Summitt & Summitt and Ors
[2009] FamCA 371
•13 May 2009
FAMILY COURT OF AUSTRALIA
| SUMMITT & SUMMITT AND ORS | [2009] FamCA 371 |
| FAMILY LAW – PROPERTY – Value of Property |
| Family Law Act1975 (Cth) Partnership Act 1891 (Qld) |
| Aleksovski v Aleksovski (1996) FLC 92-705 Pedler v Rumble and Renton (unreported, Supreme Court of Victoria, 5 November 1993) Pellegrino (1997) 22 Fam LR 474 Halsburys Laws of Australia – Lexis Nexis Australia |
| APPLICANT: | Mr Summitt |
| 1st RESPONDENT: | Ms Summitt |
| 2nd RESPONDENTS: | Mr and Mrs Summit (Snr) |
| FILE NUMBER: | BRF | 709 | of | 2006 |
| DATE DELIVERED: | 13 May 2009 |
| PLACE DELIVERED: | Brisbane |
| PLACE HEARD: | Brisbane |
| JUDGMENT OF: | Murphy J |
| HEARING DATES: | 10 – 14 November 2008; 28 April, 2009 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr Kirk SC |
| SOLICITOR FOR THE APPLICANT: | Hopgood Ganim Lawyers |
| COUNSEL FOR THE 1ST RESPONDENT: | Mr North SC |
| SOLICITOR FOR THE 1ST RESPONDENT: | K L King & Associates |
| COUNSEL FOR THE 2ND RESPONDENTS: | Mr Forrest |
| SOLICITOR FOR THE 2ND RESPONDENTS: | Murdoch Lawyers |
Orders:
That as and by way of settlement of property pursuant to Section 79 of the Family Law Act 1975 IT IS ORDERED THAT:
For the purposes of ascertaining “the property of the parties or either of them” within the meaning of the said section, the properties described as Lots 1 and 2 on RP …, County of …, Parish of …, respectively title reference Nos. … and … and Lot 4 on RP …, County of …, Parish of …, title reference No. …, collectively known as “[N property]” be declared to be the property of the partnership known as “[Summitt and Co]”.
The application by the Second Respondents for the imposition of a constructive trust in respect of the property owned by the husband and wife and known as “[P property]” is dismissed.
The applications by the Second Respondents seeking declarations in respect of capital expended by the partnership known as Summitt and Co upon the property known as “[P property]” and capital contributed to the Summitt and Co partnership by the Second Respondents are each dismissed.
The property of the parties or either of them within the meaning of s 79 of the Family Law Act 1975 be distributed in the proportion 57.5% to the husband and 42.5% to the wife.
IT IS FURTHER ORDERED THAT:
Within 42 days of the date of this Order, the parties shall file by forwarding by joint e-mail addressed to Murphy J’s associate, agreed minutes of Order incorporating these orders and otherwise giving effect to these Orders and the Reasons for judgment published today.
IT IS NOTED that publication of this judgment under the pseudonym Summitt and Summitt and Ors is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth)
| FAMILY COURT OF AUSTRALIA AT BRISBANE |
FILE NUMBER: BRF 709 of 2006
| MR SUMMITT |
Applicant Husband
And
| MS SUMMITT |
1st Respondent Wife
And
| MR AND MRS SUMMITT (SNR) |
2nd Respondents
REASONS FOR JUDGMENT
The Summitt family are, and have been for many years, successful farmers. In the 1960s the husband’s father (“Mr Summitt”) and his wife commenced farming a property, on part of which they have lived ever since.
Initially, the farming was carried out in a three-way partnership between Mr Summitt, his wife and Mr Summit’s brother. A decade or so later, Mr Summitt and his wife bought out the brother. In February 1977, the business began trading under the name Summitt & Co.
By then, their son, the husband in these s 79 proceedings, was old enough to become a partner and a one-third interest in the business was gifted to him. The business then (again) operated as a three-way partnership.
Almost four years later, in September 1980, the applicant and respondent to the current proceedings were married.
About three years after that, in November 1983, a property was purchased and registered in the joint names of each of the husband and wife, and Mr Summitt and his wife. Approximately twelve months later, the wife became an equal one-quarter partner in the farming business. Her interests in the land just mentioned and the business, were each gifted to her by the husband and his parents.
In the 24 years until November 2004, when the husband and wife separated, a number of properties were acquired; the properties were farmed; corporate/trust vehicles were created and properties were improved, in one particular case, significantly.
Real property the subject of these proceedings is held both by trustees of trusts and by the parties, the latter in differing permutations. Issues surrounding those facts, in so far as they relate to some of that property, form the basis of the central contentions of the respective parties in these proceedings, who are not only the husband and wife, but Mr Summitt and his wife.
As is common in family farming operations of this type, varying degrees of legal formality have attended aspects of the operation during its currency. For example, no formal partnership agreement attended the formation of the partnerships.
However, particularly with respect to taxation and succession planning, significant reliance has, from time to time, been placed by all parties on legal and financial advice. Unsurprisingly, when that has occurred, greater formality in the commercial arrangements has usually (but not always) followed.
While intra-familial relationships are harmonious, and while present and future expectations remain relatively aligned, a lack of legal formality usually creates few practical difficulties.
That relative harmony and commonality of purpose and expectation can break down for a number of reasons, not the least of which is the breakdown of a matrimonial relationship. Frequently, the matrimonial partnership is an integral part of the familial commercial enterprise. The breakdown of the former, and the consequent need for a just and equitable settlement of property between the parties to that relationship, can create many evidentiary and legal difficulties for this court. This is such a case.
A number of competing contentions are made about the nature and extent of knowledge of the commercial and marriage partners, in circumstances where varying degrees of legal formality have attended different aspects of the commercial enterprise at different times throughout its life. The court is asked to draw inferences from differing aspects of the evidence about those matters.
The Agreed Approach to Final Orders
All parties are agreed that the land and farming business (broadly described) is to be retained by the husband (or, as the case may be, the husband and his parents), and that the wife is to receive two investment properties, her superannuation interest, chattels and a cash sum.
The former will involve various transfers and other formalities that may have taxation ramifications, some potentially significant. Realisation costs may also be incurred. The parties are all agreed that, consequent upon my judgment, they be given the opportunity – in conjunction with their legal and financial advisers – to formulate orders giving effect to my judgment whilst minimising lawfully any of the burdens just referred to.
The commercial arrangements and interrelationship the subject of the proceedings is of long standing. The breakdown in the marriage relationship and the consequent breakdown in the commercial arrangements was an unforeseen event, and orders will force upon the parties a re-arrangement of their affairs. That these events can have unforeseen (commercial) financial ramifications has been recognised, at least in part, by the legislature by, for example, providing rollover relief in respect of transactions effected as a result of matrimonial orders.
It seems to me appropriate, then, to adopt the course urged by all parties by affording the parties the opportunity to take advice and to forward agreed minutes of order giving effect to my judgment.
Having said that, the possibility of a desire to appeal by a party should be recognised. Appeals are from Orders, not reasons. There is, of course, something entirely artificial about the parties settling Orders only to have one (or both) parties to then appeal against those Orders.
Accordingly, I will make orders giving effect to my central findings such that, if considered appropriate, an appeal might be lodged without the necessity of first waiting for settled orders to be made.
The Application Subsequent to the Trial
On 28 April, 2009, I heard an application by the husband (supported by the Second Respondents) to re-open the trial of this matter.
The basis of the application was what was asserted to be the injustice arising from an asserted significant diminution in value of the major assets at the heart of the current dispute.
On 8 May, 2009 I delivered reasons and made Orders dismissing that application. I indicated in those reasons that I would attempt to deliver these reasons within the week. So it has transpired.
In the reasons delivered on 8 May, I indicated that the application was made at a time when a preliminary draft of this judgment was very close to completion. I also indicated during the course of argument at the initial mention of the application on 8 April, 2009 that the (then approximate 4½ month) delay was regretted, albeit occasioned by pressure of work.
The Competing Contentions of the Parties and Issues
The process required by s 79 of the Family Law Act 1975 has been described as having either three or four “steps”. It is well established by authority (for example, see In the Marriage of Lee Steere (1985) FLC 91-626; In the Marriage of Ferraro (1993) FLC 92-335; In the Marriage of Clauson (1995) FLC 92-595 and, more recently, Coghlan v Coghlan (2005) FLC 93-220).
The first, and fundamental, “step” is to identify and value “the property of the parties or either of them” within the meaning of the section. Significant issues in this case attend that first step.
Here, that property includes interests in a farming partnership which has been valued by a single expert, Mr F. Mr F has excluded from his valuation of the partnership the property known as N property, because the registered owners of that property are the husband and wife.
Of course, a partnership, as such, cannot own property. The individuals comprising the partnership can own property, and property owned by only some of those individuals can constitute partnership property. The husband and Mr and Mrs Summitt contend that the N property is partnership property. As such, they contend that it should be included as an asset of the partnership with appropriate adjustments to the accounts. The wife contends that the whole of the value of the property should be regarded as property for division between she and the husband.
Mr F has included the husband’s one-third interest in the “Home Block” which he owns with his parents. An argument advanced by Mr North SC emerged during cross-examination and submissions that this block, too, was partnership property but, it seems, no such argument attended the instructions provided to Mr F.
Another property used in the parties’ farming enterprise is known as P property. It is also owned by the husband and wife. This property, too, has been used by the partnership for many years for its purposes. Yet, no party contends that it is partnership property.
The whole of the value of P property might, then, be expected to form part of the “property of the parties or either of them”. However, the husband and Mr and Mrs Summitt contend that P property was bought with, and has been improved by, partnership monies. Prior to these proceedings, no accounting had ever been done that recorded any such expenditure as such. The farm’s accountant, Mr B and a reporting accountant retained by Mr Summitt (Mr C) have undertaken calculations, based on information and figures supplied to them by the husband and Mr Summitt respectively.
Those calculations sound in the relief sought in respect of P property by each of the husband and Mr and Mrs Summitt.
The Husband’s Position
The husband seeks orders (among others) that the wife transfer her interest in N property and P property to him, as well as her interest in the partnership. The argument advanced on his behalf contends that N property is an asset of the partnership In respect of P property, it is accepted “that this property is legally and beneficially owned by the husband and wife …”.
However, in written submissions made on his behalf, the husband goes on to argue that:
“The parents assert (with some justification) that the fixed improvements should have been charged against the Husband and Wife’s loan account as they stay with the land and impact upon its value.
…
... the parents contend … that the accounts should be corrected … this will require amended financial accounts and income tax returns…
…[the wife contends] that she (and the Husband) should share the benefits that flow from the substantial improvements constructed on [P property] by the Partnership notwithstanding the other partners (the Husband’s Parents) will lose out as a result”
The husband also goes on to argue that, as a result, the court has four options:
“(1)Calculating the necessary adjustment to the capital accounts of the 4 partners so as to make the Husband and the Wife primarily responsible for the capital improvements funded by the partnership. Mr [C] assesses this at $757,995.
(2)Dividing up the current value of the improvements to [P property] such that the value included in the divisible pool is reduced by 50% of that value, namely $300,000. This would require the husband’s parents to accept that he will hold [P property] subject to their equitable rights vis a vis their positions as partners;
(3)… to declare that [P property] is held by the Husband and the Wife subject to a constructive trust in favour of the Partnership, such that the Partnership has the right to continue to use the improvements for farming purposes during the life of those improvements;
(4)[in the alternative to those three options] then in order to do justice between Husband and Wife (i.e. the Husband’s Parents have lost out completely), it will be necessary to give far greater contribution weighting to the Husband’s contributions (bolstered by the unintentional contributions by the Husband’s Parents) and/or making appropriate adjustments under s.75(2)(o) or s 79(2).”
Mr and Mrs Summitts’ Position
The position of Mr and Mrs Summitt can be seen to be very similar. They seek, in written submissions made on their behalf, a declaration as to the capital accounts of the partnership that take account of Mr C’s calculations, which incorporate the matters already referred to.
They also contend that an order should be made that N property is “held by the husband and the wife on trust for the partners of “[Summitt & Co]”. They go on to seek an order that:
“…the husband and the wife transfer all of their legal interest in the property known as [N property] … as directed in writing by [Mr and Mrs Summitt] and the husband acting unanimously.”
But, if there is a trust as alleged, in my view it can only be a trust whereby the husband and wife hold their interest on trust for the husband and wife and Mr and Mrs Summitt. If there is such a trust, the husband and wife will be the trustees and each of the four partners would have a beneficial interest in that trust.
In turn, it would seem to follow that those beneficial interests would be partnership property and, in turn, that property of the husband and the wife for s 79 purposes will be their respective beneficial interests in that trust.
In any event, paragraph 5 of the Orders sought by Mr and Mrs Summitt provides:
“Further and in the alternative to including in the calculation of the capital accounts of the partners in [Summitt & Co] as declared pursuant to paragraph 1 hereof adjustments to those accounts as currently recorded as at 30 June 2008 having regard to the contribution by [Summitt & Co] to the cost of purchasing and improving the property known as [P property] …it be declared that the husband and the wife hold their legal interests in that property subject to constructive trust in favour of the partnership to use the improvements constructed thereon for the purpose of farming activity during the life of those improvements.”
The Wife’s Position
Written submissions on behalf of the wife were confined solely to an argument relating to Jones v Dunkel. It was contended that the relevant inference should be drawn because of the absence of Mrs Summitt from the proceedings.
No evidentiary foundation (apart from her obvious absence) is provided for the submission. No cross-examination was directed to that topic. No oral submissions were directed to that topic by Mr North SC. The inference is not open on the evidence before me and I decline to draw it.
It is regrettable that, unlike the husband and the Second Respondents, written submissions did not outline the substantive arguments on behalf of the wife. In a case of considerable complexity, written submissions in respect of those issues would have been of significant assistance.
The wife contends, essentially, that the partnership accounts (prepared by Mr F) reflect the reality of the position adopted by each of the parties during the course of the partnership.
Her position might be seen to be, as it were, an expanded version of what Menzies J said in Harvey v Harvey (1970) 120 CLR 529 at 557 that: “When experienced men can reasonably think it unnecessary to make any express provision about improvements it is not for the court to supplement their agreement”.
The wife argues that Mr Summitt was a man of wide commercial experience – he was the “guiding hand” behind the Summitt farming enterprise; he was a a community leader for many years; no significant step was taken in the Summitt farming enterprise without the husband and Mr Summitt discussing all aspects of the decision; that Mr Summitt participated in planning and advice sessions with lawyers, accountants and financial advisers and that he relied significantly on their advice in all aspects of the running of the farming enterprise.
It is argued, then, that the property, and the partnership accounts, should, in effect, be taken as the court finds them. It will be seen subsequently that inconsistencies attend this approach with respect to the “Home Block”.
The delineations in ownership reflected on the properties’ titles are, it is asserted, consistent with the overall intention of the parties. This is especially clear when regard is had to what is asserted as an overriding testamentary or estate-planning intention on the part of Mr Summitt, which included the husband retaining, as it were, the farm, and where Mr Summitt’s daughters were to be treated equitably through the use of whole of life insurance policies.
The wife asserts that it is only when the marriage broke down and a property settlement was sought, that claims in respect of “equitable ownership” or other claims emerged.
A similar theme can be seen to underpin the attack by the wife on the assertions with respect to improvements made to the P property. Moreover, the quantification of those improvements (which occurred only in the context of these proceedings) is also attacked.
The Property of the Parties or Either of Them
What Property Is Agreed?
By the conclusion of the hearing, agreement had been reached in respect of most of the assets of the parties not the subject of the claims just referred to.
Neither party to the marriage suggested that a superannuation splitting order should be made and no party adopted or referred to a “two pools approach”. Each party included the respective superannuation interests as part of “the pool”.
The following comprises that part of the pool that is agreed:-
Assets
Value
M Trust – agreed as having no value but owns, subject to a mortgage liability two real properties in A at A1 and A2 $ nil Summitt Farm Management Trust – vehicle used in farm operations $ nil Summitt Farms – vehicle used in farm operations $98,615 Summitt & Co Partnership – including an agreed adjustment for a calculation error in Mr F’s report. Value includes two blocks of land used in farming operations known and valued respectively as “D Farm” $1,450,000 and “E Farm” $300,000 ($857,459) Husband’s interest in partnership with his parents ($92,053) Loans in various entities:
(a) Husband to Summitt Asset Trust
(b) Husband & Wife to M Trust
(c) Husband & Wife to S Pty Ltd
$111,918
$2,340
$2,520
Furniture
(a) Wife
(b) Husband
$5,000
$22,500
Bank Accounts
(a) Wife (total)
(b) Husband (total)
$2,500
$7,496
Motor Vehicles
(a) Wife
(b) Husband
$11,500
$ nil
Husband’s shares (AMP; Santos) $3,710 Husband’s AMP policy $6,667 Superannuation Summitt Superannuation Fund (private fund)
[Included as an asset of the fund is Lot 45 (which is part of the N property). It is included as an asset of the partnership but the single expert Mr F has removed it from such as the registered proprietor is the trustee of the Summitt Super Fund. All parties agree with Mr F that it should be treated as an asset of the super fund]
(a) Wife’s interest
(b) Husband’s interest
$150,182
$162,208
Wife’s Superannuation Funds
Wife has five small funds – all in public funds –
Total
$14,602
Property Agreed to be Retained by the Wife
The property and its value which it is agreed by all parties that the wife will obtain as a result of these proceedings, is as follows:
Property Value Real property at A1 and A2 – to be transferred out of M Trust subject to existing mortgages
Gross $310,628 less mortgages ($257,385)
$53,243
Furniture $5,000 Bank Accounts $2,500 Motor Vehicle $11,500 [Add back legal fees amount] $17,394 Superannuation (total) $164,784 Total assets and superannuation $254,421
Lot 45 and the Trusts
(a) Lot 45
The position of the wife earlier outlined was argued on the wife’s behalf by Mr North SC across all properties the subject of dispute. However, in respect of some aspects of the claim by the Respondents, that position does not in my view accord with the wife’s direct evidence in at least two respects, one of which requires no alteration to the report of Mr F, the other of which might.
First, a property at Lot 45 (in fact forming part of the N property) appears in the books of account of the partnership as an asset of the partnership (effectively, then, as owned by all four partners). However, it is accepted by all parties that this is an error. Its registered proprietor is the trustee of the Summitt Super fund. Mr F removed it from the balance sheet when doing his calculations of the value of the partnership.
As indicated, Mr F has taken this into account and the Table of Agreed Property earlier given takes account of this asset.
(b) The T Trust and the Summitt Asset Trust
The value of property owned by the trustees of each of the T Trust and the Summitt Asset Trust is included by Mr F as property of husband and wife.
He has done so because the trust deeds of two trusts record the husband and wife as joint appointors or principals and the husband and wife as primary beneficiaries. (In the case of the T Trust, Mr and Mrs Summitt are included with the husband and wife as primary beneficiaries, whereas in the Summitt Asset Trust, Mr and Mrs Summitt are listed as tertiary beneficiaries).
Mr F has therefore proceeded on the basis that the husband and wife have control of the trust, including the power, ultimately, to distribute all income and assets to themselves and, as a result, has included the property of the trusts as property of the parties. (See, eg Davidson and Davidson (1991) FLC 92-127; Milankov and Milankov (2002) FLC 93-095).
The wife was cross-examined about this. She said she didn’t know why she and the husband were made joint appointors. She was asked, in effect, “Mr [F] describes the [Summitt] Asset Trust as being you and the husband, is that your position today? The wife responded in effect, “My understanding was that ‘it was the four of us. It was set up on advice. My understanding is that it was ‘equal among the four of us’”. Subsequently, in respect of the T trust the wife acknowledged that her “position is that it is partnership”, that is, “it is a four-way split”.
I do not believe that the wife had an understanding – or at least a complete understanding - of the intricacies of the concepts involved in the trusts and their transactions and, in particular the position of appointors/principals and the delineation in classes of beneficiaries and the transfer of taxation losses.
I am satisfied, though, that the wife’s evidence is to the effect that all of the powers, and any benefits, in either trust were intended to be shared equally between she and the husband and Mr and Mrs Summitt.
Mr B, the farm’s accountant whose firm was engaged in the settlement of the trusts, gave evidence that the apparent control given to the husband and wife in the trust deeds was unintended. He said, in effect, that it was always intended that the trusts were to be set up in a way consistent with what the wife said in evidence.
Although I have no evidence of intention from the settlor, I consider I should not fly in the face of the reality of how the trusts were set up by an accountant for the benefit of the four partners.
It seems to me clear that a mistake has been made in the trust deeds, probably resulting from the use of a “precedent” document, and that the deeds as they stand do not embody the trust as initially intended.
The true intention was, it seems to me, that the four partners would be appointors/principals and that all four partners should rank equally as beneficiaries. To the extent that the documents reflect a different position, I consider that equity should intervene so as to rectify the mistakes embodied in the current deeds.
Add Back Issues
(a) The Wife’s Legal Fees
The husband asserts that two sums ought be added back to the pool and credited to the wife. First is an amount of $17,394 paid in legal fees over and above the amount financed by the wife through Impact Funding. The second is an amount of $59,509 said to have been removed by the wife at separation and the use of which, it is said, is not satisfactorily explained.
The first of the two sums referred to was, on the wife’s own evidence, used to meet legal fees in addition to those otherwise met by a loan to her from a litigation lender, Impact Funding. In addition, the wife owes two small amounts ($8,000 and $10,000) to individuals. Those sums, too, were, on the wife’s evidence, used to meet legal fees (to a previous solicitor).
The decision to add back moneys spent on legal fees remains within a trial judge’s discretion. An important matter to be considered in the exercise of that discretion is the source of funds.
It has been said by the Full Court, however, that, in the usual course, liabilities incurred in respect of monies to pay legal fees would not be deducted from the pool of assets. See Chorn and Hopkins [(2004) FLC 93-204 (especially at pars. 58-9). So, too, where joint funds which would otherwise be available to the parties at separation have been expended by one party on legal fees, the usual course of events might see that amount added back to the “pool” of assets. (Chorn and Hopkins at par 57).
Here, it seems tolerably clear that the amounts expended came from cash sources that formed part of the assets of the parties at separation.
There is no evidence which persuades me to a conclusion other than that, in the exercise of my discretion, I should add back the first of the amounts referred to and not bring to account as liabilities of the parties the two loans referred to.
(b) The Wife’s Expenditure
In respect of the amount otherwise sought to be added back, it is necessary to make a number of observations.
The decision whether to add back to the pool of assets distributed moneys spent by a party occurs against a legal framework, where the general principle is that the Court takes the property of the parties, or either of them, as it finds it at the date of trial. An exception can exist where one party has embarked upon a course of conduct designed to reduce or minimise the effective value or worth of matrimonial assets, or where one of the parties has acted recklessly, negligently or wantonly with matrimonial assets, the effect of which has reduced or minimised their value or the pool of assets.
The Full Court in Omacini v Omacini (2005) FLC 93-218 noted that circumstances in which it is appropriate to notionally add back to the pool of assets fall into “three clear categories”: where the parties have expended money on legal fees; where there has been a premature distribution of matrimonial assets; and in circumstances, frequently called “waste” outlined in Kowaliw ((1981) FLC 91-092, especially at 76,643-4).
The Full Court in Omacini rejected the notion that “the mere fact that a party has expended money realised from the disposition of assets that existed as at the date of separation will result in that expenditure being added back” as being unduly simplistic (see, eg. para 39 of the judgment). What is crucial is an assessment of the reasonableness or otherwise of the expenditure. The Full Court in M v M [1998] FamCA 42 at para 2.11 held:
“There seems to be no appropriate basis for notionally adding back moneys that existed at separation but which have been subsequently spent on meeting reasonably incurred necessary living expenses. Neither the Family Law Act nor the case law require that parties go into a state of suspended economic animation once their marriage breaks down pending the resolution of their financial arrangements. Parties are entitled to continue to provide for their own support. Whether any expenditure so incurred is reasonable or extravagant is a matter that can be determined by the trial Judge.”
That add backs are exceptional has also been emphasised by the Full Court in C v C [1998] FamCA 143, especially at para 46:
“Whilst not seeking to place a fetter upon the exercise of discretion of a trial judge in individual cases, it seems to us that the concept of adding monies reasonably disposed of back into the pool ought to be the exception rather than the rule.”
The husband’s evidence in chief contains a number of broad assertions about the conduct of the wife at or about the time of separation and its alleged effects on the operation of the farming enterprise. He makes a number of allegations in respect of specific cash amounts removed by the wife at about that time, totalling over $77,000. Some have a dubious evidentiary foundation (for example, the assertion without factual foundation at para 216(e) of his affidavit).
The wife was cross-examined about some of the specific amounts deposed to by the husband. Ultimately, it was put to her that she had access to about $60,000. The wife did not accept the figure, but nor did she deny it. I consider it tolerably safe to adopt it as the figure spent from cash funds otherwise available to the parties at separation.
The wife swore in the witness box (in effect) that, after a long marriage, she left the property with only her clothes and a car. She was out of work for three months. She needed to set herself up in post-separation accommodation and, as it were, start a new life. She borrowed $140,000 from her litigation lender which included $40,000 which was to be for essential living expenses, but that sum was ultimately used in legal fees.
It is not clear on the evidence if the sum of $60,000 just referred to includes the $17,000 added back in respect of legal fees, but it seems tolerably clear that at least some may have been used for that purpose. Even if it be determined to add back that sum, care must be taken not to “double count” against the wife.
An attack was mounted by the husband, directed to the expenditure of that $60,000 – or, at least, presumably, a significant component of it – and whether or not it could be classified as “reasonable living expenses”.
The partnership paid the wife $300 per week for two-and-a-half years post-separation. But, of course, she was still a partner – albeit not one then participating in the generation of its income - and the partnership was part of property to which she had made contributions over a long period of time.
She said she used the money on “rent, furniture, household effects and a holiday”. As to the latter, she was questioned about a trip to Germany for three weeks. She was competing in lifesaving championships. She was questioned about expenditure in Cairns. She said she needed a holiday.
I am not persuaded that I should add back to the pool of assets and thereafter credit to the wife the sum alleged. I consider that no expenditure by her fell outside the range of what could be considered reasonable in the circumstances of this particular marriage.
“Add backs” are, of course, a dollar for dollar alteration to the entitlement of a party. In this case, that would be made in the context of a very lengthy marriage amidst a miscellany of circumstances and contributions. Justice and equity point against adding back the sum.
(c) The Husband’s Accounting Fees
In so far as the husband is concerned, I took it as accepted (written submissions for the husband, Annexure A) that an amount of $105,252 was paid by the partnership in respect of legal fees of the husband and ought be added back and credited to him.
An amount of $11,470 was paid by the husband’s parents and wrongly debited to the husband’s account in the partnership. Again, I took it as given that a similar adjustment needed to be made.
If I am wrong as to the concession about these items, then, per force of the same reasoning adopted above in respect of the wife’s legal fees, I consider they should be added back.
Liabilities and the Treatment of Potential Liabilities
The valuations of the component entities in the farming enterprise take up the great bulk of the current liabilities of the parties.
As earlier indicated, significant potential taxation liabilities and realisation costs may apply. As is recognised in the submissions of Mr Kirk SC, whether they apply or not depends on a number of matters including the decision of this court, and any orders made to reflect it, and, also – and significantly – the future actions and intentions of, relevantly, the father and the Second Respondents.
Submissions have been made generally in respect of the principles applicable to potential taxation and realisation costs. In particular, the written submissions of Mr Kirk SC refer at some length to the decisions of the Full Court in Rosati and Rosati (1998) FLC 92-804; G and G [2001] FamCA 1453 and IRBH and HRBH [2006] FamCA 379 as well as to the re-trial of the latter (IRBH and HRBH [2007] Fam CA 582) and the decision of O’Ryan J in A and A [2006] FamCA 1190. It is submitted by Mr Kirk SC that “the pool could very quickly diminish if this division is not handled sensitively”.
The affidavit of the Summitts’ accountant, Mr B, reveals additional potential liabilities. For example, in respect of the Summitt Asset Trust, there is a potential tax liability of about $85,000 if the ATO was to determine that the trust has been resettled, or if the court was to order a transfer of assets not protected by rollover relief. Similar considerations apply to the T Trust (para 40 of Mr B’s affidavit); N property (para 42) and P property (para 48).
In the same written submissions, Mr Kirk SC says, however, “…the risk of [these imposts] occurring will be reduced by following the orders referred to in the tax expert’s report”. They will, too, be reduced, in my view, by affording the parties the opportunity to arrive at orders reflective of taxation and legal advice but otherwise giving effect to the court’s findings.
Mr Kirk SC submits (para 2.4.2(f) of his written submissions):
“We have no difficulty in a case such as this in submitting Your Honour should adjust for the notional CGT ($464,957) and realisation costs ($221,110) pursuant to s. 75(2) as O’Ryan J did [A & A] and Faulks DCJ did in the rehearing for [IRBH & HRBH] but we submit Your Honour ought make an adjustment as Faulks DCJ did such that both parties know what Your Honour had allowed. The combined notional liability is $686,067 and very significant having regard to the size of the pool. We will return to this when dealing with s. 75(2) matters.”
Later, in those same submissions, Mr Kirk SC says:
“The notional CGT and realisation costs, as assessed by Mr [F] have already been discussed … and should be brought to account under s. 75(2) unless Your Honour concludes that sales are inevitable and, if so, Your Honour should directly reduce the pool. The total notional liability is $686,067 which is 45% of the divisible pool of $1,500,000. A significant allowance of not less than 10% should apply under s. 75(2).
As referred to by Mr Kirk SC, the single expert, Mr F undertook calculations of tax and realisation costs. It is important, though, in light of the principles discussed in the cases to which Mr Kirk made reference, to note the basis upon which those calculations were done.
In Mr F’s updated report (Exhibit 1), he says
“52. I have calculated the value of assets of the Husband and Wife prior to realisation costs. I have estimated the realisation costs of the assets by assuming the cost of winding up [Summitt Farms] Pty Ltd is $1000 and realisation costs of 3% are included for property; 10% for plant & equipment, and 1.5% for shares.
53.I consider the realisation costs applicable should the Parties have to realise their assets in order to effect a property settlement as follows …” [emphasis added]]
There then follows Mr F’s Schedules setting out individual potential costs based on differing scenarios.
Mr F’s taxation calculations are based on similar premises. In his “Conclusion” in that respect, Mr F says:
“83. I consider the taxation costs applicable should the Parties have to realise their assets in order to effect a property settlement as follows …” [emphasis added]
Again, detailed Schedules follow, again based on differing scenarios.
No evidence was offered during the course of the trial as to the need for any of the property agreed to be retained by the husband (and/or the Second Respondents) needing to be sold, whether to fund the cash sum payable to the wife or otherwise. Despite the husband deposing in his affidavit in chief to “the debt position” and including therein, reference to the impact of “the severe drought conditions” and the like, no case was made of the need for, or possibility of, the sale of assets.
In the context of the case, this is understandable: the clear intention evidenced by both the husband and Mr Summitt was to retain the farm as a working enterprise into the future. That the landholdings are an integral, and inter-connected, part of the enterprise is plain from the report of Mr T – particularly as it refers to the supply of water for the farming operation.
Where, as here, an enterprise’s debt burdens are high, where there exists the possibility of the occurrence of events beyond the enterprise’s control (eg weather, prices etc) and where there are significant infrastructure costs to support, it might be said that a settlement of property between spouses after a long marriage might, almost inevitably, involve the possibility of sale of some, or perhaps all, assets.
Whilst that possibility is acknowledged, the principle which, in my view, emerges from the authorities to which Mr Kirk SC made reference, is that the determinant for the manner in which contingent debts neither crystallised nor owing is, like the overall exercise itself, justice and equity.
The potential liabilities here fall into two broad categories: first, liabilities pregnant in retained assets (eg CGT) and, second, liabilities which do not exist but which might yet arise (eg tax payable from ATO rulings and realisations costs in the event of sale).
In respect of the former category, calculations involving precise dollar amounts, such as those done by Mr F, are done on the basis of a value accepted for the trial and on an assumption of realisation of the asset at that time at that value. Where sale is neither certain nor likely, neither may be accurate. Whilst, like death, the certainty of the tax might remain, neither its amount nor when it might be payable is either certain or ascertainable. It is a debt that may not occur until well into the future and it may be conditional upon the occurrence of one of a number of potential contingencies.
In my judgment (by reference in particular to the principles enunciated in Rosati):
·the evidence in this case points clearly to a conclusion that a sale of assets by the husband or the Second Respondents is neither certain nor likely. (I should add that there is no evidence before me to suggest, either, that the wife will sell the assets which it is agreed she will retain);
·the assets here were not acquired as “investments with a view to their eventual sale for profit” as that expression is used in Rosati;
·the evidence does not disclose that “there is a significant risk that [assets] will have to be sold in the short to mid term” as that expression is used in Rosati
The evidence in this case points to conclusions opposite to those just referred to: there is a clear intention to do whatever can be done to retain property within the Summitt family, not only for this [i.e. the husband’s] generation but also for the next generation [the parties’ children].
It seems to me then, that, in attempting to arrive at what is just and equitable in this case, potential liabilities falling into the first of the two categories delineated above, fall to be considered as liabilities which may occur but which, on the evidence before the court, are unlikely to occur in the foreseeable future. Such a conclusion points against taking in the calculated amount as a liability to arrive at a net figure for the pool.
Those same conclusions point against the adoption of any figure (whether arrived at formulaically or otherwise) as a liability.
Those same conclusions point to the possibility (as distinct from probability) of the tax liability being taken in as part of the s. 75(2) assessment.
In my view, in the circumstances of this case, that assessment does not involve – because it cannot – any “pseudo calculation” of an amount which might then be expressed in percentage terms. To do so would be to attribute to the factor a characteristic which it doesn’t have – namely, a true present value. The calculation of tax arrived at by Mr F only has meaning (as Mr F recognises in the calculations themselves) if the relevant event crystallises the amount.
The same considerations apply, in my view, to those potential liabilities referred to as falling into the second category above. If a property is to be sold by order, clearly enough, the realisation costs (and any tax) should be taken in as a direct liability. If a ruling is made by the ATO for the payment of tax and it is payable, it should be taken in. However, even in the last case, the evidence here points directly against the probability (as distinct from possibility) of that occurrence.
Such a view is, it seems to me, consistent with the Full Court authority which binds me. “Formulaic” calculations may follow from findings in particular cases. For example, a finding that a property is, in all likelihood, to be sold, say, five years from the date of trial may provide the basis for an actuarial or formulaic calculation (based on a current value) which a court may be prepared to rely upon in an attempt to provide more tolerable pseudo-certainty to a figure which is, in turn, deducted as a liability. I say “pseudo-certainty” because, even in such a case, any such calculation must be based on ignoring the possibility of unforeseen future contingencies impacting upon the figure. For example, a formula using the present value of CGT which is then discounted actuarially assumes a sale value (and tax rate) now but, in fact, the true (future) sale value (and tax rate) is unknown and may depend on a number of unpredictable factors (inflation, general market conditions etc).
The inclusion of the possibility of future tax and costs as part of a (nebulous) assessment based on the totality of all factors relevant pursuant to s. 75(2) can be criticised as both imprecise and arbitrary. But a potential for a cost or liability that may occur within an unknown future time frame is no more capable of calculation (actuarially or otherwise) than future employment / unemployment prospects or future ill-health or future prospects or re-partnering or any of the other equally uncertain matters specified in the sub-section which, in accordance with authority, must be considered by a court in the whole.
In this case, I propose to take potential tax and costs in as part of the totality of considerations relevant pursuant to s 75(2).
In doing so, I acknowledge that the approach agreed to by the parties, and accepted by me, with respect to the formulation of orders may see some such figures crystallise because of the certainty of events contained within the orders and, as a result, become specific, certain, liabilities which can be deducted from the gross value of “the pool.
There is, in addition, a Visa card liability claimed by the wife. Evidence in respect of it is sparse. The wife has been working full-time now for some time. It seems tolerably clear that this is a liability referable to her day to day living. There is no concomitant claim by the husband. I have not added back other living expenses. I do not consider it just and equitable to take in the wife’s Visa card liability.
Property of the Parties: Partnership Property & The Role Of Intention
A partnership is, of course, unable to own real property in its own right. Real property used by a partnership for partnership purposes must be owned by the partners individually or a combination of them. But, land registered in the name of one partner, or a number of the partners, can nevertheless be partnership property. Legislation (and, in any event, equity) intervenes so that partnership property owned by one or a number of the partners is held on trust – the beneficial interest in the land belongs to all of the partners (See eg Partnership Act 1891 (Qld), s 23(2)).
Similarly, with respect to land held as joint tenants “[e]quity recognises that there should be no right of survivorship with respect to partnership property and deems that all partners have an interest in the land in the same proportions as those they have in other partnership property” (Halsburys Laws of Australia [305-260] citing Rees v Duncan (1900) 25 VLR 520 at 526)
The issue of whether property registered in the names of one or more of the partners is partnership property might be seen to have little relevance on a day to day level when the partnership operates harmoniously. That factor, though, makes discerning the parties’ intentions more difficult, especially many years after the land’s acquisition. The issue can become important in certain circumstances, for example the dissolution of partnership upon death of a partner or, as here, where dissolution follows from a dispute between some of the partners.
Where, as here, the resolution of a dispute between partners requires the application of the Family Law Act, the distinction becomes crucial; s 79 of that Act requires findings as to “the property of the parties or either of them”. If land registered in the names of the husband and/or wife is partnership property, the property of the parties, or either of them, will be the partnership share of the husband and wife; if not, the entirety of the land may be the subject of s 79.
Agreement between the partners governs the issue of whether particular property forms part of the property of the partnership. Here, there is no partnership agreement embodying any such agreement as to any of the property the subject of this dispute. In the absence of an express agreement “… it would be plainly wrong to ascribe agreement to the parties unless their dealings clearly point in that direction” (Kelly v Kelly (1990) 64 ALJR 234 at 237).
Section 24 of the Partnership Act 1891 (Qld) provides that property bought with money belonging to the firm is deemed to have been bought on account of the partnership, unless the contrary intention appears. But, it is “… the acts and intention of the parties, not the operation of [the relevant section of the Partnership Act] [that] determine finally and ultimately the question whether property owned by a partner becomes partnership property”. (O’Brien v Komersaroff (1982)150 CLR 310 at 322 per Mason J). It has also been said that “In an inquiry into the ownership of property used by a partnership, the courts will pay little regard to legal title” (The Law of Partnership in Australia Fletcher 9th ed para [5.10]).
Further, it has been held by Walsh J in the High Court that:
“... I cannot agree that it follows from the fact that land is the asset which produces the partnership profits and is physically involved in the business that it is an asset of the partnership. It is common for agreements to be made, particularly amongst members of a family, for the use by a partnership of land which belongs to one of the partners. By such an agreement, unless a different intention is expressed or is to be inferred from the circumstances, the partnership acquires a right to have the use of the land so long as the partnership continues but no greater right or interest in it either at law or in equity than a right to use the land, a right which may be regarded as arising either from a tenancy or from a licence. Subject to that right the ownership of the property remains with its former owner …
It is true, of course, that just as money may be brought into the partnership assets by way of contribution by one partner to the capital of the partnership, so also may land be brought as a contribution to capital. But in any particular case in which there is no formal agreement putting the matter beyond doubt, it must be decided upon a consideration of the circumstances whether it should be concluded that this has been done or whether the partnership has acquired no more than a right to use the land…”. (Harvey v Harvey (1970) 120 CLR 529 at 563 per Walsh J).
The task here, then, is to ascertain the true intentions of the parties which, in the absence of an agreement about those intentions, “must be decided upon a consideration of the circumstances …”.
Intention and Partnership Property: The Evidence of the Parties
(a) The Wife
The wife’s evidence of intention in her affidavit of evidence in chief is slight, and somewhat tangential to the central issues in this case. Her evidence is:-
“18. …The property at [N] had been purchased in the previous year with the intention of being [the husband’s] marital home, however an agreement with the vendor allowed them to remain in the home rent-free whilst their new home was being built …”
…
39. All of the decisions to expand the business, the day-to-day operations, management and business development inclusive of the purchase of assets, save for real property, were made jointly by [the husband] and I. From time to time, [Mr Summitt] offered his views on certain matters, but due to his commitment to the [local community], did not usually engage in day-to-day operation decisions. …
40…All real property purchases, except the two houses in [A], were negotiated and dealt with by [the husband] or by [Mr Summitt] and [the husband]. It was [Mr Summitt] who approached a local real estate agent … about buying the [D Farm] property. …Advice was always sought from the accountants and bank managers as to the most effective method of structuring and financing these purchases”.
Later, under the heading “Life Policy”, the wife deposes:-
“57 …[Mr Summitt] and [the husband] took out National Mutual ‘whole of life’ policies in 1980s. I was a participant in many discussions in which it was agreed that [the husband] would inherit the property from [Mr and Mrs Summitt], and the two daughters would benefit from the proceeds of the policy as they had no input to the farm enterprise. [Mr Summitt’s] Will has reflected this since the commencement of the policy. [Mr Summitt’s] mother died at a relatively young age (approx 53 yrs) as did his brother, and he was adamant to have his affairs in order should he suffer the same fate”
The absence of direct evidence from the wife about intention (for example, conversations relevant to the acquisition or improvement of land) – either with respect to specific properties or generally – is of itself significant in my view, particularly in light of what was said by Menzies J in Harvey v Harvey, to which earlier reference has been made.
That is also particularly so in light of the manner in which the wife refers to the family enterprise throughout her affidavit. She refers, for example, to: “the partnership” (para 20); “employees of the farm” (para 29); “the family farming enterprise” and the like. These descriptions (including what the wife described as “the greenhouse venture” on P property) are applied without delineation as to ownership of property, and in circumstances where she, the bookkeeper, does not depose to any steps being undertaken (either alone or in conjunction with the financial or legal advisers which the family had and for whom she was the main point of day to day contact) that sought to delineate any one property from another, or sought to delineate any improvements on one property rather than the other.
Under cross-examination, the wife asserted that there was a specific (oral) agreement between all parties that whatever improvements were made to properties, they were to, as it were, stay with that property for the benefit absolutely of the owners. That assertion does not appear in her affidavit. It is denied by the other parties.
I do not accept the wife’s evidence in that regard. If that is an accurate description of what was in her mind at the time, I do not accept that there was any “meeting of the minds” in respect of it by all four alleged parties to the alleged agreement.
(b) Mr Summitt
The evidence of Mr Summitt is attended by what is, to my mind, a central, troubling anomaly.
Mr Summitt deposes in his affidavit:
“The property [at P] was purchased in April, 1986. I was aware it was on the market but I had no interest in it. [The husband] came to me at some point and told me he wanted to buy it. I went and had a look at it with him. [The husband] negotiated with the vendor after that and secured a deal for its purchase. [The husband] needed our financial help to be able to buy it. I agreed to help him finance the purchase. [The husband] and [the wife] purchased it and it was registered in their names.”
In the witness box, Mr Summitt’s evidence was to similar effect: he said he was not particularly interested in the block – the husband wanted it and negotiated it and he had no objections to it being registered in the names of the husband and wife. In written submissions on Mr Summitt’s behalf, it is submitted “The second respondents accept that [P property] was purchased and registered in the names of the husband and the wife with the intention of all four parties being that it was to be the husband and wife’s property”.
Yet, in a statement prepared by Mr Summitt specifically for use by an investigating accountant (Mr C) retained by him to prepare a report for use in these proceedings (Exhibit “W9”), Mr Summitt said of P property:
“[it] was bought in [the husband and wife’s] name … The initiative behind this purchase was [the husband]. He was ambitious and wanted to expand the farm. We discussed and agreed to it being purchased in their names but I always considered this was partnership property”. It was not my intention to gift the money used to pay for this property to them. [The husband] did the negotiating. Whilst he discussed it with me, he was the main reason the property was purchased …” [emphasis added].
This seems, to my mind, in the respect emphasised, starkly different from his affidavit and the submissions made on his behalf.
A similar anomaly exists with respect to N property. Mr Summitt’s affidavit says:-
“After [the husband] and [the wife] separated I learnt that this property was registered only in their names. I did not know that before and I do not know the reason why it was registered only in their two names. I have always regarded it as an asset of the partnership”. [emphasis added]
Yet, the same document provided to Mr C by Mr Summitt says of N property: “…It is registered in the names of [the husband] and [the wife] as trustees [emphasis again added] …”
In addition, the statement provided by Mr Summitt to Mr C says nothing to indicate that his knowledge about ownership was relatively recent. Indeed, it makes a positive assertion about the nature of ownership which is, on its face, inconsistent with an assertion of an alleged – apparently long-standing – understanding of it being in four names.
The differences between the affidavit and the statement were, in my judgment, not satisfactorily explained by Mr Summitt in the witness box.
Expressed in general terms, Mr Summitt agreed under cross-examination that, in respect of the various farming properties, “the partnership treated land as if it was its own whoever owned it”. Mr Summitt also agreed that the partnership paid for all expenses and improvements on land; claimed depreciation in respect of improvements on land, irrespective of its ownership, and dealt with land to suit the various purposes of the partnership from time to time, irrespective of the legal ownership of any individual block.
(c) The Husband
The husband swears in his affidavit of evidence in chief, in effect, to the basis for a specific intention that P property not be regarded as property of the partnership:
“When [P property] was purchased in May 1986, it was placed in the names of [the wife] and I as we wanted to own real estate in our sole names (as my parents owned real estate in their own names). Despite the ownership of the property, all expenses (including the mortgage repayments) have and continue to be paid for by the partnership business”
In respect of N property the husband deposes:
“It was my understanding that the actual ownership of [N property] was held in the four names of [Mr Summitt], [Mrs Summitt], [the wife] and I”
“I say that [N property] has always been treated as part of the overall farming partnership operated in the names of [Mr Summitt], [Mrs Summitt], [the wife] and I. For example, in about 1998, the partnership business borrowed funds …and [N property] was used as security for that purpose”
In cross-examination, the husband said that he could not recall any discussions about what land constituted partnership property and what did not. He said that he did not know whether, historically, the partnership had paid rent for the use of land which was said not to be an asset of the partnership (such as the Home Farm and P property).
The husband did say, though, that, after the purchase of P property, he realised “it was selfish” to expect the partnership to pay off a property in the names of himself and the wife for their exclusive benefit. He said that, from then on, he took the view that all property should reflect the ownership of all the parties.
It is not clear to me how this evidence is said to sit with the professed “fairness’ of the purchase of P property in the first place, which, on his evidence, contemplated that very circumstance. Moreover, the purchase occurred in circumstances where it is said that discussion and reflection preceded its purchase.
The husband said that improvements were made (from partnership funds) to all properties irrespective of ownership, although that position was caveated by him, saying that improvements to the “Home Farm” (which, it is said, is owned outside the partnership) were “minimal” apart from some fencing. He acknowledged, though, that no specific accounting had ever been taken of expenditure on specific properties, and that the first time he had been asked to do that was a month or two before the trial.
Veracity and Reliability
Factual findings as to agreement or intention can be seen to lead to certain legal consequences. Here, assertions as to intention are being made, I have no doubt, by all parties, in the knowledge that consequences relevant to the s 79 proceedings will follow from findings about intention.
The task of discerning intention – difficult in any event on the evidence before me – is made all the harder, as I find, by needing to unravel the extent to which present assertions as to past intentions are influenced by what are now known by the parties to be the legal consequences of findings about those intentions.
I consider the evidence of all of the parties was influenced by this factor. Examples are the contradictions in the assertions of Mr Summitt earlier referred to and the evidence of the wife in respect of improvements.
The evidence of the parties is also, I find, influenced by a barely-concealed animosity by the wife to the family and they to her, and by, as I find, a desire of the Summitt family to keep the farm – or as much of it as possible – within the family. I consider the evidence of each has been coloured by these considerations also.
In addition, I think it entirely likely that the parties’ acquiescence in arrangements over a long period of time (and acquiescence in arrangements which, during that time, occurred with familial informality), is likely to have been productive in each of the parties of assumptions that were not necessarily shared by their fellow partners. I consider this is one reason why the evidence of, for example, specific conversations and arrangements that might point to a shared intention, is sparse.
I am not prepared to rely entirely on the account of any of the three parties in respect of this issue; I propose to arrive at findings about intention by drawing inferences from the evidence as a whole, including the evidence emerging from documents to which I now turn.
Intention and Partnership Property: Documentary and Other Evidence
(a) Severing of Joint Tenancies
One of the thrusts of Mr. North SC’s cross examination of Mr Summitt was that, as a man of significant commercial experience (including a period as a community leader), Mr Summitt would have been acutely aware of all issues relating to the management of the farm. It was asserted that he participated regularly in discussions about its management and investments made by the partnerships. Reference was made in this latter respect to Exhibit “W10”. I accept as correct each proposition.
In particular, it was put to Mr Summitt that he would have known that, if he was to be a registered proprietor of N property, he would have to sign formal documentation to that effect. Mr. Summitt replied that he was “sure he had signed the contract on [N property]”. It was put to him that this belief had come to him over time after it had been acquired. He denied this. I do not accept that denial.
In September of 1998 there were discussions with the partnership’s then accountants and solicitors. Part of those discussions was to consider, among other things, how ownership of property might be structured. It was put to the husband, and he accepted, that a close examination of landholding was part of that process.
Part of what emerged from that meeting was a consideration of whether land should be held as joint tenants or tenants in common. Consequent upon those discussions, a number of joint tenancies were severed including, importantly, the joint tenancy between the husband and wife in respect of N property. Part of that process involved difficulties in obtaining Certificates of Title and new Certificates of Title had to issue. In addition, it was at about this time that two trusts came into operation.
It is hard to accept that a man of Mr Summitt’s commercial experience did not turn his mind to the manner in which land was formally held in the circumstances just described, and I don’t accept that he did not. I consider that what in fact he did not turn his mind to, is the consequences of that landholding and, specifically, the consequences of the landholding in the event of dissolution of the partnership. I consider that he well knew that he was not a registered proprietor of N property.
However, I do not consider that the findings just described are the same thing as a finding that he (as one of the four partners) did not intend the property to become partnership property. Indeed his actions are, in my view, just as consistent with him assuming that, irrespective of ownership by the husband and wife alone, N property was partnership property as it is with the opposite conclusion.
(b) Statements of Landholdings
Exhibit “RCS-4” to the affidavit of the husband was put to the wife as a document prepared by her. The relevance of that document is that it contains a list of properties under the heading “[Summitt] Combined Land Holdings if Properties are Sold During Lifetime”. Included in the list is N property, which is shown as being owned in “common” “[Mr Summitt], [Mrs Summitt], [the husband], [the wife]”. It is argued that, the wife having prepared that document, it is indicative of her intention (and, inferentially, a common intention) that N property was a partnership asset.
The wife gave evidence that the document was not prepared by her and gave reasons for saying so. I accept her evidence. I consider it much more likely that it was prepared by the partnership’s bankers or financial adviser as the wife suggested as an alternative.
Exhibit “RCS-06” to the affidavit of Mr Summitt was also put to the wife. It is a letter on “[Summitt] Farms” letterhead over the signature of the wife addressed to the Queensland Rural Adjustment Authority in March 2004. Attached to it is a “Statement of Position”. That document, prepared by the wife, and apparently associated with attempting to obtain a loan for the partnership, lists N property as owned by the four partners.
That Exhibit was put to the wife in cross-examination. The wife said that she was not sure when she became aware that the property was only owned by she and the husband. It was put to her that she only became aware of that in the course of preparing her case for trial. She agreed with the proposition.
I consider that this document is evidence of an understanding, and probably an intention, at least on the part of the wife, that N property was to be partnership property despite its ownership.
(c) The Books of Account and Other Indicia
Both the husband and Mr Summitt point in submissions to a number of matters said to be indicative of N property being partnership property. They include:
·The accounts of the partnership have recorded N property as part of the partnership property;
·Partnership funds (and partnership borrowings) were used to acquire it;
·The vendor loan of $130,000 used in part to acquire it is recorded as a liability of the partnership;
·Partnership funds paid the mortgage and other expenses;
·The property has been used during its life as an integral part of the overall farming operations of the parties;
·The wife was unaware that she and the husband (as distinct from all four partners) were the registered proprietors of the property until after separation.
Mr Kirk SC, counsel for the husband, submitted (and I agree) that the partnership has had through its life, “lax bookkeeping”. The expression is, as I find, a convenient means of summarising what might be described as “non-commerciality” in the bookkeeping. I have already referred to what I consider to be an important example: no allocation of partnership expenses to the specific properties to which they related was ever made in the books of account of the partnership.
Also, Mr Summitt deposes in his affidavit,
“ …at least until the 1999 financial year, no attempt was apparently made to allocate any capital advances made to the partnership by various partners or cash drawings to the individual partners who made those advances or took those drawings despite differences in them. I was not aware of this at the time. I am advised … that since 1999, that has actually been done, if not necessarily accurately…”.
If such record keeping is regrettable, it is also, it seems to me, unsurprising. This was a family business; it was an intra-familial farming partnership spanning more than 20 years. Whilst clearly run for profit, and whilst clearly run with a keen eye for improvement and investment for the future, the business also operated with partners connected by familial ties rather than the rigours of arms-length commerciality.
That last factor takes on particular importance, in my view, in the light of a number of anomalies arising from the bookkeeping which emerge across the various landholdings.
For example, of the factors just enumerated, submitted as being vital indicators to N property being partnership property, only the first and the last differ from those applicable to P property (which, it is agreed, is not partnership property). P property, too, was purchased with partnership funds, with payment of borrowings (not vendor finance in its case), outgoings and improvements coming from partnership funds. Significant improvements have been made to that property subsequent to its purchase. Yet, despite an apparent agreed intention by all parties that it is not partnership property, no rent has ever been paid to the husband and wife by the partnership and, importantly, no books of account of the partnership have ever specifically accounted for improvements made with partnership funds to that property, nor any entries made in respect of it in the husband’s and wife’s capital accounts.
When two farming properties, and later a third property, were acquired by Mr Summitt and his wife at N between about 1976 and 1979, the husband was registered as an equal owner with them. Shortly after, he became a partner with them in the farming business. That property was used as part of - at that time, an integral part of - the farming operations. Partnership funds made some improvements to it. The wife was gifted her interest in the partnership when the partnership farmed those lands.
Yet, each of the husband and Mr Summitt say it is not partnership property. Mr North SC sought to argue that it was. Yet, no evidence is put forward by the wife suggesting that to be the case. Moreover, the tenor of her evidence was, in my view, to the effect that this was Mr and Mr Summitt’s farm – the “Home Farm”. (In saying that, I am aware that the husband is an equal owner with his parents but, again, the overall intention seems to be to the effect that it was Mr and Mrs Summitt’s). It, too, apparently has never been included in the books of account of the partnership as an asset. No expenditure in respect of it has ever been accounted for in the partnership books.
Lot 45 has been referred to above. It is part of the N farm (although, obviously, a separate Lot). It is recorded in the partnership’s books as an asset of the partnership. Yet, all parties (including, as I have found, the wife in the witness box) say that is erroneous, and it is in fact an asset of the super fund and owned by its trustee.
The matters dot-pointed above, central to the submissions of the husband and Mr and Mrs Summitt can be – especially when taken together – significant indicia of an intention by partners that property owned by some of them is partnership property. Yet, as earlier pointed out, when those matters are seen in the context of the whole of the circumstances of property ownership and use in this case, anomalies abound.
Further, the factors pointed to in submissions by both the husband and Mr Summitt are in my view more at home, and in my view more persuasive of intention, in a “purely commercial” arrangement. I am not convinced they have the same persuasive power that they would have had appropriate bookkeeping and arms-length commerciality attended those books and arrangements.
That said, they are also not, in my view, able to be overlooked or irrelevant and I attach weight to them in arriving at an overall determination of the parties intentions.
(d) Accountant’s Records
There is no doubt at all on the evidence before me that estate planning was a very significant consideration in all steps taken by Mr Summitt and, in turn, the other partners. Documents from the parties’ current accountants, covering a period dating from about 1997 to about 2003 are in evidence (Exhibit “W10”). Those documents are clearly redolent of the importance of estate planning and taxation minimisation as crucial to the steps being taken by the partnership including, specifically, in some cases, how property was to be held.
Exhibit “RCS-3” to the Affidavit of the husband is described on its face as a “Record of Interview”. It is, it seems, a diary note taken by the partnership’s accountants, H Partners in respect of a meeting at which the husband, wife and, I find, Mr Summitt, were present on 22 October 1997. That document, among other things, records the landholdings used by the partners and records the “N farm” as being “in four names, [Mr Summitt], [Mrs Summitt], [the husband] and [the wife]”, going on to record that “the above facts need confirmation”. Thereafter, the document records a discussion in which it is said “the ownership of the land should remain unchanged”.
In oral evidence, under cross-examination from Mr North SC, the accountant, Mr B, gave evidence that upon assuming responsibility for the Summitts’ accounting, he was aware that the “… legal structure was not one-quarter, which is the general structure”. He also agreed that, in the usual course of events, where partnership property was owned other than by all partners equally, it would be expected that there would be an accounting of partnership expenditure in respect of the property, the payment of rent and the like.
Mr B said he was aware that hadn’t been done historically, and a conscious decision was made not to do it when he took over because “the work and expense to do it would be significant”. He recalled “a vague discussion about it early on” but, he said, it was not regularly discussed.
The intention urged upon the court by the wife is also said to be inferred from Mr Summitt’s involvement in every significant aspect of the overall planning and investment strategy of the farm. It is said that this is evident, in particular, from minutes of meetings with the farm’s accountants and solicitors from time to time (some of which were admitted into evidence as Exhibits).
It is argued that, what is evident is a continuing intimate knowledge of the nature and extent of the farming properties by Mr Summitt who is, it is said, effectively the “guiding hand” in the overall planning and structure. Within that context; it is argued that it is unlikely that N property would be registered in the names of the husband and wife unless the true intention was that it was owned by them. In effect, it is argued that Mr Summitt would not have permitted that to occur if the true intention was that it was partnership property belonging to all four partners.
I am not convinced that this is so. As I indicated earlier, I think it very likely that Mr Summitt did not turn his mind to the consequences of the ownership of the land even if he was aware – at particular times – of the titleholders to land (as I have found he was with respect to N property despite his denials. That is, though, not the same thing, in my view, as saying that, as a result, he intended that the land was to be their property as distinct from partnership property.
(e) Wills and Testamentary Documents
The issues arising under this general description are important because of the central submission made on behalf of the wife earlier outlined. That is supplemented by a submission that the evidence clearly discloses conscious decisions being made by the partners after consideration and consultation with accountants, financial advisers and solicitors, and that those discussions evidence the overall intention contended for. Mr Summitt’s various wills and the minutes of meetings with accountants are said to support this contention.
A will made in November 1992 (that is, prior to the purchase of N property) provides, relevantly, for a devise to the husband of “(a) my farming properties [described]; (b) all my farming plant machinery and horses;(c) all my share of and in the capital goodwill stock- in-trade plant machinery and assets of the firm of [Summitt & Co]”. Separately, a specific devise in that will is made to the husband and wife in equal shares of “my farming and grazing freehold properties [described] subject to transferring their interest in [name real property] to my daughters …”.
Two later wills of Mr Summitt are also in evidence (Exhibits “W8” and “W9” – executed, respectively, in 1999 and 2002). Each will devises, specifically, Mr Summitt’s half, third and quarter interests respectively in land whose real property descriptions are included in the wills. Each will is made some considerable time after the acquisition of P property (1986) and N property (1996). Neither property is specifically mentioned in either will. Yet, the other properties in which Mr Summitt has (a legal) interest are.
Each will, though, also includes a general devise: “…together with any other land I may own severally at the time of my death” which, together with the earlier specifically described land is described there (and thereafter in each will) as “my Farming Assets”.
It is said on behalf of the wife that, if Mr Summitt considered N property partnership property, his (equitable) interest in that property would have been the subject of specific mention in the wills. It is said that, like P property, it is not because it was, and was always intended to be, property of the husband and wife. As a corollary, it is said that this is an indication that it was never intended to be partnership property.
Summary of Findings: Property of the Parties or Either of Them
For the reasons given above, I find, in summary, in respect of the property of the parties:
§The property includes the agreed pool earlier set out;
§The property includes the parties’ beneficial interests in each of the Summitt Asset Trust and the T Trust, but in circumstances where all four parties are the principals/ appointors of same;
§The sum of $17,394 expended by the wife on legal fees should be added back to the pool and credited to her share;
§The sum of $11,470 expended by the husband on legal fees should be added back to the pool and credited to his share;
§The actual liabilities of the parties (save as already agreed or incorporated into other agreed valuations), and particularly those liabilities for Capital Gains Tax and realisation costs, may incorporate crystallised amounts determined consequent upon the orders to be agreed between the parties giving effect to these reasons;
§The real property known as N property is partnership property and ought be included as an asset of the partnership;
§The real property known as P property is property of the husband and wife but is not impressed with any constructive (or other) trust in favour of Mr and Mrs Summitt;
§The application in respect of declaratory relief in respect of capital sums contributed to the partnership by Mr and Mrs Summitt is refused;
§The sums contributed by Mr and Mrs Summitt to the partnership and the contribution by, as it were, their one-half share of the partnership to the cost of improvements on P property will be considered as a contribution by the husband (in the sense understood by s 79 of the Family Law Act).
Contributions
The husband contends that:
“…much will depend upon the size of the divisible pool but, assuming a net notional pool of around $1,500,000 (See Appendix A), the Husband’s entitlement cannot be less than 65% and, if the pool is greater (due to the Parent’s claims being unsuccessful, his percentage entitlement must be higher”
The wife contended that contributions should be assessed in the region of 55% to the husband and 45% to the wife.
Reference was made by senior counsel for the husband to a number of authorities (including a line of authority from the Court of Appeal in New South Wales in respect of de facto property settlements) that address the issue of “initial contributions”. Particular reference was also made to the decision of the Full Court of this court in Williams and Williams (2007) FamCA 313 where that line of authority was discussed.
The Full Court said in that case (at para. 26):
“We think there is force in the proposition that a reference to the value of an item at the date of the commencement of cohabitation without reference to its value to the parties at the time it was realised or its value to the parties at the time of trial, if still intact, may not give adequate recognition to the importance of its contribution to the pool of assets ultimately available for distribution towards the parties. Thus, where the pool of assets available for distribution between the parties consists of say an investment portfolio or a block of land or a painting that has risen significantly in value as a result of market forces, it is appropriate to give recognition to its value at the time of hearing or the time it was realised rather than simply pay attention to its initial value at the time of commencement of cohabitation. But in so doing, it is equally important to give recognition to myriad other contributions that each of the parties has made during the course of their relationship”
That said, the crucial task is to assess and weigh all contributions of all types: “What is important is somehow to give a reasonable value to all of the elements that go to making up the entirety of the marriage relationship”. (Aleksovski v Aleksovski (1996) FLC 92-705 per Kay J). In a similar vein, the Full Court said in Pierce and Pierce (1999) FLC 92 – 844 at 85,881 that: “It is necessary to weigh the initial contributions by a party with all other relevant contributions of both the husband and the wife. In considering the weight to be attached to the initial contribution … regard must be had to the use made by the parties of that contribution”.
As Nygh J held in G and G (1984) FLC 91-582 at 79,697 :
“In my view, despite what was said [by the Full Court] in Norbis, both approaches are legitimate unless the High Court rules otherwise provided that those who take the global approach heed the warning that the origin and nature of the different assets ought be considered and that those who favour the more precise approach do not mistake the trees for the forest, ie add up their individual items without standing back at the end of the overall result in the light of the needs of the parties”
His Honour’s sentiments were specifically approved by the High Court in Norbis v Norbis (1986) 161 CLR 513 (at 523 per Mason and Deane JJ). Their Honours went on to say (at 524):
“The Family Court has rightly criticized the practice of giving over-zealous attention to the ascertainment of the parties’ contributions, and we take this opportunity of expressing our unqualified agreement with that criticism, noting at the same time that the ascertainment of the parties’ financial contributions necessarily entails reference to particular assets in the manner already indicated”
There is a significant imbalance in the contributions made at the commencement of this approximate 24-year cohabitation in favour of the husband.
He contributed to the relationship his interest in the partnership (which was already a vibrant business) and a one-third interest in the “Home Farm” together with a car and insurance policy. The wife was gifted an interest in the partnership (which continued to grow and develop significantly) and a one-quarter interest in the E Farm. She contributed very little directly – a car she had was written off and the insurance proceeds were contributed to the partnership.
The partnership (and landholdings) formed the foundation for the support of the family and for the current wealth of the parties.
During their 24 years, each of the parties, I find, worked hard in their respective spheres. I reiterate the comments made earlier in these reasons in respect of reliability and veracity generally. They are no less true, in my view in this setting.
I have little doubt that the husband has been a hard-working and innovative farmer. The greenhouse project, which I accept was very much his “baby” is testament to the latter.
I equally have little doubt that the wife worked hard in her roles, both on the domestic front, as a parent with predominant responsibility for the parties three children, who are all now adults, and in carrying out her tasks within the partnership. As earlier observed, from the early 1980s the farming burden was essentially the husband and wife’s. The husband worked long and hard on the farm; the wife worked long and hard in her roles.
The wife also started a business which, on the husband’s case had “some initial success” including winning “a number of awards”, although ultimately it does not sound as an asset in the “divisible pool”
In the husband’s affidavit of evidence in chief, an attempt is made to refer to conduct designed, I gather, to comment adversely on the wife’s capacities as a bookkeeper and manager at the end of the marriage. I think it highly likely the account is exaggerated. The conduct occurred at the end of a very long marriage, the separation occurred within a family business and environment where, I find, at that time the wife was very much “on the outer”. I do not consider the evidence helpful in arriving at an assessment of contributions.
The wife has been absent from the farm (and the partnership business) for a period of about 4½ years since the parties separated. The husband has continued to work the farm and has continued to work hard in that respect. The wife has, then, made no direct contribution to the partnership specifically, and the property generally, in that time.
At separation, the parties’ youngest child was a boarder in Grade 12 at a regional private school and is now at the University of Queensland. The husband asserts that he has “financially been solely responsible” for that child since separation and that he pays a weekly sum of $200 for him. His expenses, though, have come from the partnership of which the wife remains a member, although she had not directly contributed to the generation of its income since that time. The oldest (adult) child was living on the farm until recently and the middle (adult) child lives with his de facto partner and their two children on the farm.
As indicated earlier in these reasons, I consider that Mr and Mrs Summitt have made contributions on the husband’s behalf by reason of their capital injections into the partnership, and by reason of their partnership share’s contribution to P property.
Those contributions have been substantial, and I accept that they have played a significant role at various times during the partnership - including when, as the husband alleges in his affidavit, there were cash flow difficulties, and also in respect of “the greenhouse project” in more recent times.
Their contributions are ameliorated by reason of the fact that they received benefits from the partnership when the labour in respect of the generation of income was primarily that of the husband, and other work in respect of the partnership was primarily that of the wife. Furthermore, as referred to earlier, they will retain an interest in a significant amount of the property once orders are made.
Contributions - Assessment
I have attempted to give full and appropriate weight to the contributions made by the wife and particularly those made in the capacity of homemaker and parent, as they are very substantial (albeit difficult to quantify). This is a long marriage.
I consider the contributions made by the parties in their respective spheres during their 24 years of cohabitation to be equal save for the contributions made on the husband’s behalf by his parents I consider that the contributions made by (or on behalf of) the husband post-separation also need proper recognition.
It seems to me that a proper assessment of the respective contributions (in all of the respects referred to in s 79(4) ) sees a significant imbalance in favour of the husband.
In summary, I have reached that conclusion based essentially on the following considerations (for reasons discussed earlier):
§The initial contribution of the husband (made by him and on his behalf by his parents) was significant in the light of the use to which it was subsequently put in providing a home and a business;
§Although a miscellany of other contributions have been made during the parties’ 24-year cohabitation, the initial contribution can be seen, in light of its place in the current assets, to retain significance;
§The contributions made on behalf of the husband by his parents in injecting capital into the partnership and contributing (as partners) to P property which, in its improved state, forms part of the s 79 property “pool” are significant;
§The capital sums otherwise invested into the partnership (reflected, at least in part in the partnership shares forming part of the s 79 “pool”) are also substantial;
§The use made of each of those contributions is significant as they have allowed the partnership to flourish, to provide an income for the family and to grow (including the acquisition of real property) and, more recently, expand into other areas;
§The post-separation period is significant and the husband has continued to work the farm (with some of the children), and Mr and Mrs Summitt contributed during that period.
The assessment of contributions, whether expressed in percentage or dollar terms, is not susceptible to precise mathematical calculation. Care must be taken, though, not to allow assessments expressed in percentage terms to be made without regard to the dollar value of any such assessment.
Additionally, I consider it very important to also bear in mind that the expression of an assessment in percentage terms embodies, as a result, a finding as to the disparity in contributions between the two parties to the marriage which should also be looked at in dollar terms; the dollar representation of what is found to be a disparity in contributions is, in my view, a very significant pointer to the justice and equity of the assessment.
It is when a dollar attribution is made that the task here becomes problematic (as Mr Kirk SC points out in written submissions on behalf of the husband) because the “pool” is – still – not capable of precise calculation. Mr Kirk SC contends on behalf of the husband (supported, in effect, by Mr and Mrs Summitt) for a “net notional pool” of “$1,482,215 or $1,943,210”. Mr North SC contends on behalf of the wife for a pool in excess of $3million.
The findings earlier made in respect of the trusts, P property and N property, as well as the findings made with respect to the declarations sought, will require adjustments to the net pool. The potential for error in my attempting to arrive at a precise figure for the pool resulting from the findings earlier made is high.
One alternative is to seek further submissions consequent upon a re-working of the figures, consequent upon my findings and the (possible) crystallisation of taxation liabilities. I have rejected that course of action; the parties need finality, the Act requires finality to the extent it is possible and there has already been more delay than is desirable in delivering these reasons.
I proceed, in any event, because, for present purposes, we are here not dealing with precise calculations; what is needed is a total net pool with only such sufficient accuracy that will give meaning to the percentage determinations otherwise arrived at. I consider that I can arrive at such a figure for the net pool and have done so by referring to Annexure A to Mr Kirk’s written outline and allowed for the findings made by me.
Doing so produces a figure for the net pool (including superannuation but with no allowance for tax) of roughly $2.2millon which I will use purely for the purpose of putting an approximate dollar value on percentage assessments (and a dollar figure on the resulting disparity).
Here, I have come to the conclusion that contributions should be assessed in the proportion 62.5% to the husband and 37.5% to the wife. That sees a disparity of 25% in the respective contributions.
That assessment would see the wife taking property (and superannuation) valued at about $825,000, and that entitlement would comprise the property (and superannuation) earlier described totalling about $250,000 and a cash adjustment of about $575,000.
That result means that my assessment of all contributions over a long marriage would be expressed by a differential in favour of the husband of slightly more than half of a million dollars in a pool of about $2.2million. I am satisfied that the assessment is appropriate.
Section 75(2) Factors
The husband is aged 50 and is in good health. The wife is aged 49 and is in good health.
The contributions assessment will see a significant disparity in the “property and financial resources” of each of the parties.
The husband will retain the business. It involves risk and is subject to climactic influences that can sometimes be dramatic (witness the long-standing drought of which I can take judicial notice). However, as a relatively young man, he also retains the potential for growth in the business and assets, and any improvement in the value of the land on which the business is conducted and in the business itself.
He will also retain, as a 50-year-old, about $160,000 in superannuation.
The wife, after 24 years of co-farming, has no farming property and no business. She will, as a result of ultimate orders, retain, by agreement. two properties in A with a combined value of $310,000 and a combined mortgage debt of about $250,000. The cash sum ultimately payable to her will see her able to discharge those mortgages if she desires, but, I note, the properties are rented and there may be taxation (and perhaps other) advantages in retaining those mortgages.
But, the wife lives in rental accommodation on the Gold Coast where she works. She owns no other real estate. Her superannuation, as a 49-year-old is about the same as the husband.
The wife is currently employed and earns a gross salary of about $73,000 per year. The husband declares a taxable income in his Financial Statement of about $34,000. The comparison, does not, though, compare like with like. The wife earns a PAYG salary. The partnership continues to meet a number of expenses for the husband (and other members of the extended family), including expenses that might otherwise need to be met from net income. I consider the parties’ respective “true” or “available” incomes to be roughly comparable.
In terms of property and financial resources (assuming a contributions assessment as earlier indicated) the wife is, in my view, in an inferior position to that of the husband. She will, though, have a significant cash sum with which she can, for example, re-house and has the income capacity to meet a reasonable mortgage. The husband (or, perhaps more accurately, the business) will need to find the cash payment. There is no evidence about how that will be done.
The husband (or, more accurately, the partnership) was, at the time his affidavit was completed, supporting the parties’ youngest child, then aged 21. He deposes though, that this child was due to finish his degree at the end of last year and his then intention was to move back to the farm.
It is, of course, difficult to compare “standards of living that in all of the circumstances [are] reasonable”. Yet, where the husband is able to continue to live a rural lifestyle at an existing home and place and doing work which he clearly enjoys and where the wife is working for salary in rented accommodation on the Gold Coast, I consider I can conclude that the wife’s standard of living is inferior to that of the husbands and inferior – at least in tangibles – to that which she experienced during the marriage.
As clearly emerges from the evidence, the wife has clearly contributed to the income, earning capacity and resources of the husband.
The husband (and other members of the family) will continue to enjoy the fruits of the property to which she contributed (in a number of different ways) over 24 years.
I mention, in the context of s.75(2)(o), a class action in which, as the husband puts it in his affidavit, “the farming business which is known as [Summitt Farms]” is involved. The action involves a commercial company and involves allegations of “cartel conduct” and other “breaches of the Trade Practices Act 1974”. The proceedings commenced in April 2006 and are, apparently, on-going. No trial date has apparently been set.
There is, I gather, a potential benefit to Summitt Farms in the form of damages. No figure has been put on any potential damages nor is any broad estimate provided. The husband deposes that a firm of solicitors is representing the plaintiffs, including Summit Farms on “a conditional fee basis”. He deposes that, in the event of success in the claim, Summitt Farms will share in the legal costs with the other plaintiffs. In the event of lack of success, the husband deposes that “the costs of [the defendant company] will be paid by the representative applicant” and not the other plaintiffs, including Summit Farms. Whilst there is, then, no potential detriment in costs, there is, apparently, uncertainty whether the defendant company will be able to pay any potential award.
Whilst there is the potential for injustice to the wife if the claim is successful and substantial damages are awarded and recovered, both the amount, if any, and the timing of any such payment are entirely nebulous. I do not propose to take it into account pursuant to s 75(2)(o).
In addition, there may be, despite the best efforts of the parties’ financial advisers and the terms of the orders made in these proceedings, taxation liabilities, particularly capital gains tax. By the terms of the orders which will be made (which, in broad terms) will see farming land and property remain (effectively) in the husband’s hands he (and perhaps his parents) will bear any such potential taxation liability. But, as is earlier discussed, the crystallisation of any such impose is by no means certain by reference to any time frame.
Whilst this, too, currently remains nebulous, potential taxation imposts have more certainty about them than the potential for a class action to deliver damages, and I consider I should have account of that possibility in the mix of matters to be taken into account under the section.
Section 75(2) - Assessment
Taking account of the totality of the matters just referred to, I consider that the matters pursuant to s 75(2), mandated as relevant by s 79(4)(e), call for an adjustment in favour of the wife.
An adjustment of about $100,000 represents just short of 5%. I consider an adjustment of 5% appropriate.
Overall Result and the Justice and Equity of the Orders
The overall result, then, is that the husband will receive a percentage entitlement of 57.5% of the divisible property and the wife will receive 42.5% of same. The differential (15%) is in the order of about $330,000.
I have considered aspects of the justice and equity of orders when considering each of the components of the result.
In summary, the wife will receive property and superannuation of about $930,000. Included in that is a cash sum of about $675,000. The wife should be able to re-house and retain the two investment properties (albeit with small equities, but with the potential for income and capital growth).
The husband will retain property and superannuation of about $1.25 million dollars. The components of that result will see him retain the farm and its associated valuable real property, including P property with the greenhouse project. It will continue to provide a lifestyle and income for him. He will retain his superannuation.
In the circumstances of this marriage, I consider the overall result to be just and equitable.
Orders
As indicated earlier, I propose to accede to the parties’ request and give them the opportunity to draft minutes of orders giving effect to my reasons.
However, as also earlier mentioned, I am aware that, if there is to be an appeal, it will need to be against orders (as distinct from reasons). If there is to be an appeal, the parties should have the opportunity to do so as soon as possible rather than waiting for formal orders to be made giving effect to the mechanics of the ultimate findings. Furthermore, it is artificial for parties to await orders they themselves have drafted only to, in effect, appeal their own orders.
Accordingly, I propose to make Orders giving effect to these reasons but to not include the transfers of property and the other mechanical components of the orders until such time as agreed minutes are received.
Delay in Judgment
Regrettably, these reasons are delivered later than I would have liked. The delay is essentially mine, occasioned by a number of factors, including some, but by no means all, outside of my control, and including my absence for a period of a month over the December – January period.
I record my apologies to the parties for that delay.
I also record, however, that, the ultimate delay incorporates the hearing of an application to re-open the trial which is the subject of separate reasons.
I make orders as indicated at the outset of these reasons for judgment.
I certify that the preceding three hundred and ninety three (393) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Murphy.
Associate:
Date: 13 May 2009
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