I have done so without a rigid and specific mathematical approach, though of course I was at all times acutely aware of the financial impact of and the outcome of my orders. I endorse the statement of the Full Court in Garrett’s case that the long term significance of the various contributions made by each of the parties enhanced their lifestyle and that of their children and they have all benefited from their work and effort over the marriage and the resulting net asset pool now available to be divided between them.
OBSERVATION OF WITNESSES
I have had the benefit of observing the husband and wife in giving their evidence and in observing them in the courtroom, their demeanour, behaviour and character and also when they were cross‑examined. That observation of them has been of assistance in formulating appropriate orders. Those observations are acutely available to a trial judge and the legal authority for such a position is that part of the Judgment of Kirby J in Minagall v Ayres (1966) SASR 151 at 154 per Hogarth J; see also Government Insurance Office of New South Wales v Bailey (1992) 27 NSWLR 304 at P313:
By conventional theory, the observations made by a trial judge of the appearance and demeanour of a witness giving evidence are not only available to be used in the determination of a dispute but amount to important ingredients of the decision-making process. They normally provide the primary decision-maker a distinct advance which controls, and even limits, the exercise by the appellate court of its statutory functions in an appeal by way of re-hearing: see Owners of Steamship Honestroom v Owners of Steamship Sagaporack [1927] AC 37 at 47; Jones v Hyde (1989) 63 ALJR 349 at 351; 85 ALR 23 at 27; Abalos v Australian Postal Commission (1990) 171 CLR 167 at 178ff.
I have had the significant benefit of hearing all of the evidence in its entirety, of reading carefully all of the affidavits, the annexures to the affidavits and the other exhibits in the proceedings. I have reflected upon and have weighed all of the evidence prior to delivering these reasons for judgment. I stress that, in this case, my court observations of the parties were of benefit and importance.
STANDARD OF PROOF
S.140(1) of the Evidence Act 1995 (Cth) provides that a Court must find the case of a party proved if it is satisfied that the case has been proved on the balance of probabilities. Sub-paragraph (2) further provides that, without limiting the matters that the Court may take into account in deciding whether it is so satisfied, it is to take into account:
(a) the nature of the cause of action or defence; and
(b) the nature of the subject – matter of the proceeding; and
(c) the gravity of the matters alleged.While Dixon J.’s classic discussion in Briginshaw v Briginshaw (1938) 60CLR 336 case of the operation of the civil standard of proof does express the considerations which s.140(2) of the Evidence Act 1995 (Cth) requires a court to take into account, the correct approach, as observed by Branson J. (with whom French and Jacobson JJ. agreed) in Qantas Airways Ltd v. Gama (2008) 247 ALR 273, at para. 139 is that :
. . . references to, for example, “the Briginshaw standard” or “the onerous Briginshaw test” . . . have a tendency to lead a trier of facts into error. The correct approach to the standard of proof in a civil proceeding in a federal court is that for which s.140 of the Evidence Act provides.
Similarly, in Johnson & Page (2007) FLC 93-344, at 81,891, the Full Court of this Court expressly agreed with the view “that reference to the Evidence Act”, is proper and I have therefore applied this section in my deliberations.
VALUE OF REAL ESTATE
In the course of final submissions a discussion was had with both Counsel as to the primary reason for the increase in value of the parties’ assets during the marriage. Whilst the parties undertook some level of renovation and repair to the former matrimonial home it was their acquisition of the land and the construction of the E units and their prudent purchase of the former matrimonial home and the capital increase in their value that formed the basis of their current net worth. It is important that I record that finding upfront in this judgment because so much of the time, money and effort in this case was devoted to the value (or loss of value), financial support and earnings from X Group. Whilst the income earnt by the husband and otherwise monies available to the family from X Group were of some importance so to was the wife’s additional income from gainful employment and the rental income from various of the E units but those monies were largely spent on the children and living expenses. The progression by the parties to their current wealth was established early in their marriage by their successful real property investments and the monies available for division today predominantly reflect the net assets of real property owned by them or their family trust.
WIFE’S EVIDENCE
The wife is now employed as a relationships manager explaining to customers the operations of her employer. She works at suburb V, somewhat near to the home, and her current salary is $74,000 per annum gross plus superannuation. She works Monday to Friday and has the appropriate skills and work qualifications for this ongoing employment.
The wife’s employment history is detailed by her in paragraphs 11 – 16 (inclusive) of her trial affidavit and I accept that evidence, updated by her current employment and salary package. I find that the wife has made a very meaningful s 79(4) contribution by this past employment to the conservation and improvement of matrimonial property and that is properly reflected in the ultimate percentage division of net assets which I have ordered.
Presently she receives the rental income from the remaining F Street unit although that property will now be sold and then her future income will solely be received from her gainful employment. I intend that she continues to receive that income until the settlement of the sale of this tenanted unit.
Her expenses and other outgoings are detailed in her Financial Statement filed 9 February 2012 and they were not the subject of any detailed challenge.
The adult daughter Q lives with the wife and she pays the majority of her domestic and household expenses and upkeep. The adult son B has again returned to live with her. I have assessed that the wife made a significant contribution as homemaker and parent throughout the marriage and particularly when both children were of a young age. I carefully do not criticise the husband’s contribution in that regard but it was one of less involvement and significance than that of the wife’s.
I have read and I accept the relationship history recorded by the wife in paragraphs 2 – 5 (inclusive) of her trial affidavit.
As to her evidence on initial contributions which I have later evaluated in detail, I accept what she has deposed to in paragraphs 6 – 10 (inclusive) of her affidavit though that evidence has been expanded upon by the agreed valuation of $75,000 being the value of F Street at the time the husband’s parents gave that property to the parties.
The wife’s evidence as to her contribution as a homemaker and parent and her time and effort involved with the children is deposed to in paragraphs 19 – 29 (inclusive) of her trial affidavit. I accept her evidence which was almost entirely unchallenged. I therefore have given proper weight to the wife’s homemaker and parent contribution pursuant to s 79(4)(c) and that has been an important factor in my determination of the appropriate percentage division of the parties’ property.
The wife deposed to what she alleged to be the husband’s emotional, financial and verbal abuse in paragraphs 30 – 48 (inclusive) of her affidavit, noting that several sentences have been struck from the record.
Substantially her evidence was of a level of criticism and abuse that she said occurred for a number of years within the marriage. The attacks upon her were said to be personal and insulting and she alleged that the husband’s behaviour was both menacing and bullying. In particular she highlighted his behaviour over the last four years of the marriage and the verbal abuse that she said became regular.
I find that there is some measure of truth in her evidence but most likely this marriage became volatile from time to time and both parties contributed to the criticism and abuse of the other and thus I have not adjusted any percentage division of property by regard to this evidence of the wife, or other like evidence of the husband. There was no specific domestic violence issue raised within the context of Kennon v Kennon (1997) FLC 92-757 and therefore, whilst this was a personal issue to both parties and it did impact upon their marriage, it is otherwise not a matter that has directly influenced the financial outcome and orders pronounced.
I am even less troubled by the events at or immediately after separation and the heated discussions about settlement and resolution of the property proceedings given the timetable of those events. Those matters, highlighted by the wife in paragraphs 35, 38 and 39 of her affidavit and enlarged upon by Mr Wilson in his cross-examination of the husband have not been persuasive and have thus not impacted upon the division of property that I regard to be just and equitable.
I record that the husband, in paragraph 183 of his trial affidavit, has denied the contents of paragraphs 30 – 48 (inclusive) of the wife’s affidavit although he admitted that they argued towards the end of the marriage, but he maintained “that the arguments were equally heated on both sides”. He further asserted that the arguments were never within the presence or hearing of the children.
The wife was not specifically cross examined upon her allegations of verbal abuse and bullying and thus I assessed her evidence against the weight of the husband’s denial of any such inappropriate conduct.
Mr Wilson referred the Court to the reported decision of Kowaliw v Kowaliw (1981) FLC 91-092 and the judgment of Baker J who there said that conduct having economic consequences is a relevant consideration pursuant to s 75(2)(o) of the Act. I highlight however that this submission and the reference to this reported decision was focused upon only the alleged improper or reckless financial conduct of the husband and was not related to the previously discussed issues of alleged abuse, criticism and bullying within the marriage.
What his Honour said, at page 76,664, was that:
It does seem to me however, that if a party has either by deliberate act or by economic recklessness reduced the value of assets available for distribution then the economic consequences which flow therefrom, including the resultant burden to the other party, are directly relevant to a consideration of the respective contributions of the parties contemplated by s 79(4).
The conduct of the husband that was the subject of investigation on behalf of the wife and upon which he was cross examined at length related to the lack of interest and financial concern that he displayed towards X Group in the latter period of the marriage, and certainly immediately upon separation, and how, what was said to be a significant business asset was allowed to decline and then fold. It is in that context that I have analysed the husband’s financial conduct and its consequences to the lifestyle of the parties, their income and the value of an asset that was no longer available to them post separation.
The wife’s evidence of the history, expansion, development and the ultimate demise of X Group is provided in substantial detail in paragraphs 52 – 135 (inclusive) of her trial affidavit. She was substantially cross examined upon her evidence and primarily upon the husband’s assertion that it was her inappropriate financial conduct in regularly withdrawing essential funds from the bank accounts of the business that substantially contributed towards its eventual demise. That issue, and the husband’s withdrawal of funds from the business for overseas travel and personal expenses, and the lifestyle which the parties lived as a result of the financial and taxation benefits from the corporate structure, were focused on by Counsel and are matters which I have carefully evaluated.
Given however that the business has an agreed nil value and is no longer operative I have reached a concluded view that each of the parties expended excessive time, effort and money on substantial legal and other fees in their protracted investigation of the financial demise of the business and the reasons therefore. As an overview each of the parties withdrew funds and diverted monies and lived a lifestyle within the corporate structure of the business that was financially unsustainable. I record however that neither of them were prepared, as may be expected, to admit their dealings and financial conduct contributed to the business failure and each of them preferred to substantially blame the other and sought to derive a financial benefit in these proceedings by the conduct of their legal argument.
The wife was the sole director and shareholder of X Group but her work was almost entirely limited to bookkeeping and banking duties. She did not prepare the tax returns or BAS statements. She did not give management instructions to sub-contractors. She did not obtain work for the business or liaise with the corporate customers from whom work was derived. She worked up to three hours a week, and as best I can make of somewhat confusing evidence, was paid approximately $33.00 per hour. She did not exercise an operational or management role within the business. She was otherwise largely gainfully employed and had parental and homemaker responsibilities to which she substantially attended. I accept her evidence in paragraphs 57, 58, 59, 60 and 61 of her affidavit.
In contrast the husband was primarily responsible for the management, operation and direction of X Group and I largely accept the wife’s evidence in that regard as recorded in paragraph 64 of her trial affidavit.
The wife’s evidence of the financial demise of X Group and the perceived value of its previous operating business is exhaustively detailed in her affidavit and by her in response to cross examination.
Generally the demise of the business accelerated in the months leading up to separation in mid 2010 but certainly in the latter part of that year difficulties arose with the withdrawal of funds from the business, its banking facilities, the supply of work and with the various contractors working for the business and who required prompt payment.
The evidence of the wife concentrated upon staff turnover, loss of contractors, the non-payment of invoices rendered and the actions of the husband in allegedly diminishing the work operations, contracts and therefore the value of X Group. I have read carefully her affidavit evidencing these matters in paragraphs 67 – 121 (inclusive) but ultimately I have not found it necessary to make findings upon each and every specific matter raised.
I have however considered certain financial transactions upon which the parties were cross examined and in particular the issues put to the wife about her withdrawal of monies were said to have left X Group without cash funds and therefore unable to pay its creditors and contractors and thus leading to its eventual closure.
Exhibit “W2” is a statement of reconciliation of credit card payments prepared by the wife which highlighted monies spent by the parties, on themselves and on the family and company expenses in the years 2010 and 2011. Other than primarily to highlight the financial benefits available to the parties and their lifestyle through the company, and aside from the issue of the husband’s overseas travel expenses for personal reasons, I do not draw any conclusions adverse to either of the parties from that document.
Exhibit “W3” is a statement prepared by the wife of the husband’s credit card expenditure from August 2010 until January 2011 (inclusive). The husband’s expenditure was said to total approximately $20,000, aside from corporate expenses. An examination of the document however highlighted that a majority of expenditure related to the purchase of furniture, chattels and possessions when the husband separated and relocated to the unit in E leaving behind with the wife the household contents wife in the former matrimonial home. On balance I derive no real benefit from the document or the expenses, some of which may be open to further investigation but which generally are not exceptional and did not lead directly, and of themselves, to the demise of the business. It is proper to record that the husband challenged the contents of the wife’s documents of financial expenditure and did not accept that all of the items were purchased by himself. Again this mathematical approach undertaken by the wife, with her bookkeeping background, was not satisfactorily proved in Court and ultimately was more of a side issue to the primary task before the Court.
Exhibits “H2”, “H3” and “H4” were produced by the husband, or in the handwriting of his Counsel, and they purported to summarise various cash withdrawals that the wife had made from the Westpac Line of Credit or from the company account in the months following separation and in early 2011. The husband’s case as submitted, and the basis of his Counsel’s cross examination of the wife, was that she had withdrawn funds that were desperately required by the business to meet its outgoings and that it was her withdrawal of these funds, more than any other factor, which led to the failure of the business in late 2010 and January 2011.
The exhibits do illustrate both the wife’s withdrawal of monies and her redepositing of monies but the wife agreed that, over those months she withdrew a net amount of $33,408 in excess of monies withdrawn by the husband. I find that these monies may have met the immediate expenses of the business and payment of contractors but it would not have prevented the ultimate financial collapse of the business as by that stage both parties had embarked on their separate lives and were far more inclined to fight each other rather than to work together to maintain the business, or even to prepare the business for a trade sale.
The affidavits of both parties, and cross examination of their Counsel concentrated upon the purpose for which such monies were withdrawn, including the $17,000 sum withdrawn by the wife, she said with the knowledge of the husband, to purchase a motor vehicle for their daughter. That withdrawal took place on 7 December 2010 but thereafter $15,000 of that sum was repaid by the wife to the bank account on 18 January 2011.
Ultimately, and aside from the overseas travel costs incurred by the husband, I was not further assisted by the specific banking, financial and mathematical evidence of the parties, and their criticisms of each other in determining the final division of net property.
As I have elsewhere highlighted in these reasons for judgment X Group had not made an operating profit for the past 4 years (2006 – 2009 inclusive) and this fact is more starkly revealed in Schedule 3 to the report of the single expert chartered accountant, Mr W, whose evidence is hereafter evaluated in these reasons for judgment. Whilst the parties used the corporate structure to their financial and taxation advantage the available net income derived by the business was rather modest and paid a wage to the husband of $300 per week and to the wife for her bookkeeping duties of less than $100 per week. I have elsewhere more thoroughly considered the submissions of the wife’s Counsel who have, on instructions, valiantly sought to persuade the Court of the financial and economic benefits of the business and its implied value at least at or in the immediate years prior to separation, notwithstanding the evidence of the single expert.
I record that the wife had received in or about July 2010 a retirement benefit from her previous employment outside of the business and that sum of approximately $10,400 was contributed generally to the financial welfare of the family and is a s 79(4) matter to which I have had regard.
Likewise there was a sum of $9,000 in cash in the family safe of which the wife had access to $5,000, but not the balance thereof and I have had regard to that division of cash assets.
The husband’s evidence on the wife’s expenditure of company funds was detailed by him in paragraphs 74 – 96 (inclusive) of his affidavit which I have read and assessed against the wife’s evidence. In particular he emphasised a net balance of $12,000 taken by the wife and which he sought to be added back to the property of the parties or otherwise adjusted in his favour. That matter is further considered in these reasons for judgment.
That said however I do not intend to apportion any specific blame or responsibility for the demise of the business to either of the parties. The reality was that the breakdown in the marriage, the events before and after separation, the financial needs of the parties and the lifestyle that they had previously enjoyed upon the business gave each of them an unrealistic expectation of their financial demands and perceived financial security. As is so often the case upon a breakdown in a marriage the income and financial assets are often insufficient to maintain two separate households and lifestyles and that most likely was the scenario for this family.
I have carefully reflected upon the correspondence passing between respective solicitors and written upon the instructions of their clients. These letters are more particularly identified as annexures “DS 12”, “DS 13”, “DS 14”, “DS 15”, “DS 15”(again) and set out in pages 131 – 144 (inclusive) of the husband’s trial affidavit.
I conclude that the husband’s offer to his wife to take over full responsibility for the business was always unrealistic and somewhat tactical. The offer to sell the business was perhaps a more sensible approach but also far too late given the debts, unpaid accounts and loss of reputation that had already occurred within the business. I therefore do not criticise the firm rejection by the wife of the sale of the business in her solicitor’s letter dated 8 December 2010.
The husband offered by letter dated 17 January 2011 “to stay on and continue running [X] Group for a short time until my replacement is found … and to get the company back to a profit making position”. That was rejected but, at the time when the offer was made, all was seemingly lost with the business. Staff had resigned and neither party had the goodwill, desire or inclination to work and salvage that failed business. Likewise I have read but do not accept the further offers contained within the letters of 28 January 2011 given the then circumstances of the business and the attitude of the parties, both to each other and to the business. By that time it was far too late.
Pursuant to previous orders of the Court the wife was to undertake the sale of business assets and I accept that she has done so to the best of her ability. Whilst the husband somewhat belatedly offered some minimal assistance he has largely stood aside from the liquidation of assets and in that regard. I have given proper weight to the wife’s s 79(4) contributions, without which the debts may have been much greater. The husband’s annexure “DS16” was perhaps the high point of his assistance in asset disposals and it is does not represent an impressive contribution by him to minimise the losses of X Group. The simple truth is that he was largely unhelpful in realising business assets.
The wife had devoted very considerable time and effort and made a significant contribution to the preparation and conduct of her case. With her bookkeeping training and background she re-constructed financial statements and documents to support and prove her claims. Her approach was largely adopted by her Counsel and solicitors but it was simply too mathematical and clearly the wife primarily focused upon financial issues to her benefit and to prove her case. In some ways it was intended both to exonerate, or at least to explain, her financial behaviour post separation.
As a witness the wife was determined to achieve her desired outcome, though her assertions of her superior s 79(4) contributions were somewhat exaggerated. Generally I found her to be a witness of truth with her primary failing being that she could not and would not properly acknowledge the contribution made by the husband to the acquisition, conservation and improvement of property and the business. She also downplayed her current employment, her work skills and earning capacity.
Overall this is not a case which largely turned upon any particular finding of credit. The final orders which I have concluded are primarily shaped by my evaluation of all of the evidence and providing a just and equitable outcome to both parties.
HUSBAND
The husband is unemployed and there is no evidence that he receives any income, including Centrelink income. He is supported by his parents who pay all of the bills and outgoings of his household and a minimum cash sum of $500 per week.
The husband’s evidence was that he has prepared over 700 job applications, for all forms of employment. He said that he had been offered three interviews. He obtained one suitable job but after a period of approximately nine weeks the business was taken over by an interstate group and his position was made redundant. His evidence on his employment circumstances in his trial affidavit was contained in paragraphs 36 – 43 (inclusive) thereof and I accept that evidence, notwithstanding the strong cross-examination of the wife’s Counsel to the contrary.
Mr Wilson identified paragraph 21 of the husband’s affidavit and challenged why he had limited his qualifications therein described to exclude a position in senior sales or as a store manager, as identified in “Annexure A” of the wife’s affidavit, being a print out of the husband’s Linked In profile. I do not accept that criticism. It is necessary to further read paragraphs 24 and 25 of the husband’s affidavit as to his past work history, but more particularly to reflect upon paragraph 36(d) and the significant annexures to the husband’s affidavit and in particular at pages 58, 67, 70, 71, 77 (for the manager of the … shop at …) and 78 thereof.
There was particular questioning of the husband as to his opportunity to work in a similar industry to that which he worked with X Group. I accept that the husband does not own necessary plant and equipment or a truck and for him to obtain employment in various of the fields of work suggested by Mr Wilson would require considerable capital expenditure.
It is not reasonable to expect the husband to have attached the 700 job applications. I observed that many of his applications were labour hire firms and I accept that he is registered on their books for future employment.
It may be hard to understand how a relatively fit and healthy person, such as the husband, remains unemployed with his past work experience and qualifications. Nevertheless, I find that the cross-examination of him on all employment related issues, if it was intended to show that he was either lazy or disinterested, was wholly unsuccessful.
In the period of several weeks over which this case was adjourned before resuming with the cross-examination of the husband, his evidence was that he has made further job applications and had obtained two job interviews, both of which were unsuccessful.
The husband, as a necessity for his family circumstances and lifestyle, must find employment. At the very least he has a duty to financially support his new partner given the circumstances that she cannot work in Australia under visa requirements, which evidence I accept and which were never the subject of proper challenge or admissible evidence. The husband has little or no cash or available capital and cannot continue to live upon the financial goodwill of his parents. Thus he needs employment and I am satisfied that he has made a more than reasonable effort to seek out employment opportunities.
I have carefully read paragraphs 17 and 18 of the wife’s trial affidavit but there is nothing there deposed which would contradict the husband’s evidence on this issue. I find that the husband has skills and expertise which can and should secure him a job. That said however, I am satisfied he has made a significant effort to obtain gainful employment.
The husband’s Counsel, in structuring her s 75(2) factors, focused upon his lack of employment and the likely fact that that situation may continue for the foreseeable future. Indeed Ms Stoikovska sought an effective 5% loading primarily based on the husband’s unemployment though, as an aside, she endeavoured to persuade the Court of his ongoing responsibilities to financially support and provide for his partner. As to his current unemployment I am not persuaded in any way whatsoever that it should found any successful increase in the division of property in his favour. True it is that the husband may have to extend the range and options of employment sought, but at some future time he will obtain some level of employment. He has always been employed or working in X Group. He is fit, physically strong and capable. He has skills in renovating property and doing substantial repairs and maintenance, as he did with the E units. Given the final form of property orders that I have pronounced he will receive a substantial cash sum and has no ties to any particular Melbourne suburb and is indeed free to travel and obtain employment anywhere he may chose within Victoria or Australia, or elsewhere, and subject only to his family commitments to his parents and adult children. Ultimately the decision as to the venue and form of employment is his alone.
I record that there was no evidence of the husband receiving Centrelink unemployment benefits and his partner is not entitled to any government support or pension given her current immigration status.
The husband’s evidence was that the failure of his business has embarrassed him with Telstra or companies working for Telstra or the NBN. As well, the husband’s evidence was that he does not have the required equipment and has not undertaken the further training courses to satisfy the work requirements with the rollout of the NBN. I have no evidence to the contrary and I have not been persuaded to reject the husband’s evidence on this matter.
The husband was aggressively and substantially cross-examined upon his work and role at X Group in its latter years, the reasons for its demise and the lack of effort, involvement and financial consideration displayed by him throughout 2010 and January 2011.
The essence of the wife’s claim, as submitted by her Counsel, was that the husband was wholly distracted from the business, did not make a meaningful contribution to safeguard and protect the business and thus the family’s financial investment therein, and ultimately, that he was primarily interested in establishing a rival business to take up the work and goodwill available, but without financially acknowledging the wife’s past work contributions and entitlements. I record that the husband wholly rejected those allegations as highlighted by the wife in her affidavit and as pursued by her Counsel in his vigorous cross-examination of the husband.
The husband identified that he had built up the X Group business over an 11 year period and that he was its primary operator, notwithstanding that legally the wife was the corporate officer, sole director and shareholder. I accept that the wife’s role was primarily for tactical purposes and upon accountant’s advice.
The husband explained the structure of the business, its reliance on contractors and the timetable for payment after the company had been paid by Telstra, or its related entities, for its work and service. I accept that all business accounts were paid by cheque or money transfer and that there was no cash available to the business and that the diversion of money or cash payments has not been an issue in this case.
I am generally able to accept the evidence of both the husband and wife over the management and operation of this company up, until calendar year 2010.
It was suggested that the income stream derived by this company provided a comfortable lifestyle for the family, particularly when the wife otherwise earned a reasonable income from her gainful employment during substantial periods of the marriage and otherwise had a level of financial assistance from each of their parents and the income from the E investment units.
A monthly summary of the income and expenditure was before the Court as Annexure “J” to the wife’s affidavit and additionally the further annexure which contained the summary of expenditure, total payments and net receipts for the financial year ended 30 June 2011 was tendered and marked page 158A to that annexure book. That document is exhibit “W4” which I have closely evaluated along with its accompanying annexure in the wife’s documents.
As best as I can understand, and this was a matter of detailed cross-examination of the husband, the business met the full running costs of the three motor vehicles, including the husband’s Ford performance vehicle, paid sponsorship for their daughter in her sporting endeavours and paid certain household expenses including electricity, postage, telephone and perhaps some loan repayments and maintenance and repairs.
That said, the household expenses should not have been claimed as business expenditure, but there were otherwise no substantial or lavish expenses incurred by these parties against the business.
The husband’s caution with the monthly summary figures was that they were prepared by the wife post-separation and thus likely created by her in a way to highlight the value of the business, its income and the lifestyle that it offered for the family. That is true to a limited extent and I do not find that the wife has acted fraudulently in any way in the preparation of that document and the input of all business related income and expenditure.
The real analysis of the business, to which I endeavoured to direct attention of Counsel (largely unsuccessfully) was its net receipts for the year ended 30 June 2011, in particular until the month of January 2011, but more significantly in each of the preceding four calendar years. The profit and loss statements of X Group throughout this period, highlighted in Schedule 3 to the report of the single expert valuer, which I have hereafter examined.
Mr Wilson focused on the need of the Court to examine the state of mind of the husband in the months of August and September 2010 and his attitude at that time to the business, in diverting work from the business and his future plans to establish a rival company to continue the work and contracts of the business to his personal financial advantage.
Otherwise I have evaluated the evidence of the parties as to the business, their work and contribution therein and its ultimate demise. I have balanced the fact that the husband had established another like entity to continue the business in mid-January 2011 but that did not proceed and was perhaps very much an afterthought and is now of no value and would not obtain any continuation of work.
For the purposes of their respective balance sheets, tendered as exhibits at the commencement of the proceedings, both parties have apportioned a nil value to X Group and its past businesses. As can be seen from the expert business valuation of Mr W, hereunder discussed and evaluated, that is also his professional opinion.
X Group must be wound up, the trust vested and the business name of X be deregistered. The current outstanding taxation debt of $2,404 was agreed by the parties to be paid, together with outstanding accounting fees of Mr G, which were then in an amount of $3,069. These debts must be paid upon the settlement of the sale of the first sold S Street unit, together with any other tax liabilities, or interests, costs or penalties accrued thereon, and the balance of all accounting fees payable to Mr G.
Any and all costs involved in the winding up of the company and the financial and corporate finalisation of the entities under which the parties formally conducted their business are likewise to be expenses jointly paid by them and paid from the proceeds of the sale of the first of the S Street units.
I require that the parties co-operate on all aspects of concluding their corporate interests and sign all documents and do all acts and things required, in a cost efficient manner, to minimise ongoing debt and liability and ensure that all required payments are made before division of their net property in accordance with my orders.
A PAST BUSINESS VALUE WASTED?
Central to the wife’s evidence and the detailed submissions of her Counsel was that the husband, by his alleged irresponsible conduct and actions, had wasted or abandoned a significant business which should have been of real value to the parties.
Mr Wilson consolidated all of the wife’s evidence and his cross examination of the husband in his final submissions where he identified four aspects of the business, or the husband’s actions, which he said were central to this alleged financial wastage. They were:
(i)the business was a significant source of income to the parties during the marriage;
(ii)that pursuant to the valuation report of the single expert, paragraph 8.9 thereof, the business had the potential from its services provided to reach an income of $1,000,000 per annum, which was said to be the trend between the financial years 2005 and 2010 (inclusive);
(iii)it enabled the parties to acquire valuable plant and equipment and to write off those assets;
(iv)it enabled the parties to live a lifestyle on the business, to fund their motor vehicles, telephone and electricity and other personal and family expenses which I have previously identified in these reasons for judgment.
Again Mr Wilson, in his submission, linked each of the above stated financial benefits to what was said to be the reckless and improper financial conduct of the husband and its significant economic consequences as identified by Baker J in Kowaliw (supra).
I am unable to agree with those submissions, save for the adjustment of overseas travel and other monies then expended by the husband and the offset sum for the excess of monies taken by the wife. These are matters that I have considered and already determined in these reasons for judgment and which I will not again repeat.
MR W – COMPANY VALUATION
The single expert report is dated 28 October 2010 and Mr W approached the valuation of X Group Pty Ltd upon the basis of a capitalisation of future maintainable earnings.
Schedule 3 to that report set out the actual income for the financial years 2005 – 2009 (inclusive) and the provisional income for the 2010 financial year and thereafter, and somewhat generously Mr W estimated the future maintainable earnings on the basis of those two most recent years, but not on an averaged basis.
Likewise his assessment of the total expenses of the business are recorded for the purposes of his report in a sum almost $90,000 less than the provisional expenses for the financial year ended 30 June 2010.
I am not satisfied that the report provides a proper explanation of the calculation of those future maintainable earnings and associated expenses which resulted in the single expert deriving an operating profit of approximately $50,000 for the purposes of his report.
Those identified concerns however are of no significance because, even upon the maintainable profit before interest, tax and owners remuneration of approximately $50,000, Mr W concluded in paragraphs 7.9 and 7.10 of his report that the business has no commercial goodwill and its earnings were insufficient to support a commercial salary package to the parties, as the two managing employees of the business.
Alternatively, and on a net asset approach, the business showed an excess of liabilities over assets and accordingly on that basis the value of X Group Pty Ltd was found to be nil.
What is of real significance in this case is the date of this report, 28 October 2010 and the fact that it was commissioned by the parties, pursuant to Court order, shortly after separation and at a time when it was alleged by the wife that the business was a valuable asset.
The report should have rung alarm bells for both parties and their solicitors. It highlighted that X Group had in fact recorded an operating loss for each of the financial years ended 2006, 2007, 2008 and 2009. The provisional loss for the 2010 financial year was approximately $38,000.
The wife’s evidence was that the business provided an income and a lifestyle to both her husband and herself and was constructed in such a way that their expenses, motor vehicle, telephone and other charges were paid on a tax effective manner through the business. That may well have been the case but the parties drew a modest wage and the expenses paid were not excessive.
That report, when considered by the parties, their legal advisers and extended family should have highlighted the financial uncertainties confronting the business in the months of October, November and December 2010 and it should not have been surprising that the continued withdrawal of monies from the business for personal or family expenses would only escalate the ultimate early of the business.
PARTIES CONTRIBUTION TO BUSINESS
I have concluded that the parties made an equal contribution to X Group. It was the primary source of employment for the husband for eleven years and he primarily established, operated and directed the business. That said, the wife made a contribution to the business from her employment duties and otherwise was gainfully employed for the financial benefit of the family. I have discussed at length the profitability of the business and the modest lifestyle it afforded the parties. Whilst the husband primarily established and developed the business ultimately it is of no financial benefit to the parties. I do not however conclude that there should be a finding of financial reckless conduct anchored home to the husband over its demise. These matters I have already explained and therefore both parties are unsuccessful in their endeavours to obtain a greater division of the net assets in their favour over their respective arguments and submissions concerning the establishment, operation and then the demise of X Group.
SN PTY LTD
This company was established by the parties in December 2007 for the purposes of allowing the husband or X Group to approach a service provider for more contracting work. The parties were the sole shareholders, though not a director thereof.
The husband’s evidence on this company is detailed in paragraphs 32 – 34 (inclusive) of his trial affidavit and the wife makes reference to this entity in paragraph 55 of her affidavit. SN Pty Ltd was one of the companies referred to by the single expert valuer in paragraphs 4.16, 4.17 and 4.18 of his report where he provides a history of the company on instructions provided to him by the parties and from his searches.
Mr W’s conclusion as to its value is that, as the entity had been sold by the parties for a sum of $100,000, that was its proper value for the purposes of the proceedings.
That sale occurred in October 2010 and each of the husband and wife received $50,000. The wife’s share of funds were used to pay her legal fees in these proceedings and the husband says that he lived off his share of the sale proceeds for five months during the period of his continuing unemployment.
Each of the parties agreed that there is no other value in SN Pty Ltd to be added to the asset pool and I am not asked to interfere with the past distribution of monies between the parties. I therefore have not further considered that equal capital distribution made to the parties and I have made no orders concerning this company or its particular sale proceeds. Those monies are not to be further apportioned or brought to account in the ongoing adjustment of financial issues as a result of my orders.
Finally, I find that there is both logic and merit in the husband’s evidence that the decision to sell this company hastened the eventual demise of X Group. At the time of its sale SN Pty Ltd represented a valuable asset to the parties and given the nature and scope of its work it was thereafter in opposition for the work and services of X Group and it became a real competitor to X Group and therefore the parties’ interests. How it was sold without any effective restraint of trade clause or other work limitations was not an issue before me and clearly did not worry the parties at the time of its sale. However surprising that may be it is a past, but mutual decision, of the parties which was then final and which I have not revisited.
MITSUBISHI TRUCK
The primary physical asset of X Group was a Mitsubishi truck which was purchased in 2010 and fully outfitted. There is a dispute between the parties as to whether its purchase was for the primary purpose of the husband re-engaging in physical onsite work activities in addition to his business and management role.
On the closure of the business the wife negotiated a sale of that truck, without its many accessories, for $58,500 and additionally obtained a refund of Victorian Roads registration paid of approximately $800, given that it was sold to an interstate operator. That sale price discharged the liability on its purchase. The husband had complained that the Court order made by consent on 13 May 2011 had required that the truck be sold for not less than $60,000 unless otherwise agreed. He asserted that there was no such agreement and the wife had ignored the requirements of that Court order. In the circumstances of the disposal sale, and given the price obtained for the truck without its many accessories, I have concluded that it was both a reasonable outcome and the wife used her best endeavours to properly dispose of an unwanted asset of the business to reduce its liabilities, however modest I have assessed the wife’s contribution, with little or no assistance from the husband, in the sale and disposal of business assets. Her role was important in salvaging some value from the corporate wreck and I have therefore given a modest weighting to her enterprise in that regard.
In the weeks leading up to its sale the truck had been leased to a contractor at a sum of $1,000 per week and that had also reduced business liabilities.
OTHER BUSINESS ASSETS
The parties, though primarily the wife, had conducted an orderly sale of the remaining plant and equipment of the business. Only the Ford Trader 509 motor vehicle remains to be sold. Given that I accept that the wife has made a genuine effort to sell that motor vehicle I order that the husband now assume responsibility for its sale at any price greater than $4,000 and if not sold the husband is to retain that asset at its discounted value of $4,000 in the ultimate division of any remaining assets and as part of his percentage division.
The tools of trade were given to various contractors on a negotiated basis to reduce their outstanding debts. The office furniture was seized by the landlord in lieu of arrears of rent. Some of the computer systems were likewise traded and there remains no physical assets or plant and equipment of the business.
TELECOMMUNICATIONS SECURITY SYSTEM
The wife identified as a potential asset, or as a financial resource, the telecommunications security System which the husband had first developed in 2007. …
In her draft pool of assets, in paragraph 147 of her affidavit, the wife asserted that the intellectual property associated with this invention should be estimated at a value of $27,601. Likewise she recorded that purported value in her Financial Statement filed 9 February 2012.
The wife however in her single page balance sheet of assets and liabilities handed to the Court pursuant to my direction at the commencement of the proceedings, and updated during the hearing, identified this telecommunications security System as a financial resource but with its value not known.
The husband, in his documents before the Court and in his balance sheet of assets, exhibit “H1” in the proceedings, asserted that the system had a nil value.
The wife’s evidence is outlined in paragraphs 136 – 146 (inclusive) of her trial affidavit, save for various sentences that were struck out from that material. She there identified that the potential value of $27,601 was the sum of a research and development tax concession received from the Australian Tax Office in August of 2010. She asserted that the husband would be establishing at a later date a marketing company in Melbourne to market and sell the system, presumably at a significant financial benefit to himself.
In paragraph 146 of her affidavit the wife asserted that:
I am afraid that the husband will transfer his interest and control in the “[telecommunications security]” system to his cousin or to a third party so that it is no longer considered part of the asset pool for proposed division as he has told me that he intends to transfer the intellectual property and our interest to a “family friend” and that he will then deny our company invented or developed the concept”.
The husband’s evidence is contained within paragraphs 126 – 132 (inclusive) of his trial affidavit.
He asserted that the marketing and development campaign for the system was unsuccessful and that he had agreed with the wife to abandon the product. In paragraph 131 thereof he said:
I have not met with any marketing companies in Melbourne or anywhere else since returning from [Europe]. I did not meet with any manufacturers. I have no desire to continue to try and sell the product. We did not receive any income from the product.
The husband thereafter specifically denied any intention to sell the product to his cousin or to a third party.
In the proceedings before me the husband’s position stated in open Court, and confirmed by his evidence, was that he would relinquish in favour of the wife any right, interest or entitlement in or to the design, intellectual property or ownership of the telecommunications security System. He invited the Court to make an order transferring any and all such right or interest to the wife without any financial adjustment in his favour and that is what is provided for in my orders.
I have concluded that the telecommunications security System has no value or potential value, has no established market or likely sales and currently would be of no value and should not be described as a financial resource. Nevertheless the wife sought such an order in her favour though I have no understanding that she has either the knowledge, skill or financial ability to further develop or to convert the system into a financially meaningful concern. I have so ordered.
ASSESSMENT OF CONTRIBUTIONS
I have evaluated all of the contributions made by the parties, both financial and non-financial, to the acquisition, conservation or improvement of any of their property, including contributions made in their capacity as homemaker or parent and otherwise as identified within the various s 75(2) factors. Further, I have balanced the earning capabilities of both parties and the effect that these orders may have upon them.
I conclude that both parties made an equal contribution to the acquisition, conservation and improvement of their property throughout their marriage, each in their own way but each of equal importance. The initial contribution made on behalf of the husband by his parents, partly offset by the wife’s parents contributions were assessed as part of the whole of the contributions made throughout a twenty year marriage by each of the parties, including in the business, investment properties, the home and the wife’s more substantial role as homemaker and parent. It is the balancing of all of these contributions and my primary conclusion that the current net asset pool has primarily arisen from market appreciation in the value of land and buildings thereon, that has resulted in the outcome that there should be no differential between the parties for all of their work, effort and contributions made over the years of their marriage. I find, as an assessment of the s 79(4) contributions, that this is a just and equitable outcome.
I found no assistance in the somewhat enthusiastic submissions made by Counsel on behalf of their clients for each of them to be given a somewhat substantial loading, certainly in monetary terms, for their particular contributions in a marriage of some twenty years and where the current market value of the primary assets were largely the result of capital appreciation.
ASSESSMENT OF S 75(2) FACTORS
Save for the excess of the husband’s retained superannuation entitlements and any other work entitlements of each of the parties which are relevant pursuant to sub-paragraph (f) thereof, I otherwise have concluded that there should be no further adjustment in favour of either of them for these factors which I have earlier identified.
I am aware of the age and the good state of health of both parties and no adjustment should be made in that regard.
I am aware of and have carefully evaluated the income, property and financial resources of each of them and in particular their capacity for ongoing gainful employment. I have made specific findings about the husband’s work skills and past experience and, no matter the present employment difficulties, he most certainly has the physical and mental capacity for gainful employment. I have rejected his Counsel’s submission for a substantial loading of up to 5% because of his present employment circumstances, as contrasted to those of the wife. That would be both inappropriate and would not reflect a just and equitable outcome.
Each of the children are now adult and can and should be self supporting. Notwithstanding the recent event of B returning to live with his mother I have concluded it is not appropriate to make any adjustment pursuant to sub-paragraph (d) of this section. I add only that likewise it is inappropriate to make any adjustment in favour of the husband for his support of his current partner and that is inclusive also of my consideration of sub-paragraph (e) thereof.
I have determined that there should be no superannuation split and I will therefore adjust the division of the net assets of the parties by a sum equal to 2.5% of the value of the parties’ net property in favour of the wife, but with the husband retaining his additional $55,000 in superannuation entitlements. I record that I am aware of the age of the parties and the temporary limitation that may place upon the husband in accessing those restricted monies, other than in hardship circumstances and upon that issue I make no finding.
Each of the parties should be well able to enjoy a reasonable standard of living. True it is that the wife retains the home subject to its current mortgage and outgoings but, to balance up the payment required to the husband on the division of net property basis that I have ordered, it may be that she will be required to borrow and pay a sum of money to the husband. If that impacts upon her standard of living then that is because of her choice to retain the former matrimonial home.
As to sub-paragraph (n) I have concluded an order that permits the wife and the two adult children to remain in the home with all of its convenience and benefits. The husband will have an equal value sum in cash and superannuation and can then invest those monies or otherwise purchase a home at his election. He is free to create whatever future standard of living and lifestyle he may choose for himself and his partner. I have endeavoured to ensure that all liabilities (save for the former matrimonial home), outgoings, taxes, professional fees and expenses are paid jointly by the parties and that ultimately they receive an item of real property or monies and superannuation, such that they retain an equal division of all of their net property.
ASSESSMENT OF PERCENTAGE SUM
My orders therefore require the net property of the parties (save as otherwise provided for) to be equally divided between the parties save that, with each party retaining their superannuation and all work related entitlements, a sum of 2.5% should be adjusted in favour of the wife and against the husband so that the overall division of net property, inclusive of all of my considerations of s 79(4) and s 75(2) are that the wife should receive 52.5% and the husband 47.5%.
MONETARY EFFECT OF ORDER
I have carefully evaluated the financial situation and monetary effect of my orders pursuant to which the wife retains the former matrimonial home subject to current liabilities and perhaps a future sum subject to the net sale prices of the three suburb E units, when calculated, to be paid by her to the husband to effect the overall 52.5% - 47.5% division of assets with the husband otherwise retaining all of his superannuation entitlements. That future payment sum, if any, can only be calculated when the final net proceeds of sale of the three E units and other personal property and shares are all known to the parties and can be properly adjusted against the agreed value of the former matrimonial home of $1,475,000, less the Westpac liabilities and other outgoings.
I emphasise that the wife is to be responsible for all expenses of and related to the former matrimonial home from this day. I have an agreed value of the former matrimonial home for the purposes of this hearing and I have determined to retain that agreed value for the purposes of these orders and calculating the final payment sum to the husband. It may be, that over the next six to nine months or thereabouts the current market value of the former matrimonial home may increase or decrease but I can have no regard to any such factor. I have decided not to have updated the current market value of the former matrimonial home as at the date when the parties adjust the payment sums required pursuant to these orders. That would incur further costs to the parties and, given their likelihood of disputing any or all matters, would lead to further court hearings. My orders are intended to be final and thus there will be no updated valuation of the former matrimonial home.
To best achieve justice the three E units should be offered for sale as soon as practicable, subject to the subdivision of S Street and the necessary preparation of all properties for sale. Those requirements are primarily the obligation of the husband who has the sole conduct of the sale of each of the three E units.
Ultimately the husband retains largely cash which gives him a unique opportunity to invest in whatever property or other assets or investments he deems appropriate and in that way he can best secure his future financial security and lifestyle.
FOURTH STEP
Previous court decisions have underlined the requirement for a Judge to reflect on the final orders, to consider the real impact in money terms and to make any other adjustment which is required by reference to s 79(2) of the Act. In particular I have recorded the financial and lifestyle benefit that the wife has retained with the former matrimonial home and the requirement of the husband to otherwise pay stamp duty or further costs and expenses on any other property that he may purchase. What I have decided upon is that each of the parties will retain certain personal assets, motor vehicles, furniture and chattels and these items are included in calculating the net property of the parties available for distribution and upon which the 52.5% - 47.5% division is to apply. I have hereafter identified those particular personal assets that are covered by this ruling, which does not apply to assets to be sold such as the shareholdings and the Ford Trader truck.
ASSETS TO BE SOLD
The following assets are to be sold:
§each of the three E units;
§the public or private shareholdings in Smorgon Steel (delisted), TAH and Echo shares and Argus Solution; and
§the Ford Trader truck
ASSETS TO BE PERSONALLY RETAINED
WIFE
The wife is to retain the following:
§ the former matrimonial home, at a valuation $1,475,000 less the Westpac mortgage debt agreed at $250,000 and the payment of any arrears of costs and expenses of and related to her ongoing occupancy of that property;
§ the Holden Commodore motor vehicle at a valuation of $10,000;
§ the remaining furniture, possessions and contents of the former matrimonial home (save for all items to be delivered up to the husband) and including her jewellery and personal possessions of a value of $11,000;
§ her superannuation and work related entitlements
HUSBAND
The husband is to retain the following assets:
§the Ford performance vehicle to be transferred from X Group at his expense and valued at $20,000;
§the Nissan Patrol motor vehicle at a value of $7,000;
§his chattels and personal possessions in his S Street unit, and those which he is to receive from former matrimonial home at no value;
§the Kawasaki motorbike at $2,800;
§his superannuation and work related entitlements.
Leaving aside the former matrimonial home and the superannuation and work related entitlements of the parties I have decided not to otherwise adjust any dollar value of the remaining personal possessions as against the ultimate property division that I have ordered. If it is that the wife’s evidence of her admitted valuation of the furniture, possessions and contents of the former matrimonial home was $11,000 then with the motor vehicle she would have personal assets to a value of $21,000 as against personal assets then to be retained by the husband of approximately $30,000 or thereabouts. I have determined not to order any financial adjustment in that regard and in so doing I am particularly alert to the fact that in the process of obtaining ownership of the former matrimonial home that transaction will be free of stamp duty whereas the husband will be required to pay a significant sum in stamp duty if and when he elects to purchase any other residential or investment property.
On balance, and aside from the ultimate division of property that I have ordered, the transfer of these personal chattels and motor vehicle is appropriate without any other financial adjustment and I conclude that contributes to an overall just and equitable order.
STRUCTURE OF ORDERS
Throughout these reasons for judgment I have identified the assets that are to be sold and those which otherwise are to be retained by the husband and wife, including for each of them to retain their current superannuation entitlements and any other related work benefits.
I have provided detailed directions as to the manner of sale of the three E units and all liabilities that are to be discharged upon those sales. Likewise I have identified the other personal and corporate liabilities and past and ongoing expenses that are to be paid prior to any division of the net assets between the parties.
It is impossible to estimate the net sale price of each of the E units notwithstanding a general agreement of their market value. It is proper that the final monetary division be determined upon the actual sale price, less all appropriate costs and expenses of sale, liabilities and other expenses of the parties to be discharged from that gross sale price. Ultimately the net proceeds of sale of each of the three E units will be able to be calculated with precision and all liabilities, government taxes, charges and subdivisional costs will have been paid.
I have endeavoured to particularise in my reasons for judgment all of the associated issues and payments that may arise but, almost certainly, there will be other accounting, personal and legal issues which occur between the parties and which will likely require a mature and commonsense approach by them and their solicitors to resolution.
Close to the conclusion of the proceedings Counsel volunteered to draft the final form of minutes to encapsulate all of the Court directions and intended orders but with some modest level of flexibility as to a timetable or other terms, conditions and issues which I have not principally addressed. If any of these matters do remain in dispute then they can be relisted before me on short notice and brief oral submissions would then be required.
I emphasise that there will be no rehearing of any issue in dispute. What I intend and that my acceptance of the offer from Counsel to finetune the appropriate further orders is only to afford their clients a reasonable level of input on the implementation of my orders.
I record that the transfer of ownership of the former matrimonial home by the husband to the wife should occur only after the settlement of the sale of each of the three E units and when all other orders have been complied with and when financial adjustments are capable of being accurately calculated so that the division of all of the property of the parties specifically reflects the 52.5% – 47.5% adjustment that I have ordered, and with each party retaining their superannuation and work related entitlements.
Specifically it may mean, subject to the final net sale price of each of the three E units, that a payment is required to be made by the wife to the husband or, if one or all of those units sell at a particularly attractive price, then the reverse may apply with the husband being required to pay an adjusted sum to the wife.
It is specifically for that reason that I invited the legal practitioners for the parties to carefully prepare and scrutinise the draft form of orders that provide for that ultimate financial adjustment inclusive of the disposal of the remaining business and personal assets and payment of all of the agreed liabilities, or those which I have directed are to be paid.
I record that the furniture, chattels and possessions within the former matrimonial home and the husband’s unit are to be excluded from any other division save that the chattels and items sought by the husband from the former matrimonial home are to be forthwith made available to be collected by him pursuant to my findings in these reasons for judgment.
I have handed down the final form of orders that I intend to pronounce. I will allow some time for them to be read and then offer comments to the court as to any amendments required to the final form of orders, inclusive of any timetable or procedural charges or other corrections to accurately reflect the orders as I have outlined. Of course the final orders will remain to be made by the court and the parties consent is not sought to any of such final orders.
I certify that the preceding three hundred and fifty (350) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Young delivered on 18 April 2012.
Associate:
Date:
Key Legal Topics
Areas of Law
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Civil Procedure
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Equity & Trusts
Legal Concepts
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Res Judicata
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Abuse of Process
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Estoppel
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Constructive Trust
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