Tait and Marcic - [2009] FMCAfam 936

FEDERAL MAGISTRATES COURT OF AUSTRALIA

TAIT & MARCIC

[2009] FMCAfam 936

FAMILY LAW – Property settlement – determination of asset pool – dispute between valuers – difference in business and property valuations – equal contributions – future needs of the parties – adjustment in wife’s favour.

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

Norbis & Norbis [1986] 161 CLR 513
Lee Steere & Lee Steere (1985) FLC 91-626
Tuck & Tuck (1981) FLC 91-021
D & D [2003] FamCA 473
McMahon and McMahon (1995) FLC 92-606
Ferraro & Ferraro (1993) FLC 92-335
Clauson & Clauson (1995) FLC 92-595
Russell & Russell [1999] FLC 92-877
Pierce & Pierce (1998) 24 Fam LR 377
Weir & Weir (1993) FLC 92-338
DJM & JLM (1998) FLC 92-816
Omancini & Omancini (2005) FLC 93-218
Mallet & Mallet [1984] FLC 91-507
AER & AG [2004] FMCAfam 641
Phillips & Phillips (2002) FLC 93-184
Waters v Jurek [1995] FLC 92-635
In the marriage of Little (1990) FLC 92-147
Georgeson & Georgeson (1995) FLC 92-618
Best v Best [1993] FLC 92-418
In the marriage of Coghlan (2005) 33 Fam LR 414
Elsey v Elsey (1997) FLC 92-727
In the Marriage of Little (1990) FLC 92-147
Chorn & Hopkins (2004) FLC 93-204
Townsend & Townsend (1995) FLC 92-569
In the marriage of Lenahan (1987) 11 Fam LR 615
Commonwealth v Milledge (1953) 90 CLR 157

Applicant:

MR TAIT

Respondent:

MS MARCIC

File number:

MLC 316 of 2008

Judgment of:

O’Sullivan FM

Hearing dates:

26, 27, 28 May & 13,14 August 2009

Date of last submission:

18 September 2009

Delivered at:

Melbourne

Delivered on:

18 December 2009

REPRESENTATION

Counsel for the Applicant:

Mr P. O’Shannessey

Solicitors for the Applicant:

Harwood Andrews Lawyers

Counsel for the Respondent:

Ms. M. Smallwood

Solicitors for the Respondent:

Pearsons Barristers & Solicitors

ORDERS

The parties bring in minutes of orders to give effect to these reasons for decision within 28 days.
The matter be adjourned to a date to be fixed, but not before 25 January 2010 for the purposes of making final orders to give effect to these reasons.

IT IS NOTED that publication of this judgment under the pseudonym Tait & Marcic is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).

FEDERAL MAGISTRATES
COURT OF AUSTRALIA AT MELBOURNE

MLC 316 of 2008

MR TAIT

Applicant

And

MS MARCIC

Respondent

REASONS FOR JUDGMENT

Introduction

These reasons concern the outcome of a protracted hearing over an application for the division of matrimonial property pursuant to section 79 of the Family Law Act 1975 (“the Act”).
The applicant is Mr Tait (“the husband”) and the respondent is Ms Marcic (“the wife”).
By the time the matter proceeded to final hearing the husband was

44 years of age and the wife was aged 39 years. The parties married on (omitted) 1994, separated on 22 October 2007 and were divorced in 2009.
The proceedings were commenced by an application seeking parenting and property orders filed by the husband on 14 January 2008. The wife filed a response and affidavit on 4 February 2008.
There are two children of the marriage and, after a number of interim hearings and orders, on 19 February 2009 final parenting orders were made by consent that provided for the children to live week about.
The property proceedings were adjourned to 2 April 2009. Unfortunately, due to inter alia disputes between the valuers engaged by the parties to value the business operated by the husband the final hearing could not be accommodated on that day and was subsequently (after a number of mentions) fixed for 26 May 2009.
The final hearing commenced on 26 May 2009. However, for reasons that will become clear presently, it was necessary at the start of the hearing for an order to be made for the various valuers engaged by the parties to confer and to prepare joint reports for the Court.
The hearing ran for the 3 days that had been allocated to it and on

28 May 2009, due to competing court commitments and that the oral evidence had not concluded, was adjourned part heard to 22 July 2009.
Before the matter could return to Court, and on 9 July 2009, the wife filed an application in a case. On 22 July 2009 orders were made to effect an agreement that saw that application discontinued.
The part heard final hearing was then adjourned to 13 August 2009 and witness evidence concluded on 14 August 2009. At that time the following orders were made:
“1.The Respondent file and serve submissions by not later than 4.00 pm on 31 August 2009.
2.The Applicant file and serve submissions by not later than
4.00 pm on 14 September 2009.
3.The Respondent file and serve any submissions in reply by not later than 4.00 pm on 18 September 2009.
4.The Court otherwise reserves it’s decision.”
Both parties changed solicitors during the course of these proceedings and after that occurred the value of the business (and at least one of the other assets) controlled by the husband became the most contentious issues at the final hearing.
The disputes between the experts engaged by the parties not only prolonged the final hearing but also contributed to an expenditure on legal fees estimated to be in excess of $250,000. In the end the Court was left with real reservations as to whether the parties and their solicitors approached these issues with any degree of proportionality.[1]
[1] The parties had been asked and opposed the matter being transferred to the Family Court of Australia

The hearing

At the final hearing Mr O’Shannessy of Counsel appeared on behalf of the husband and Ms Smallwood of Counsel appeared on behalf of the wife.
The husband and the wife both gave evidence and were cross examined. Whilst at times it seemed the entire proceedings were occupied dealing with the evidence of and disputes between the experts engaged by each of the parties in the end as the submissions filed on behalf of the wife put it:
“3.The asset pool in this matter has a number of contentious issues. Each of those issues, although significant in result, can be confined to a discrete question in each instance. The dispute re the valuation of (name omitted) Unit Trust, (the unit trust) can be confined to the value of the factory in which the company, (name omitted) Pty Ltd, conducts it’s business. In turn, the dispute re the value of the factory can be contained to whether a capitalization rate of 7.5 or 8.5 is applied. The dispute re the value of (name omitted) Pty Ltd can be limited to whether a multiplier of 2.5, 3.0 or 3.5 is applied to assess it’s value. There is a dispute as to whether there should be an add back of $33,000 being money drawn down by the wife pursuant to paragraphs 1 and 3 of the Order made 8^th December 2008.
4.It is open to the Court to reach a different conclusion as to the value of the real estate, or the business, to that reached by any of the valuers, as long as the Court adopts a proper approach to determining that valuation. In other words, the Court could apply a different capitalization rate, or multiplier, in the abovementioned disputes, should the Court consider such an approach to validly determine the value in dispute. The methodology adopted by each of the valuers in both areas of dispute is agreed. It is also open to the Court, in the event it is difficult and complex to ascertain the true value of property, and there is significant disparity in the evidence, to order a sale of the property, as a proper solution. In the Marriage of Little (1990) FLC 92-147.”
Whilst the matter did come down to the issue/s as identified above it had been necessary for the Court to make a number of orders for the experts engaged by the parties to confer and where possible reach agreement or identify areas of dispute for the Court to decide.
Even with the benefit of reports produced as a result of Court ordered conferences between the experts, the evidence from those experts occupied the overwhelming majority of the hearing time before the Court.

Material relied upon

The parties relied on the following material:
a)the husband relied on:
·his application for final orders filed 14 January 2008;
·his affidavit filed 13 June 2008;
·his affidavit filed 6 February 2009;
·his affidavit filed 16 April 2009;
·his financial statement filed 5 February 2009;
·the affidavit of Mr P filed 16 June 2008;
·the affidavit of Mr P filed 5 February 2009;
·the affidavit of Mr S filed 16 April 2009;
·the affidavit of Mr M filed 23 March 2009;
·minutes of conference of experts filed 22 May 2009 (exhibit A6); and
·final submissions filed 15 September 2009.
b)the wife relied on:
·her affidavit filed 16 June 2008;
·her financial statement filed 25 November 2008;
·her affidavit filed 25 November 2008;
·her trial affidavit filed 17 February 2009;
·the affidavit of Mr M filed 3 February 2009;
·the affidavit of Mr F filed 15 May 2009;
·her affidavit filed 22 May 2009;
·minutes of conference of experts filed 22 May 2009 (exhibit A6);
·final submissions filed 1 September 2009; and
·final submissions in reply filed 18 September 2009.
Both parties also tendered a number of exhibits during the hearing.[2]
[2] see exhibits A1-A12 and R1-R6

Final orders sought by the parties

In the outline of case filed 22 May 2009 the husband sought the following orders:
“1. That the Wife retain her interest in the real property known as and situate at Property T, and she re-finance the mortgages registered thereon into her sole name.
2.That the Husband retain his interest in (name omitted) and indemnify the Wife as to all liabilities of those companies and trusts and the wife transfer all her right title and interest in the (name omitted) to the Husband including in any loan account.
3.That the wife pay to the husband the sum of

$152,976
.
4.That the Wife make available for collection by the Husband, the items on list A from the former matrimonial home.
5.That the husband make available for collection by the wife, the items on list B marked Y (for yes) from the Property G home and stored at the husband’s fathers home and that the husband make diligent search for and when located make available for collection by the wife the items on list B marked.
6.That unless otherwise specified in these orders and except for the purposes of enforcing the payment of any money due under these or any subsequent orders:
(a)each party be solely entitled to the exclusion of the other to all property (including chooses-in-action) in the possession of such party as at this date. The furniture, personal possessions and like chattels in the matrimonial home are considered to be in the possession of the Wife.
(b)each party hereby foregoes any claim they may have to any superannuation benefits belonging to or earned by the other.
(c) all insurance policies to become the sole property of the owner named therein.
(d)each party be solely liable for and indemnify the other against any liability encumbering any item of property to which that party is entitled pursuant to these orders;
(e)any joint tenancy of the parties in any real or personal estate is hereby expressly severed.”
The Court had not been provided with any evidence that the trustees of the relevant superannuation funds had been accorded procedural fairness. Given this, and as the form of any final orders remained subject to the determination of a number of questions as to the size of the asset pool, the husband’s final submissions simply restated the orders that had been sought in his outline.[3]
[3] see para 102 of submissions filed 15 September 2009
In her final submissions the wife sought a division of the matrimonial assets of 65% in her favour, which she contended, if the evidence led on her behalf were accepted, would see her receive:

The wife retain the former matrimonial home (unencumbered)

$1,200,000

A payment to the wife in the sum of:

$435,440

Super split of 50/50 seeing a split to her of:

$81,682.50

Total

$1,717,122.50

As with the husband’s final submissions, in submissions filed on her behalf after the hearing the orders sought by the wife necessarily remained subject to the determination of a number of questions as to the size of the asset pool. Accordingly, the figures set out above need to be considered in that context.[4] However the wife’s final submissions were:
“28. It is submitted that the wife should receive a percentage division of assets of 65 percent in order to reach a just and equitable conclusion. It is submitted that that calculation should be done as a 50/50 contribution assessment, with a loading of 15 percent over and above that contribution assessment, to properly address the prospective impact of any orders the Court makes. In the alternative, should the Court be persuaded that the husband should be assessed as making a superior contribution to the assets of the marriage, which suggestion is strongly rejected on the wife’s behalf, then the ultimate percentage division should remain 65 percent in favour of the wife. Any such reduction from the wife’s base contribution necessitate a greater s.75(2) adjustment to the wife, in order to effect justice and equity in the manner contemplated in Clauson’s case and Waters v. Jurek.”
[4] see Para 2 of submissions filed 31 August 209

The law

Section 79 of the Act defines the Court’s powers in determining applications for property settlement. It has been well established that the Court’s approach to such an application involves four steps (see Lee Steere & Lee Steere [1985] FLC 91-626, Ferraro & Ferraro

[1993] FLC 92-335 (“Ferraro”) and Clauson & Clauson [1995] FLC 92-595 (“Clauson”)).
The first step involves making a finding as to the pool of assets and liabilities. The second step involves a consideration of contributions made by the parties as defined in s.79(4)(a) to (c). The third step involves the Court having regard to the matters set out in

s.79(4)(d)-(g) (“the s.75(2) factors”) of the Act.
At both the second and third steps, the Court must consider whether it is appropriate to make an adjustment of the parties’ property interests. Finally, the Court is required to step back and determine if the overall result after the first three steps is just and equitable in the particular circumstances of the case (see Russell & Russell [1999] FLC

92-877 (“Russell”)).
The Full Court In the marriage of Coghlan (2005) 33 Fam LR 414 considered the relevant provisions of the Act including the manner in which a Court should formulate the asset pool and in particular whether the Court should effectively adopt a two pools approach, one for property as it is defined in s.4(1) and a separate pool for superannuation. Concerning the different approaches, the majority held:[5]
[5] In the marriage ofCoghlan (2005) 33 Fam LR 414
“Nothing we have said in this judgment would prevent a Court in the exercise of its discretion from including a superannuation interest as an item of property in the list of property which is drawn as “the first step” in the determination of proceedings under s.79, whether or not a splitting order is sought in those proceedings. This approach could be adopted where the parties agree that it should be adopted, or where the Court is satisfied that the superannuation interest is indeed property within the meaning of the definition of property contained in s.4(1), or if the interest is not within that definition, but is of relatively small value in the context of the value of the other assets in the case, or there are features about the interest which leads the Court to conclude that this would be an appropriate approach.
The parties’ contributions to all items on that list (including the superannuation interest) would then be assessed on either a global or an asset by asset basis. It might then be necessary in the s.75(2) context to have regard to the parties’ future superannuation entitlements (having regard of course to any division proposed on the basis of their contributions), with consideration then being given to the overall justice and equity of any proposed award or order (including any proposed splitting order).
…
However, given the conclusions we have reached above, we consider that the preferred approach to the determination of property settlement cases must be to prepare in addition to the list of items of property (which would clearly fall within the definition of that term in s.4(1)), a separate list containing any superannuation interest or interests (valued according to the Regulations if a splitting order is sought in any application before the Court, or if no such order is sought, valued either according to the Regulations or otherwise). This of course is the approach which the trial Judge adopted in this case.
Then for the reasons we earlier gave, whether or not a splitting order is sought on either party’s application, the parties’ contributions to both the property (as defined in s 4(1)) and also to the superannuation interests should be assessed. The other factors in s.79(4)(d), (e), (f) and (g) would then need to be considered. Specifically in the context of s.79(4)(e), that is the s.75(2) factors, any division of the property (as defined in s.4(1)) and any “division” of any superannuation interest (in the sense of an allocation of the base amount) based respectively on the assessments of the parties’ contributions to the property and to any superannuation interest, would then be considered.
Similarly, the parties’ future superannuation prospects (be they in capital or income form) would also need to be considered. The overall justice and equity of the ultimate award (including any proposed splitting order or the need for such an order) would then be considered.”
There is a significant amount of superannuation in this case. However the parties agreed it should be divided 50/50. Whilst it will be treated separately for the reasons set out above, the position of the parties before the Court obviated the need to consider adjustments to that species of property at each of the second and third steps and the parties’ submissions before the Court proceeded on that basis. Given that position I am content to adopt the position of the parties on that issue which renders, given the agreed position of the parties, separate consideration of superannuation at each of those stages unnecessary.
Given the level of detail that the disputes between the experts engaged by the parties descended to (as identified at paragraph

14 above) I note that in In the Marriage of Lenahan (1987) 11 Fam LR 615, the Full Court said the following:
“A trial Judge, as part of his ultimate responsibility under s 79 or otherwise, is normally required to determine a number of issues. Some of those issues may properly attract the evidence of expert witnesses. In appropriate circumstances their opinions are admissible to assist in the determination of such an issue. It is the responsibility of the trial Judge to take into account the opinions of such witnesses, however, the ultimate duty of the Judge is to determine the issue on the whole of the material before him, including such opinions. The expert evidence is called to enable the Judge to form his own independent judgment on the matter by the application of the appropriate principles.”
The determination of value is one for the Court to make, assisted by the opinions of the various witnesses call by each of the parties. In In the Marriage of Phillips (2002) 29 Fam LR 128 at 136, their Honours of the Full Court said this:
“In Commonwealth v Milledge (1953) 90 CLR 157 the High Court said that the correct approach to be applied to the resolution of a valuation dispute should be a commonsense endeavour after a consideration of all material to fix a value satisfactory to the mind of the Court as representing the value. As to the appropriate principles, there is no fixed rule as to the proper method of valuation, and the preferred methodology depends upon the facts of the case. However, the Court cannot adopt a valuation methodology that is fundamentally flawed and not applicable to the facts of the case. If there is a dispute as to the value of an asset and the Court prefers one expert to another then reasons for the preference should be stated. …”

Background

In what follows a statement of fact constitutes a finding of fact unless the context suggests otherwise.
At the start of the relationship the husband, who is a (occupation omitted) by trade, had commenced a business that (omitted). The wife worked full time as a (occupation omitted) and both parties used their joint endeavours to further their lives and build a better future.
In February 1992 (name omitted) Pty Ltd was established. Early in the marriage the parties bought a home in Property T where they resided from 1994. Both parties contributed to the purchase price for this property.
On 28 January 1997 the (name omitted) Unit Trust was established.
Also in 1997 land was purchased for the factory for (name omitted) at

Property A, (“the Site”). A factory for (name omitted) was constructed on the Site which was completed in 1998. The Site is owned by the (name omitted) Unit Trust.
The factory at the Site contains all of the machinery and equipment required for reconditioning and refurbishment of (omitted). The factory contains specialist equipment designed and built specifically for testing (omitted).
X, the first child of the marriage was born on

(omitted) 2000. By the time of the final hearing X was aged 9 and attending (omitted) Primary School in grade 3.
Since 21 August 2000, (name omitted) has been known as (name omitted) Pty Ltd.
The wife had worked full time as a (occupation omitted) up and until shortly before the birth of the first child. She returned to work as a part time (occupation omitted) in late 2002 after maternity leave until the birth of the second child.
On the arrival of the second child the wife again stopped her employment outside the home. Y, the second child of the marriage was born on (omitted) 2003. By the time of the final hearing Y was in grade prep and also attending (omitted) Primary School.
In October 2005, (name omitted) won a contract with (name omitted). Whilst by the time of the final hearing, the contract had expired and proceeded on a month to month basis 62% of (name omitted’s) gross income was derived from this contract.
During the course of cohabitation the parties purchased the property at Property T (“the former matrimonial home”) in or around 2002. The title for the former matrimonial home is in the wife’s name.
There is a mortgage (home loan account number (omitted) -$109,600) and a line of credit (line of Credit account number (omitted) -$184,600) encumbering the former matrimonial home for which both parties are responsible.
As at the date of the hearing the value of the former matrimonial home was $1,200,000 and the total of the liabilities secured against it were $294,200 leaving equity of $905,800.
Save as set out above during marriage the parties had traditional roles. The husband devoted his time to (name omitted) and the wife, who was employed initially as a (occupation omitted), carried out home duties.
Since separation the wife has had sole use and occupation of the former matrimonial home. The husband moved post separation into rental accommodation in (omitted) and pays $470 per week in rent. In addition, the husband also pays $260 per week to rent a beach house in Property M which is owned by part of the (name omitted).
At the time of the final hearing the husband was a director of (name omitted) with a salary package of $197,000 per annum. However in the last 12 months and via loans from the Business he had access to $320,000 in funds to apply as and where he saw fit.
At the time of the final hearing the wife was employed as a (occupation omitted) earning $234.00 gross per day and her work was spasmodic.
Final parenting orders were made by consent on 19 February 2009 providing for a week about arrangement. The husband pays $11,596 per annum to the wife by way of child support for the children.

The Business

In order to properly contextualise the dispute between the experts referred to earlier it is necessary to understand the structure behind the Business.
The (omitted) (“the Business”) combines the entities of (name omitted) Pty Ltd, the (name omitted) Unit Trust the Tait Superannuation Fund (“the Super fund”), the Tait Investment Trust (“TIT”) and the Tait Equipment Trust (“TET”).
The trust deed of the (name omitted Trust) dated 28 January 1997 showed 66.7% of the units were held by the husband with the remaining 33.3% held by the Super Fund. The 2007 income tax return of the (name omitted Trust) showed at distribution of 91% to the TIT and the remaining 9% to the Super fund.[6] The trustees of the (name omitted Trust) are (name omitted) Pty Ltd.
[6] para 3.3.4. of Munday’s report
The Super fund is a self managed superannuation fund with (name omitted) Pty Ltd as the trustees. The members of the fund are the husband and his father, Mr Tait.
The TIT is a discretionary trust. Its trustees are (name omitted) Pty Ltd. The appointers of the TIT show that the husband and his father as its appointers. However the primary beneficiaries of the trust are the husband, the wife and the children. The trust is 100% controlled by the husband. The TIT holds 91% of units in the (name omitted Trust) whilst the balance is held by the Super fund.
In 1999 (name omitted Trust) purchased a property at Property M, for $200,000. It is agreed the value of the Property M property is $425,000. The husband rents the Property M property from the (name omitted Trust) in the sum of $260 per week.
Since 21 August 2000, what was (name omitted) has been known as (name omitted) Pty Ltd. The husband is the Director and Secretary of the Business and held 99% of the shares.
In 2004 the (name omitted Trust) sold a block of land in Property G, for $445,000 and the net proceeds were applied to repay the National Australia Bank (NAB) who have at various times advanced money to the Business (one of or its constituent entities) in return for security including in the form of mortgages over real property owned by the Business or one of its constituent entities.
The Site is owned by (name omitted Trust). The Business paid (name omitted Trust) $72,000 in rent for the year ended 30 June 2008.
(name omitted) also leases equipment from TET. For the year ended 30 June 2008 (name omitted) paid $183,338 for the rent of plant and equipment, of which the TET received $143,392.
The Business has four loan accounts:
a)overdraft
b)loan account no. (omitted)
c)National Australia Bank fixed rate loan account no. (omitted); and
d)loan account number (omitted).
The husband has access to the line of credit connected with the Business. In the last 12 months in addition to a salary of $197,000 the husband drew up to $120,000 from the Business to cover inter alia his legal expenses.

Issues in dispute

Leaving to one side for present purposes the parties respective contentions regarding contributions and future needs, the issues in dispute were identified by the parties in their respective submissions as follows:
a)Business valuation.
b)Site valuation.
c)whether $33,000 should be added back into the pool as a result of orders made on 8 December 2008 and another add back raised by the wife in final submissions.
d)whether there should be an order in relation to the Volvo motor vehicle which is leased through the Business but is used by the wife.
e)how a number of the many chattels should be divided.

Dispute between experts on valuation of the Business

Evidence was led from two experts (engaged by the parties) on the value of the Business. Both valuers were very experienced and no challenge was made to their qualifications.
Pursuant to orders of the Court Mr M (who had been engaged by the husband) and Mr F (who had been engaged by the wife) filed Minutes of the Conference of Experts on 22 May 2009.
In summary that minute noted the items agreed upon (such as methodology for valuing (name omitted Trust), TET, (name omitted Trust), the Superfund and TIT) and the main remaining item they disagreed on (the (omitted) for the combined (name omitted) and TET business or the multiplier ratio). This had been:
·2.5% per Mr M report.
·3.0 – 3.5% per Mr F report.
The valuers prepared a joint statement in the above mentioned minute which provided inter alia that:[7]
“Mr M issued his report assessing the value of the (name omitted) on 23 March 2009.
Mr F issued his report critiquing the Mr M report and assessing the value of the (name omitted) on 3 May 2009.
…
Earnings Multiple
·    The experts could not agree on an earnings multiplier and retain their pre-meeting positions.
·    Mr M considered a multiplier of no more than 2.5 could be justified for a business relying on one customer for 60% of its business, especially when that client is likely to provide less work to (name omitted) in the medium term (he referred to correspondence from (name omitted) to Mr Tait dated 11 May2009, which showed (name omitted) heavy reliance on (omitted)).
·    Mr F stated he had seen businesses with one customer representing 91% of sales sold at a multiplier of 4.5 times (omitted) and stated that (omitted) was a long term client of the business. He was content with his 3.0 to 3.5 times range.
…”
[7] Minute of Conference of Experts filed 22 May 2009

Mr M

Mr M was appointed as an expert on behalf of the husband to value the Business. Mr M issued his report on the (name omitted) on 23 March 2009.
Mr M gave oral evidence and was cross examined on 28 May 2009.
Mr M’s evidence was that the Business had one major client, (name omitted) (responsible for over 60% of sales) operating in a very competitive market, reliant on the owner, running on low margins and with a declining profit history.
Mr M’s evidence was that the Business had a high level of labour, that the work was high risk and the Business had WorkCover issues.
Mr M gave evidence that the Court should accept his position on the appropriate multiplier rate, for reasons including the following:
i)the (omitted) business generates over 60% of the Business profits;
ii)the Business is heavily dependent on (omitted) and through them the work (omitted) gave (omitted);[8]
iii)there are 176 businesses in Victoria in the same area as the Business therefore there is a lot of competition in the (omitted) business;
iv)the Business runs on low margins;
v)historically the Business profit fluctuates; and
vi)the market for sales was too uncertain to justify a higher rate.
[8] see also Exhibit A2
Mr M gave evidence that he was not aware of any previous offers made or negotiations to the sell the Business.
Mr M gave evidence that in the present economic climate he was reluctant to nominate a single figure (in terms of the business multiplier) for the value of the Business as it was not reliable. His evidence was a mid point of the range would be the most accurate which was how he arrived at 2.5%.
Mr M gave evidence that in conducting his valuation, in his view, he needed to take a conservative approach.
An additional factor in Mr M’s view that should be taken into account was the husband’s role within the Business including that he was:
i)the director;
ii)he had been with the Business since its commencement;
iii)he had a strong relationship with his clients which was a key to the Business;
iv)he no longer worked “on the tools”;
v)he had 35-40 employees; and
vi)the Business was well structured.
Mr M gave evidence that he gathered information relating to small to medium commercial sales in the area of the Business. Mr M said that the statistics gathered from the publication referred to by Mr F in his evidence were wholly unreliable for valuation or comparative sale purposes as they were not comparing the same type of business.
Mr M gave evidence that given the current market and the economic climate there was a trend in the market, that:
·     there was less spending;
·     there was a decrease in turnover/profit;
·     potential buyers were finding it difficult to obtain finance;
·     credit across the board had been tightened; and
·it was harder for a new purchaser to arrange to purchase the Business.
Mr M emphasised in his evidence that “we are in uncertain times” and this conclusion had clearly informed his view on the appropriate multiplier.

Mr F

Mr F gave evidence and was cross examined.
Mr F gave evidence of comparative sales that he had considered in arriving at his opinion and he had included sales from different industries and businesses in coming to his view. One of the businesses referred to in his report was a business from the wholesale clothing industry which in that particular instance relied on a single contract which was 93-95% of the profits. Mr F did not appear to consider that this would not be comparing “apples with apples” in doing so.
Mr F’s evidence was that whilst the different figures on multipliers reached by the experts were not significantly different, in this case he preferred 3-3.5%. However he made plain that it would vary depending on the industry.
Mr F gave evidence of his understanding of the impact of the current economic climate on businesses and sales of businesses. Mr F’s evidence was that it was much more difficult for businesses to borrow money than as it was 12-18 months ago. His evidence was as a result there was an impact on the future earnings assessment for businesses being sold and the multiplier for any business would change as a result.
Mr F’s evidence was when coming to his opinion on the value of the Business he said that he applied an average over the past 3 years. He stated that “it’s certainly not an exact science.” However he stated during his evidence that a multiplier of 3% is more likely rather than 3.5%.
It was agreed that the bulk of the profits generated by the Business were derived from 1 customer ((omitted)) which generated nearly 60% of sales. The remaining 40% of income comes from numerous smaller customers. The contract with (omitted) expired in November 2008 and the Business is engaged on a month by month basis by (omitted). Mr F’s evidence was that there were a number of associated risks with having one main customer, including that it would be a potential risk for a new buyer. However, he believed there could be sale contracts drafted which would provide for the transfer of the relationship.
In response to Mr M’s evidence that the husband had a good rapport with his clients and this had been taken into account by him in arriving at his position on the multiplier Mr F said that the relationship with clients is a factor that can be transferred with time to the new owner.
Mr F’s evidence was that he found Mr M’s report comprehensive, balanced and reasoned. Mr F stated that he had used Mr M’s report as a starting point and confirmed that he would have used the same methodology if he prepared the initial valuation.
Mr F’s evidence was that in deriving a range for his valuation he had taken into account the economic conditions and the global financial crisis. His evidence was that Mr M’s multiplier of 2.5% was a very low range and he was more optimistic about the economic outlook.
Mr F’s report was based on “limited information provided”.[9] He did not appear to have sought further information or clarification from the husband or from the financial manager of the Business.
[9] See paragraph 6.13 (page 10) of Ferrier’s report

Decision on value of Business

There was no dispute as to the expert’s experience. The experts agreed on the methodology for and factors relevant to the multiplier effect. The experts agreed the difference came down to the assessment of the “same bucket of relevant matters”.
In her submissions filed after the hearing the wife set out why she contended the evidence of Mr F should be preferred as follows:
“12.Dealing now with the valuations of the business, it is submitted the valuation of Mr F should be preferred. He also was most moderate and considered in his demeanour in the witness box, entertained an open approach to information, and did not give the impression he was anything other than balanced in his approach. Again, as the selection of a multiplier is ultimately a subjective choice, those qualities in his evidence recommend it.
13.Both Mr M and Mr F agree that the range for selection of a multiplier is between 2 to 5. The financial performance of (omitted) has been strong, and increased in the last financial year. In essence, Mr M chose a low multiplier. He did so because of general concern re the “credit crunch”, (omitted)’s reliance upon (omitted) as to 60% of it’s current work, perceived dependence on the husband himself within the business, and the ups and downs of the past performance of (omitted). Mr F addressed the 60% client share occupied by (omitted) by referring to a particular example “of an actual sale” he had in the clothing business, where a single client accounted for 95% of business. The multiplier had been high, regardless of the perceived risk of a single client. Mr F also addressed common arrangements to secure clients by way of stepped payments after purchase to mitigate that risk. Mr F addressed each of the concerns raised by Mr M, and indicated he had taken all those factors into account when completing his valuation task. It is submitted his evidence was persuasive, thorough and most even handed, and the Court is referred to the transcript of his viva voce evidence in that regard.”
The husband dealt with why, in his submissions, the evidence of Mr M should be preferred at paragraphs [52] to [67].
Ultimately, in relation to this issue, as the submissions of the wife made clear the dispute in relation to the value of the Business can be limited to whether a multiplier of 2.5 or 3.0 to 3.5 is applied to assess its value.
By way of explanation for the variation between the figure he had arrived at (of 2.5) and that reached by Mr F (of [3.0-3.5]) Mr M’s evidence made plain he had been conservative in his estimate given the circumstances he gave evidence of, with respect to the current market, the difficulties getting finance and the cautious approach he adopted to comparable sales in the light of those issues.
Mr F’s evidence confirmed the difference between the valuers was in essence one of the application of a discretionary and subjective view applied to the business at hand (“the Business”).
Mr F acknowledged there were risks associated with valuing the Business and his evidence were these had been factored into his assessment. Mr F’s evidence was there was no dispute with Mr M over the valuation methodology and the differences between the experts came down to an assessment of the same factors.
The experts each referred to comparative sales in the area and to a (omitted) publication. The Court was told that (omitted) publications was a recent development and available to assist in valuing businesses by providing information on comparative sales. The publication was used by accountants and businesses brokers and the statistics were gathered from surveys. However it is clear from that evidence of both experts that the data in that publication is not transparent.
Acknowledging “one can’t approach these matters with a degree of exactitude” Mr F confirmed he had relied on amongst other things in coming to his view the sale of a business in a different industry but with a single client as in part justifying the multiplier he arrived at. However, he acknowledged it “maybe different for different industries”. Moreover Mr F acknowledged the sale of the Business and his multiplier would be subject to a number of factors in any sale contract which could be as peculiar as the particular business, the individuals involved and whether there had been a due diligence process.
As the husband noted in his submissions:
“62.In any event Mr F clearly did not maintain a value at 3.5 or even at the high end of that range. He re considered his position to move to a multiplier of more to 3 in evidence in chief. See his evidence[10] after considering the (omitted) document (Exhibit A5): “It would probably cause me to take it towards the lower end, more towards the 3 mark than the 3.5” and at P-10 line 14 in cross examination, “The gist of your evidence when you take account the views that are expressed in the letter…in terms of your assessment of the value of this business, you say you move towards
[10] 28/5/09 P-7 at line 7.
3 rather than 3.5? Because there are other factors raised within that letter after what I assume is sufficient due diligence”.
…
64.The attempt by Mr F, in expert conference and in evidence, to justify a higher capitalisation rate by anecdotal reference to one sale 3 years ago in a dissimilar industry (clothing wholesaler[11]) also undermines his reliability when compared to Mr M’s more straight forward but relying on greater detail approach. The attempted reliance upon the (omitted) publication similarly undermines the reliability of his opinion.
65.Mr M in expert conference took on board the reliable points of Mr F as to net liabilities and made an adjustment from $(758,409) to the agreed $(638,409) to $(658,409). This sensible concession will fortify the confidence of the Court in Mr M’s opinion.”
[11] or as he said “a completely different business”.

Notwithstanding the time the parties spent interrogating the basis for the opinions of the experts in the context of their valuations of the Business at the time of the final hearing neither party sought to reopen the hearing on the basis that a change in market conditions warranted those opinions being revisited.
Mr F accepted Mr M’s analysis was well within professional boundaries. In my view Mr M’s valuation, in the context where the difference between them had come down to the multiplier effect, was subject to fewer variables. It is in my view more reliable and to be preferred.
In coming to that conclusion I have not ignored the submissions advanced on behalf of the wife on this issue.[12]
[12] see paras 12-13
As was noted in the husband’s submissions Mr F’s opinion did vary, Mr M has greater experience and made sensible adjustments and reached his opinion independently and without reference to information in other industries or on the basis of anecdotal information.[13]
[13] see paras 54-65 of the husband’s submissions
Moreover a critical issue in Mr F arriving at his higher multiple was his reliance on a sale in a business with a similar customer base. However he acknowledged it was a totally different industry.
Mr M’s opinion was not only the more conservative approach but in my view a more realistic assessment of the multiplier likely to be applied by an arms length purchaser in the current economic climate (which both valuers acknowledged added to the uncertainty). On balance for all the reasons set out above I am persuaded that Mr M’s assessment is to be preferred.
Accordingly for the reasons set out above I accept Mr M’s estimate and find the multiplier should be 2.5.

Dispute between experts on the Site

The parties each engaged valuers in relation to the dispute between them over the value of the property (the land and the factory) at the Site.
At least two of the valuers (Mr P for the husband and Mr M for the wife) had been engaged for an extended period of time (and been required to provide valuations over that period) and this may go some way towards explaining the hostile dynamic that was palpable between them when they gave evidence before the Court.
Whilst changes in values given by experts are usually explicable by different mythologies and changes in information in this case the Court was left with the impression that at least some of the experts engaged to value the Site crossed the line in the lead up to the hearing between experts and partisan witnesses.
In April 2008 Mr P first provided a valuation of $1,400,000. In May 2008 Mr M provided a valuation of $1,585,000. By January 2009 Mr P provided a further valuation, this time of $1,250,000 and in February 2009 Mr M also provided a further valuation this time of $2,850,000.[14]
[14] Exhibit A11
By March 2009 Mr S had also been retained by the husband and provided a valuation of $1,300,000. At the commencement of the hearing the Court was told Mr M had revised his further valuation to $2,400,000.[15]
[15] Exhibit A11
Given this and against the above background on the first day of the final hearing the Court made orders for the experts to confer and try and reach agreement and/or identify the issues on which they remained in dispute and why.
Pursuant to the orders made by the Court on 27 May 2009 a report of the conference of valuers was prepared which provided:
“Basis of valuation- Conclusion
It was resolved by the valuers that the discrepancy in the assessment is primarily attributed to the “direct comparison” versus “summation” basis of valuation adopted in this instance. Acknowledging that all valuers had given regard to the “capitalisation of income” approach as a check method of assessment, it was therefore considered a constructive basis of consideration for the purposes of endeavouring to establish areas of agreement and disagreement by focusing on this method as a means of trying to reach a common agreement in this matter.
·    Although consensus was not reached on the applied rent, parties arrived at rents close to common agreement; as was the case with agreement of letting up allowances.
·    Consensus was not reached on the treatment of the additional (rear) land; (name omitted) and (name omitted) Valuations both adopted ground rentals and capitalised same at prevailing market yields; (name omitted) Valuers preferred the application of a $ rate-per-square metre for same. Notwithstanding the valuers differing approaches, the difference between the valuers’ added valuers for the rear land was not considered to be great;
·    Consensus was not able to be reached with regard to the application of market yields; (name omitted) Valuations and (name omitted) having applied 8.5% with (name omitted) Valuers a yield of 7.5%.
·    With regard to the preliminary report on concrete panel distress existing at Property A, prepared by (name omitted) Building Consultants and Building Surveyors, we advise that (name omitted) Valuers had not been provided this report at the time of completing their respective assessments. (Name omitted) Valuations as in receipt of this report and having observed the defect remain of the view that a deduction to reflect the potential cost and inconvenience associated with the rectification of the defect is warranted. Acknowledging that all valuers in this instance are not building construction or structural experts and are therefore unable to certify the structural soundness of the improvements or the cost associated with rectification, we refer you to the (omitted) report of February 2009, Reference 3775 for consideration on what deduction (if any) should be applied to the market value of the subject property.
·    In the absence o full agreement the respective valuers advise the following revised asset value

(omitted)

Mr P

(omitted) Valuers

Mr M

(omitted) Valuations

Mr S

$1,350,000

$1,740,000

$1,487,500

The issue here is whether Mr M’s, Mr P’s or Mr S’s valuation for the Site should be accepted noting that the Court is not bound by a choice between the three.[16]
[16] see para 15.2 of husband’s submissions

Mr M

Mr M gave evidence and was cross examined. He was engaged on behalf of the wife to value the Site. That report was annexed to his affidavit sworn 19 June 2008 and filed 3 February 2009 which valued the building and land at $1,585,000.
In Mr M’s report he submitted that there were two ways of valuing the property being the Summation method (Land & Building) or the Capitalisation method (based on hypothetical rental) all of which were based on key comparative sales.
As set out earlier by the time of the final hearing Mr M had revised his valuation on at least two occasions and did so again (after the conference of experts) eventually arriving at the figure set out above.
Mr M explained why he believed the experts came to different values and why his earlier valuation had differed so greatly from that of Mr P. Mr M accepted that the capitalisation rate he had arrived at was informed by subjective choices.

Mr P

Mr P gave evidence and was cross examined. He was engaged on behalf of the husband and swore an affidavit on 3 February 2009 and filed 5 February 2009 annexing his report. He valued the Site at $1,250,000. In his later affidavit filed in July 2009 he arrived at the value of $1,350,000.
Mr P gave evidence that he made a “subjective and educated guess.” The wife in her final submissions said that:
“Mr P had considered as an important matter the disadvantage of a draft Property A development plan, and the public disquiet he believed the plan had created. It transpired under cross examination that the husband was the source of information concerning public disquiet, and his solicitors. He nevertheless gave no real concession with respect to the importance he had placed on what could be described as a deliberate, and successful, attempt by the husband to influence the valuation process. He seemed unwilling to concede the information suggested to him by the husband to be inaccurate, and to have been overrated by him. Although he had emphasized the importance of the proposal in his earlier valuation, he was not prepared to make any change to his view, in the absence of any such proposal. It is submitted his valuation should be rejected.”[17]
[17] see para 10 of wife’s submissions
As set out earlier Mr P revised his valuation prior to the final hearing and a significant dispute between him and Mr M appeared to be an issue concerning a rumoured Council planning proposal which could impact the Site.
Mr P accepted that his valuation was the product of subjective educated guesses. In relation to the rumoured planning issue he confirmed the husband had raised it with him first. Mr P confirmed he believed a higher capitalisation rate to that arrived at by Mr M was appropriate.

Mr S

Mr S gave evidence and was cross examined. He was also engaged on behalf of the husband. Counsel for the wife initially raised concerns about the husband leading evidence from two valuers. Ultimately no objection was taken to Mr S’s giving evidence before the Court.
Mr S swore an affidavit on 25 March 2009 and filed 16 April 2009 annexing his valuation of the Site. Mr S arrived at the value as set out above.
The wife in her final submissions at para (11) said that:
“Mr S was disinclined to make any concession, or to step away from his conclusion in any way. Whilst it is submitted Mr M readily engaged with information put to him, Mr S demonstrated a more rigid approach about both his rental estimate, and cap rate. As both those matters are essentially subjective in the ultimate decision, it is submitted Mr S’s failure to consider making any concession at all is unlikely to most accurately establish the value. The general economic circumstances to which he referred, and placed great emphasis upon, are most likely to be reflected by comparable sales. Whilst Mr S indicated that the sales referred to in the joint statement took place in April 2008, they are the only sales available in the area for analysis. It is submitted they cannot properly be dismissed by Mr S, as they are the only history available in the area. He has no other comparable sales. His dismissal relates principally to his surmise of the general economic climate, which is not a matter on which he is an expert, or has any special knowledge at all.”

Decision on value of the Site

The uncompromising position of the parties in this matter was reflected albeit initially, in the position of the valuers retained on their behalf in relation to the Site.
Given the widely divergent valuations and the directions issued by the Court for the valuers to confer it was possible the valuers could have compromised. Unfortunately, whilst the breadth of the dispute was narrowed, and by virtue of Court orders the valuers adopted agreed methodologies, agreed values perhaps understandably given the background to their preparation couldn’t be reached.
In his submissions filed after the hearing the husband at paragraphs [19] to [51] addressed the chronology of the preparation of those reports and why the evidence of one particular expert should be preferred over the others.
In submissions filed on her behalf after the hearing it was the wife’s position that:
“5.The Court is confronted by an unusual situation regarding evidence. The husband himself leads conflicting evidence regarding the value of the factory, relying upon two competing valuers. The husband himself was so uncertain of his own expert evidence, he sought leave to rely upon two experts, who reached different conclusions to each other. The fact that the husband himself cannot put a single position before the Court as to the value of the factory must highlight the difficulty to the Court of determining the matter, in the absence of a sale. The husband tells the Court that he cannot put determinative evidence before the Court as to value, but nevertheless urges the Court to reject the single and determinative evidence relied upon by the wife the husband’s own position renders a sale inevitable, should Mr M not be accepted as correct by the Court.”
The wife then went on in her submissions at paragraphs [8] to [11] to deal with why the evidence of Mr M should be preferred over the others.
However in my view the husband’s submissions accurately summarised the evidence of Mr S as follows:
“48.Mr S’s report and evidence was sensible and clear. His movement and search for common ground should be commended. The Court will find his concise explanation of the complex valuation process helpful. The Court can accept his evidence with confidence. He is less concerned at the acquisition issue than Mr P and on the alternative methodology has a higher rent than Mr P. The paragraph 11 submission that Mr S was “disinclined” to make any concession is not correct. This ignores his more, at his client’s expense, but driven by his obligation to the Court, to leave aside (in the final meeting) for the court those matters that were not common ground. That his “concessions” were not on the same scale of wild fluctuation as Mr M cannot be a criticism.
49.Mr S’s final figure was $1,487,500. He reached this in an attempt to find common ground to assist the Court. The overall impression is of an expert witness following his duty to assist the Court, not pushing his client’s barrow. To reach $1,487,500 he removed consideration of two things not common ground: the 5% draft structure plan and the issue of repairs.
50.Because the Court will accept that the draft structure plan will or must have an impact on value the court will ultimately prefer Mr P’s final position to Mr S’s. Alternatively the Court could, if it prefers the opinion that the draft structure is less significant accept Mr S’s opinion.”
Despite the time and energy the parties invested in interrogating the basis for the opinions of the experts in the context of their valuations of the Site at the time of the final hearing neither party sought to re-open the hearing on the basis of a change in market conditions warranted those opinions being revisited.
I have already set out the position of the valuers. I found the evidence of Mr S’s more convincing and in my view it is to be preferred. Contrary to the claims made by the wife in submissions he willingly made concessions including that he believed the dispute between the experts had done the Court a disservice. Before coming to that conclusion I carefully considered the submissions advanced on behalf of the wife on this issue.[18] Notwithstanding those submissions in my view the presentation of the other experts before the Court made plain there remained palpable rancour between them over matters such as delays in responding to provision of information necessary to prepare valuations[19], absences from work due to illness, the impact of rumoured planning proposals and perceived slights against their professional reputations.
[18] see paras 8-11 of the wife’s submissions
[19] see for example exhibit A12
This issue was referred to at least in part in the husband’s submissions as follows:
“44.Mr M refused to consider the obvious relevance of the “draft structure plan” until it was gazetted. If correct, this of course advanced his argument for a higher value to his client’s advantage. However despite it being law, the circumstance that the Factory planning or zoning forbade residential development (this is “core” industrial land), and there being no suggestion that this could change, did not prevent Mr M taking into account the “blue sky” of possible residential development in the distant future that potentially increases value. He is prepared to look at the “blue sky” of residential development but refuses to have regard to the more certain “storm clouds” of uncertainty caused by the actual state and existence of the “July 2008 draft structure plan”.
…
47.Mr P’s concern about the impact of the draft structure plan accord with common sense. Having read his reports and observed Mr P in the witness box the Court will reject the allegation in paragraph 10 that Mr P was influenced by a “deliberate and successful attempt by the husband to influence the valuation process”. This allegation was not put to the husband at all and was not put to Mr P. It should not be made now and cannot be made out. The criticism put to Mr P was that he had obtained information from the husband (is it seriously suggested that the husband should not have alerted Mr P to the new draft structure plan not referred to in his earlier report?), then obtained information from his commercial solicitor and then confirmed the information from council directly. …”
As set out earlier the husband’s submissions provided a chronology of the work of the valuers for the Site at paragraphs [19] to [40].[20] In reflecting on that chronology and notwithstanding the difficulties in the valuation process Mr S’s comments referred to earlier are particularly apt.[21] The difficulties I have accepting the evidence of Mr M and Mr P are also, I am satisfied adequately set out in the husband’s submissions. In particular I accept the criticisms of Mr M’s evidence at paragraphs [25] to [45]. However for the reasons referred to earlier, I also have reservations about accepting Mr P’s evidence. Ultimately the differences between them narrowed but their remained reservations in my mind about their respective opinions and their objectivity.
[20] see also exhibit A11
[21] see para 131 above
In contrast in relation to Mr S, I accept as was noted in the husband’s submissions that:
“48.Mr S’s report and evidence was sensible and clear. His movement and search for common ground should be commended. The Court will find his concise explanation of the complex valuation process helpful. The Court can accept his evidence with confidence. He is less concerned at the acquisition issue than Mr P and on the alternative methodology has a higher rent than Mr P. The paragraph 11 submission that Mr S was “disinclined” to make any concession is not correct. This ignores his more, at his client’s expense, but driven by his obligation to the Court, to leave aside (in the final meeting) for the court those matters that were not common ground. That his “concessions” were not on the same scale of wild fluctuation as Mr M cannot be a criticism.
49.Mr S’s final figure was $1,487,500. He reached this in an attempt to find common ground to assist the Court. The overall impression is of an expert witness following his duty to assist the Court, not pushing his client’s barrow. To reach $1,487,500 he removed consideration of two things not common ground: the 5% draft structure plan and the issue of repairs.”
Whilst an issue had been raised initially about hearing evidence from Mr S by Counsel for the wife, ultimately this was not pursued and his evidence left the clear impression he was “following his duty to assist the Court, not pushing his client’s barrow.”
Mr S gave cogent reasons for the differences in the value he had arrived at as compared to that reached by Mr M or Mr P.
Mr S gave evidence that he believed the market had “come back significantly” and the value he had arrived at was, in my view, more explicable, took into account appropriate comparable sales and was more reliable.
For all the reasons set out above I prefer the evidence of Mr S as the more reliable valuation of the Site and will apply the value he arrived at.

First step – Asset pool

What were the assets and liabilities

At the commencement of the hearing the parties provided the Court a list of assets and liabilities that identified where there was agreement and where there was dispute (and if so, what values they each contended for). This is reproduced below with the footnotes from that document omitted:[22]
[22] Exhibit A1. However, the Court was told an Outline of Case filed by the husband filed 22 May 2009 contained some minor changes to this.

Asset	Agreed	Husband asserts	Wife asserts
Property T	$1,200,000
Less Home Loan (omitted)	($109,600)
Less Line of Credit (omitted)	($184,357)
Leaves Property T equity at	$906,043
Barro order (wife)	$33,000
Husband’s legal fees paid	54,891
NAB Term deposit (omitted)	$11,028
(name omitted) & TET	$102,000	$412,000
(omitted) Unit Trust	$567,100	$1,659,100
Total of non super assets agreed	$1,004,962	$1,674,062	$3,076,062
Other potential assets/liabilities
NAB Mastercard husband	$25,955
Term Deposit CBA wife	$10,000
GST on wife’s car transfer 10% E	$2,500
Loan accounts owed as of 30.06.2008	$69,100
If factory is to be sold CGT	($140,100)
Relocation costs if factory sold	($260,000)
Superannuation
Wife’s superannuation	$73,000	$73,000
Husband's (omitted) Superannuation	$50,600	$82,100
Husband's (omitted) Superannuation	$176,865	$176,000
Total superannuation	$300,465	$331,100

The wife in her final submissions after the hearing set out what was described as her “precise position” on the pool:

a.	Property T	$1,200,000
b.	(name omitted) Pty Ltd (@ 3.5) See appendix (ii), minute of conference of experts Mr M and Mr F	$412,000
c.	(omitted) Unit Trust See appendix (ii), minute of conference of experts Mr M and Mr F. Includes real estate of factory @ $1,740,000, and Property M @ $425,000	$1,013,000
d.	Add back re-letting expense deduction	$50,000
e.	Loan adjustment to be added as per agreed Mr M and Mr F calculation	$69,100
f.	Legal fees paid by husband from business assets prior to business valuation	$54,891
g.	National Australia Bank term deposit in wife’s name, but held as security by (omitted) Pty Ltd.	$11,028
TOTAL	$2,810,019
h.	Less liabilities
i.	Home Loan	$109,600
j.	Line of credit	$184,357
NET NON SUPERANNUATION ASSETS:	$2,516,062
Superannuation:
k.	Wife’s superannuation	$73,000
l.	Husband’s Australian superannuation	$176,865
m.	Husband's (omitted) superannuation	$100,100
TOTAL SUPERANUATION	$349,965

In his final submissions the husband set out his position on the pool in the event that inter alia the evidence of Mr S and Mr M’s evidence were accepted. The table from those submissions was:

Agreed	Husband asserts	Wife asserts
Property T	1,200,000
Less Home Loan (omitted)	(109,600)
Less Line of Credit (omitted)	(184,357)
Property T Equity	906,043
Barro order (W)	33,000	Now no Barro
Husband’s legal fees paid	54,891
NAB Term dep (omitted)	11,028
Addback re letting expense	Nil	50,000
(omitted) & TET	102,000	412,000
(omitted) Unit Trust	783,200	1,013,00
Loan accounts owed (30.06.2008)	69,100	69,100
NAB Mastercard (H)	(25,955)	Post separation
Total non super assets	1,933,307	2,516,062
Other potential assets/lib
Term deposit CBA Wife	Now conceded nil	Nil
GST on wife’s car transfer 10%E	De minimus
If factory is to be sold CGT	(149,100)	?
Relocation costs if Factory sold	(260,000)	?
Superannuation
Wife’s superannuation	73,000	73,000
Husband's (omitted) Superannuation	59,500	100,100
Husband's (omitted) Superannuation	176,865	176,865
Total superannuation	309,365	349,965

Determination of issues at Step 1

Given the position of the parties identified above and notwithstanding the findings already made regarding the value of the Business and the Site, there are several matters that require determination before the asset pool can be established.

Add backs

Pursuant to orders made on 8 December 2008 the wife received $33,000. That order provided that the wife could draw down on the line of credit account over the former matrimonial home. The wife used those funds for legal disbursements and to meet other costs. [23]
[23] see exhibit A1
The principles with respect to the treatment of legal fees within the context of a s.79 application are summarised in Chorn & Hopkins (2004) FLC 99-204. The wife deposed in her affidavit filed 22 May 2009 as to how she disposed of the monies she was advanced.
The wife’s opposition to those monies being added back was I am satisfied driven in no small part by her knowledge, which the evidence subsequently established was the case, that the husband was using the Business to fund his costs and other expenses. The wife’s opposition was no doubt driven by the sense of unfairness she felt if she was required to add back that money given the above.[24]
[24] see Townsend (1995) FLC 92-569
Contrary to claims made on his behalf the husband’s evidence in cross examination was he had paid legal fees (excluding trial costs and disbursements) and he obtained those funds from the Business. The wife did not have the funds available to meet the costs of the proceedings in the same way as the husband has to date.
In the particular circumstances here and whilst the normal approach would be to add back costs already paid I am not satisfied those monies should be added back given how the husband met his costs. In the particular circumstances of this matter as I am satisfied both parties have had access to the pool of assets for that purpose yet, and even taking into account one further issue which I will explain below, only one party is effectively being asked to add back it would be unfair as between the parties to do so given this.
The Court does not intend to add back that $33,000 into the pool. In coming to that view I have not ignored the parties had agreed to include in the pool legal fees paid for the husband before the Business was valued or that the husband believed the wife would be required to add back the $33,000. Whilst it will be taken into account in the wife’s final monetary distribution to add it back would in my view be unfair in these particular circumstances for the reasons set out above.
As set out earlier there was another issue concerning add backs which was raised by the wife only in final submissions. In his submissions in reply, which I accept, the husband’s position was:
“15.4.1This is item (d) of the wife’s asset pool in her submissions and addressed at paragraph 6. This is the first time the issue was raised. The wife’s submissions fail to understand how the three valuers applied this adjustment. This was not and is not a liability to be deducted whether a sale occurs or not. It is a fundamental part and parcel of the second but common methodology of the capitalisation of income.
15.4.2It was agreed that the orthodox application of the methodology required this adjustment. This cannot now be departed from. Such a departure or variation of methodology was not put to or led from any expert. Brown v Dunn and the rules of procedural fairness mean this cannot now be agitated.
15.4.3 Again a party cannot rely upon the parts of a methodology that suits his or her case and delete the bits considered unhelpful.”
Accordingly there will be no add back on this issue either.

Other issues

There was also an issue regarding the husband’s credit card debt. The husband’s submissions addressed this at paragraphs 15.5.1 to 15.5.3. The wife in submissions in reply at paragraph 8 continued to take issue with the husband’s position that it should be included.
It is a debt of the husband and should be included, but he will be responsible for it.
Finally, whilst the husband had raised an issue regarding money allegedly held in a term deposit this was abandoned in final submissions in light of the evidence and has not been included.

Determination of the asset pool

Pool 1 – Non superannuation assets and liabilities

Given the above, the Court finds the non superannuation assets and liabilities of the parties to be set out below.
For the reasons given above with respect to the valuations the Court accepts the evidence of Mr S and Mr M. Accordingly, on that basis the Court finds the value of the pool as follows:

Property T (former matrimonial home)	$1,200,000
Less Home Loan (omitted)	-$109,600
Less Line of Credit (omitted)	-$184,357
Equity in the former matrimonial home	$906,043
NAB Term deposit (omitted) (wife)	$11,028
(omitted) & TET	$102,000
(omitted) Unit Trust	$783,200
Loan accounts owed	$69,100
NAB Mastercard (H)	-$25,955
Total non super assets	$1,845,416

Accordingly, I find the nett non superannuation assets in the amount of $1,845,416.

Pool 2 – Superannuation assets

The wife conceded in her submissions in reply that she accepts and adopts the husband’s value of superannuation as correct.[25] Therefore, it is now agreed and the Court is satisfied that the value of the parties superannuation is as follows:
[25] para 1 of wife’s submissions in reply

Wife’s superannuation

$73,000

Husband's (omitted) superannuation

$59,500

Husband’s Australian superannuation

$176,865

Total superannuation assets

$309,365

It is further agreed between the parties that the superannuation should be split equally. Therefore, each party shall receive approximately $154,682.50 in superannuation.
Given that the wife already has $73,000 in superannuation to effect such a distribution the wife would need to receive a further payment from the husband’s Australian Superannuation Fund of $81,682.50.
It was conceded by both parties that the trustee of the husband’s superannuation fund had not been provided with procedural fairness and this would need to occur before a splitting order could be made.

Evidence of the parties

Before turning to consider the contributions and future needs of the parties it is timely to review the evidence from that part of the hearing where the husband and the wife gave evidence before the Court.
The lingering resentment between these parties arising from the breakdown of their relationship was clearly evident in their numerous affidavits, the manner in which the litigation was conducted on their behalf and in their evidence before the Court. Sadly at times, they both appeared bewildered by the way the litigation had unfolded. The Court was left with the impression neither could understand the course events had taken and how the litigation appeared to have taken on a life of its own.
However, save for the issue of initial contributions and a difference of opinion on their respective future needs, their evidence was such that save for one matter I don’t believe it was necessary to have to consider whether one party’s evidence should be preferred over another.
Nonetheless in considering their evidence I have factored in where necessary that it was given from a point of view where the pressures that applied after and since separation were still uppermost in their minds and in a situation where not unexpectedly they seek to paint themselves in the best possible light.[26]
[26] see for eg. husband’s evidence he thought they were married in 1995 not 1994. see also husband’s claim the Business was built from “my endeavours”

The husband

The husband gave evidence and was cross examined. Cross examination concluded at the end of the first day of the final hearing. However the husband was recalled to give further evidence by consent on the second day of the final hearing.
The evidence before the Court including that given by the husband made plain in my view the Business was not “established” at the time of the marriage at least to the extent he claimed. His role in the Business is now to generate sales, manage people and oversee the manufacturing. The husband’s evidence made plain he had control of the Business, derived a lucrative income from it (but also was using loan accounts and other financial and business vehicles as a means to deal with expenses he had incurred) but relied on others to manage the Business finances.
Whilst his evidence was the Business had grown from a turnover of $800,000 at the commencement of the marriage to $7.5 million, contrary to the argument advanced in opening by his Counsel, the evidence of the husband made plain the Business was in large part built and developed by the joint endeavours of the parties during the relationship.
In his affidavit filed 6 February 2009 the husband deposed:
“48.My overall financial position is as set out in my Financial Statement updated on 4 December 2008. I have been advised that my income form the business needs to be lower because of the trouble the business is in generally. The only reason my income is as high as it is through the business is that it is required to support the payments to and on behalf of the Wife, the financing of 2 households and the high level of legal costs I have been forced to incur in responding to the many applications filed by the Wife. The level of payments has caused my accountant to have to create a debit beneficiary loan account with must be repaid and which currently stands at in excess of $180,000.
…
52.The continuing financial support provided to the Wife and children since separation is set out in the spreadsheet annexed and marked with the letter “CT9”. This spreadsheet covers the period from 22 October 2007 (the date of separation) to January 2009. This support has been considerable but I have had to reduce the overall amount paid for the wife due to my inability to maintain these payments because of business issues, including economic downturn (referred to in my affidavit sworn 13 June 2008) and the rapidly increasing balance of the debit beneficiary loan account in the company which I have had to increase to cover these and other expenses. This loan account is causing serious cash flow issues in the already struggling business and will incur significant tax liabilities for me personally. Annexed hereto and marked with the letters “CT10” is a copy of a letter from my accountant as to this issue. Annexed hereto and marked with the letters “CT11” is a copy of my loan account with the business from 1 July 2007 to 4 December 2008 which shows the personal expenses that are accruing to my loan account with the business that will have to be repaid and on which I will be assessed to pay tax. Since the purchase of the property at Property T, I have always made extra payments to the mortgage payments on End of December 2008 Ceasing my payments to this mortgage account does not affect the security and was a way to reduce my outlay without any harmful consequences to the wife and children.
53.My child support payment is $305 per week. Annexed hereto and marked with the letters “CT12” is a copy of my current child support assessment. In addition to this I also pay the children’s school fees and extra curricular activities.”
A consistent theme throughout the husband’s evidence either in examination in chief or more particularly in cross examination was that he at least saw no difference between himself and the Business and saw nothing wrong with financing his lifestyle (after separation) from the Business. Moreover indicative of the husband’s attitude more broadly was his answer in cross examination that the wealth of the family was from “my endeavours.” (emphasis added)
Whilst the husband consistently claimed to be making payments to the wife he appeared not to acknowledge or fully appreciate that the money for those payments was coming from the Business. It appeared from the husband’s evidence he even met his child support obligations from the Business. Whilst the husband led evidence as to the reasons why the financial support he had provided since separation had ceased the difficulties he gave as the reasons for this did not appear to have had a similar impact on his expenditure after separation. Moreover the husband didn’t appear to think there was any inconsistency in or unfairness about this.
As to the future needs of the parties the husband deposed in his affidavit filed 6 February 2009 that:
“54.The Wife could work full time if she chose to do so. Her responsibilities to the children do not prevent this. I have the children 6 nights out of each fortnight. We have excellent after school care facilities and the Wife’s job as a (omitted) and the abundance of (omitted) in the immediate vicinity (who are, based on advertisements in the local paper, seeking full time (omitted) ) would make it easy for her to pick up and drop the children on her days. My youngest daughter has now started full time school in 2009 allowing my wife to work on a full time basis.
55.I refer to the Wife’s recent Form 13 Financial statement. In this she has significantly understated the expenses that I pay on behalf of her and the children. She is well aware of the level of these payments. Line of credit, car repayments and car maintenance have not been included under Part F Expenses at all. Furthermore, the Wife’s expenses are far in excess of those incurred during our marriage. By her admission, during the marriage, the wife managed the household expenses quite comfortably on $750.00 per week but now, according to her financial statement, she reports in excess of $1,600.00 expenditure per week, with one adult less to look after the children only 8 nights per fortnight.”

The wife

The wife gave evidence and was cross examined. The wife adopted the affidavits referred to earlier.
In her affidavit filed 17 February 2009 the wife had deposed:
“36.Prior to the marriage neither the husband nor I had any assets. The husband had commenced the business but had approximately four employees and was earning a minimal income. I was working full time as a (omitted).
37.That during the marriage the husband and I both contributed to the family and after the birth of the children I as the primary carer of the children and I ceased working and in 2002 I did a period of (work omitted) prior to the birth of Y in 2003. I was the full time carer of the children until separation and following separation in October 2007 I commenced doing (work omitted).”
The wife confirmed that she had paid her solicitors $30,000 to cover disbursements only. The wife gave evidence that her anticipated legal fees were approximately $120,000 (inclusive of the costs of her former solicitors).
The wife gave evidence that she had 3 bank accounts in her name being:
a)Commonwealth Bank of Australia term deposit;
b)Commonwealth Bank of Australia (omitted) account; and
c)(omitted) (credit union) account.
The wife gave evidence that her credit union account was her everyday expenses account into which her income, social security payments and child support are placed.
The wife gave evidence that it is her “desire to work part time” and to remain involved in the children’s education. The wife is currently involved in (work omitted). She assists with the (work omitted). The wife gave evidence that at the (workplace omitted) there is a roster whereby she would assist half a day to a day on average per week.
The wife rejected the husband’s claims regarding her work capacity. In her affidavit filed 17 February 2009 the wife deposed:
“80.That as to paragraph 54 of the husband’s affidavit I say that I wish to continue to work “on call” as an (occupation omitted) as this enables me to be able to run the household and provide for the children’s needs even when they are not with me. I still need to maintain the household and carry out the domestic chores necessary to provide for the children and attend to chores whilst the children are not with me. In addition I am also involved in the children’s school such as (omitted). I do not wish to place the children in before or afterschool care. This would necessitate them being placed in care from 8.00 am until 6.00 pm and I believe that this is far too long a day for children of this age in particular Y who is just starting school.”

The disparity between the parties projected income into the indefinite future is “massive”, there is an imbalance in the parties’ relative reasonable living standards into the future if the husband’s proposals are accepted. Moreover the husband’s income earning resources into the future were built by the parties’ joint endeavours. In the event the husband’s proposal to be accepted, the wife would be left at a “survival level” and with little future benefit from her undertakings during the marriage and no access to the future income stream from the Business.[35]
[35] Appendix V to Mr M’s affidavit noted the Business income for financial year ending 30 June 2008 was almost $5 million with $5.7 million in sales
For all the reasons set out above I accept the submissions advanced on behalf of the wife that on adjustment at this stage of 15% is just and equitable and will properly as between the parties address their future needs.

Is it just and equitable?

At this stage it is the justice and equity of the actual orders that the Court must consider.[36]
[36] see Russell [1999] FLC 92-877
Section 79(2) of the Act provides that:
“The Court shall not make an Order under this section unless it is satisfied that, in all the circumstances, it is just and equitable to make the Order.”
The husband’s submissions on the issues at this stage were set out at paragraphs [87] to [97] and [102] of the submissions file on his behalf after the hearing.
The wife’s submissions were at paragraphs [29] to [41] of the submissions file on her behalf after the hearing. Those submissions were:
“29.It is submitted that the wife will not get a single dollar of benefit for the rest of her life from the parties’ joint endeavour in the building of assets, most particularly (omitted). Her only recognised benefit will be whatever sum the Court sees fit to adjust pursuant to s.75(2). It is submitted that any such adjustment should be more than a gesture only, and should be a meaningful and practical endeavour to project, as far as possible, a just and equitable result as between the parties.
30.The husband, on the other hand, will reap the benefits of the parties’ joint endeavours for the rest of his working life.
31.The Court is required as a fourth and final step to assess whether or not a just and equitable result has been struck. The Court must look at the final position of the parties.
32.In this particular instance, the parties are both relatively young. The husband is left with a most lucrative business. No matter what the ultimate value of the business is, there is no doubt it generates an income in the vicinity of $300,000 for the husband per annum, year in, year out. Within that business structure he had the benefit of a beach house, at Property G, which will become his after the close of these proceedings, albeit it is registered in the name of company, a beach house formerly used by the family as a whole.
33.The Court should be aware that the husband did not willingly permit the wife to continue to use the beach house with the children following separation. Proceedings were instituted in that regard, seeking orders to permit the wife to also use that asset during summer holidays. She was permitted to use it for 2 weeks only, with the children, and will not be using it again following these proceedings. The husband will have the ability to purchase a home should he so desire, from the income stream available to him. Last year he paid a total of $38,000, after tax, to rent a home in the city and the beach house. The Court will note he paid rent himself to his own corporate entity to rent the beach house and claimed that payment in his Form 13 as an expense. Whilst that payment may have been an expense, correctly incurred at law, it was incurred concurrently with the husband having free access to his loan account, from which he withdrew approximately $120,000 per annum. In addition to the $38,000 per annum rental he has paid, he has also paid private legal costs of $177,000, before the commencement of this trial. Those legal costs will have increased considerably since that time. The payment of those legal costs was met from (omitted) surplus funds. That income was generated from a business to which the wife has entitlement until orders are made by this Honourable Court excluding her from the benefit of that asset. The husband spent, after tax, $250,000 on legal costs and rent alone in the 2 years following separation. The history of his earnings, it is respectfully submitted, can inform the future. The husband would be well able to purchase a home in which to reside with ease. The monies used to pay legal costs alone could have been used to discharge debt, or pay a deposit on a house, but were not.
34.In contrast, the wife could not hope to accumulate any portion of savings from the financial resources and income available to her into the indefinite future, let alone over a 2 year period. The husband has had in the past 2 years, from the operation of (omitted), more money than the wife could ever dream of having at her disposal. The wife will be required to pay her legal costs, which unlike the husband she has not been able to pay on a running basis, from her capital, received upon orders being made. The husband will not be required to apply any capital to legal costs, as surplus corporate funds and income have paid his on an ongoing basis. This gives the husband an immediate capital benefit in excess of, say, $150,000.
35.The husband seeks to include $33,000 in the asset pool, as capital had and received by the wife, primarily to pay her legal costs. That sum was drawn by her pursuant to the order made on [8 December 2008] from the home loan, such draw down to be classified by the Trial Judge. It is submitted that sum was received as spousal maintenance, and should not be taken into account as capital received by the wife. The husband has contemporaneously taken $177,000 as legal costs himself from surplus funds available at (omitted). Those surplus funds were not divided or made available to the wife. If so, the wife would not have been required to draw down from the loan account. It is inherently unfair to suggest the wife should have to account for her $33,000, whilst the husband was free to take whatever he chose from the joint asset, (omitted), over and above his salary.
36.It is further noted that the husband attempted to discontinue payments on the wife’s Volvo motor vehicle during the course of these proceedings, alleging (omitted) could no longer afford to meet the payments. Such an assertion is demonstrative of the husband’s attitude and conduct throughout the course of these proceedings.
37.During the course of the proceedings the Court asked whether there were precedents to support a 15 percent loading pursuant to s.75(2). It is respectfully submitted that each day precedents are made citing a 15 percent or more loading in s.75(2) factors. It is submitted that broadly speaking 60/40 has become a base standard from which s.75(2) considerations depart. 15 percent loading is a very regular adjustment and it is respectfully submitted that the loading is often significantly more. The greater the earning capacity discrepancy, the greater the loading, as s.75(2) is fundamentally a prospective operative section. It is therefore properly attracted by such a discrepancy. The section enables a Court to exercise a proper judicial discretion when endeavouring to establish a just and equitable result between the parties (Mallett’s case).
38.Some examples in answer to the Court’s query are Clauson v Clauson [1995] FLC 92-595. The marriage was of 9 years’ duration, and 4 children were born. At the initial trial an assessment of 15 percent was awarded to the wife for s.75(2) factors. That award was overturned and a further

10 percent was added. That determination was made in circumstances where the husband had a substantial income of some $200,000, paid child support of $25,000 per year, in juxtaposition to the wife’s earning capacity being restricted. The Court re-exercised its discretion and increased the adjustment from 15 percent to 25 percent.
39.In the case of Best v Best [1993] FLC 92-418 the wife received 100 percent of the available assets, in circumstances where the husband’s profession (a lawyer) gave him a continuing capacity to steadily earn his way out of the financial position in which the parties found themselves before the Court. He had a very high earning capacity in juxtaposition to the wife. The Court noted the wife had no such capacity and therefore she received 100 percent of the assets, as a legitimate exercise by the Court of the discretion with which it is charged.
40.In Waters v Jurek (supra) it is stated:
“If a trial judge comes to a conclusion that there is an imbalance in the income or respective earning capacity of each of the parties, an adjustment can be made in favour of one of the parties. This must be so, if for no other reason other than that any order which the court makes under the provisions of s.79 must in all the circumstances be just and equitable.”
41.It is respectfully submitted that it is common to grant at 15 percent loading in circumstances where income discrepancy, and future living circumstances are not nearly as disparate as those in this matter before the Court. That percentage loading must increase, to create prospective justice and equity, in the event of any contribution percentage adjustment in the husband’s favour.”[37]
[37] Wife’s final submissions filed 1 September 2009 paras 29-41
In his submissions the husband maintained he will be receiving “high risk assets and substantial debt.” However as the wife noted in her submissions:
“23.The husband suggests the wife look around for cheaper accommodation. She was cross examined as to whether or not she could find a house costing $550,000 to $600,000, rather than $1,200,000 being the value of the home in which she has remained. The cross examination was premised on the basis she could not receive the Property T home unencumbered, but rather could receive it only subject to the mortgage debt. It is plainly evident from the evidence that the wife could not possibly hope to service that mortgage debt, and care for the 2 girls, and meet all expenses associated with their family unit, on an income of $67,000 per annum. …”
The husband’s position was that there simply is no equity left to fund a large payment to the wife. The husband’s contention was that the wife’s consistent position that it was necessary to sell property to fund such a payment, was made more for tactical than other reasons and it failed to take account of serious costs at least to the Business (or those involved in it) associated with such a sale. Whilst his claims in this regard where fleshed out to the extent they were, they were less than convincing.
The husband’s position was the reality was that in the event he could not refinance to pay out the wife then the sale of the Business may be the only alternative to give effect to a just and equitable distribution of matrimonial assets between the parties. In the event the Business had to be sold, then it was argued there would be adverse impacts on his potential earning capacity into the future. The husband also submitted that:[38]
“If the factory is to be sold, the Court will conclude that relocation is inevitable. The sell proposal brings into play sec 79(4) (d), the effect of any proposed order upon the earning capacity of either party to the marriage. The sell the factory option adds a substantial risk that the husband’s earning capacity will be effected. This is the very factor that warrants (modest) adjustment under sec 75(2) in the wife’s favour.”
[38] see para 97 of husband’s submissions
The husband deposed that:
“6.A forced change of locations would also impact adversely on staff moral, causing loss of key people within the business, the central location attracts personnel from all areas of Melbourne with one apprentice travelling from (omitted). The lost production time involved would cause our clients concern and would more likely than [not] further contribute to a significant loss of confidence to them in our ability to deliver works to them. The costs as set out along with lost cash flow and reduced securities would force the company to closure.
7.It is submitted to this Honourable Court that if any part of the orders made in settlement of the property require that there be a sale of the Property A factory that the multitude of expense associated with relocating the business to new premises would have a potentially fatal effect on the business, the value of the business and the employment of 44 employees.
8.The expenses associated with relocating the business to new facilities can be summarised as follows:
8.1.Costs to relocate the equipment to new premises and general costs associates with re-establishing the factory to its current standard and efficiency;
8.2.Lost income from the business as it cannot trade during the period of relocation;
8.3.Capital gains tax on the sale of the factory and Property M property;
8.4.Loss of potential new client’s and new contracts;
8.5.General loss of standing within the market due to the inability to trade for several weeks;
8.6.Significant sake costs associates with selling the business during these difficult economic times; its specialist nature; and the high reliance on skilled labour and specific reliance upon my experience would make the business difficult to sell;
8.7.Ongoing rental payments on a new premises, printing, stationery, phone system IT and other ancillary costs;
8.8.The time to find a building suitable for our needs as the current building has been specifically designed to meet our needs, equipment footings, buntings, and carnage requirements, costs that have not been allowed for.
9.I have requested and obtained a costs estimate from Mr R of (omitted) Pty Ltd – Machine tool and reconditioning service’ for the costs associated with the relocation of the factory’s equipment to another factory within a 20 km radius of the current site. The estimated cost pursuant to this report is $260,440.00….
10.It is estimated that it will take approximately 6-7 weeks to fully relocate the business to new premises if this is required. During this time, the business would experience significant losses as it would be unable to trade until the new factory becomes fully operational. The staff are under the (omitted) Award 1998 and would continue to be paid as annual leave cannot be forced due to relocation reasons.
11.The business is currently experiencing significant financial and operational difficulties. The downturn in the economy is causing the services supplied by the business to be in decreasing demand…”
12.The factory at Property A together with another matrimonial property at Property M provide the only cross-security for $1,597,167 of borrowings with the National Australia Bank as of 21 January 2009. These borrowings relate to loans to purchase the factory and the Property M property (which still carry significant mortgages), the business overdraft, business credit cards, equipment leases and a bank guarantee on a large contract. I have been informed by the National Australia Bank that the removal of any one of these properties as cross-security for these liabilities would have a significant impact on the capacity to maintain their lending facilities…”[39]
[39] Affidavit of husband sworn 25 March 2009 and filed 16 April 2009
It was the husband’s position that if a party advocates a sale of property to the Court with that privilege comes the obligation to demonstrate the inevitable costs of sale and that here they include substantial selling costs. Further considerations were, so it was contended, the likely relocation and disruption to the Business. In light of the above matters, the husband maintained a sale should not be ordered. No persuasive independent evidence was provided that a sale of some property wasn’t possible and what was I don’t intend to place much weight on as it was in my view plainly self serving.[40]
[40] for e.g. the husband made claims regarding possible wage increases the Business may face because of industrial campaigns by unions.
As set out earlier the Court preferred the valuations of Mr S and Mr M and the value of the pool has been determined in light of that evidence. However whilst the husband maintained he didn’t believe refinancing to meet a payment was possible I am just not satisfied that is the case. Moreover I am not satisfied that a sale of some property isn’t possible.
Annexure C to the husband’s affidavit of 16 April 2009 was a letter from a partner in NAB business to the Secretary of the Business in May 2008. That letter identified properties against which debt incurred by the Business was secured.
Those properties included, a house at Property M which had been purchased as a holiday home by the parties, albeit that it was owned by VTUT.
At that time the letter said:
“…any change to them [the properties] may adversely effect your current lending facilities and removal would have significant impact on them.”
The letter was for “discussion purposes only”. However, I just don’t accept that no change is possible, (given passage of time since that advice) or that what the letters implies (e.g. the properties can’t be dealt with) is the case.
The husband also tendered another letter from NAB from February 2009.[41] However, even though that letter was more discursive it did not establish that property couldn’t be dealt or finance facilities couldn’t be changed. Moreover, not only was it not definitive and only for “discussion purposes” it did not (contrary to the husband’s claims) detail (or with sufficient specificity detail) the danger in selling one of the secured properties. No further up to date information or direct evidence from his financiers or those responsible for the Business was provided by the husband to justify his claim that various adjustments to the Business (or entities controlled by him) couldn’t be made to fund a payment to the wife. Given this conclusion such an order would, if necessary, be required to effect a just and equitable division of property between the parties and should be made.
[41] Exhibit 4A
If the husband is unable to refinance to enable a payment to be made to the wife which would represent a 65/35% split in her favour then he will need to arrange for property including the holiday house if necessary to be sold to meet that payment.
I am just not satisfied based on the material before the Court that the husband who has shown the ability to establish and run a successful business within a group of trusts and nominee companies, could either not obtain finance or restructure the Business’s affairs to sell property to allow him to transfer property to the wife to effect this distribution.
The total pool excluding superannuation for division between the parties is $1,845,816. A 65% adjustment in favour of the wife means that she should take non superannuation property to the value of $1,200,000.
The wife wishes to retain the former matrimonial home and has better prospects of doing so if it is not encumbered with debt.
As noted earlier the Business has a lot of real estate assets and in previous financial years according to Mr M had $5.7 million in sales and close to $5 million in income. The husband was asked in cross examination whether he had thought of selling the holiday house in Property G to allow the wife to receive a share of the property. His answer such as it was, not only made plain he had not considered it but was revealing as to his attitude about what was just and equitable the details of which I have referred to elsewhere in these reasons. However, he certainty did not dismiss it as impossible and I am satisfied it is possible for him do so.

I accept the wife’s submission that as the parties are both relatively young and as a result of these proceedings the husband will be left with a business (which despite the various costs, loans etc) generates a substantial income (in terms of money he could access) “year in, year out” and that:
“33.…The husband will have the ability to purchase a home should he so desire, from the income stream available to him. Last year he paid a total of $38,000, after tax, to rent a home in the city and the beach house. The Court will note he paid rent himself to his own corporate entity to rent the beach house and claimed that payment in his Form 13 as an expense. Whilst that payment may have been an expense, correctly incurred at law, it was incurred concurrently with the husband having free access to his loan account, from which he withdrew approximately $120,000 per annum. In addition to the $38,000 per annum rental he has paid, he has also paid private legal costs of $177,000, before the commencement of this trial. Those legal costs will have increased considerably since that time. The payment of those legal costs was met from (omitted) surplus funds. That income was generated from a business to which the wife has entitlement until orders are made by this Honourable Court excluding her from the benefit of that asset. The husband spent, after tax, $250,000 on legal costs and rent alone in the 2 years following separation. The history of his earnings, it is respectfully submitted, can inform the future. The husband would be well able to purchase a home in which to reside with ease. The monies used to pay legal costs alone could have been used to discharge debt, or pay a deposit on a house, but were not.”
The Court has not come to a conclusion on an appropriate division of property lightly or ignored (the value of the Business or) that the Business may have to make some changes and the husband be responsible for more debt.
However, in coming to a view on appropriate orders the husband (I am satisfied on the material before me) is able to adjust the financing arrangements of the Business (through his control of the Business) so that the mortgage/s or other debts affecting the former matrimonial home can be discharged. If that requires the holiday house at Property G or other property to be sold (whilst this is not ideal) it would enable a just and equitable distribution to be reached if alternative arrangements can’t be made and should be a default order if he doesn’t.
The division of property reflects the result of the adjustments set out above. These reasons make clear the wife is to receive the former matrimonial home and the superannuation the parties agreed. The husband will in addition to the remaining superannuation, and his income earning capacity continue to enjoy the benefits, control of and responsibility for and involvement in the Business. He will need to shoulder additional debt. As set out above I have considered the assets the Business has (and notwithstanding the claims made) I am satisfied the resulting changes that may need to be made to meet this are necessary to effect a just and equitable division between the parties.

Other issues

A Volvo motor vehicle was leased through the Business for the wife’s use. Since separation, the husband arranged for the Business to maintain the lease payments. However, on a number of occasions it was suggested this would stop.
Whilst the hearing was adjourned part heard it was alleged the husband ceased payments on the wife’s Volvo motor vehicle, allegedly because the Business could no longer afford to meet the payments.
In final orders the husband sought that the wife retain the Volvo at the value of $38,338. His position was the wife would get the vehicle unencumbered and that he would refinance and do so within 60 days of the Court making final orders.[42]
[42] see para 86 of husband’s submissions filed 15 September 2009
The wife proposes to return the car to the husband and to buy another car from the cash payments she contended she should receive from the husband.
The husband showed he was prepared to use the facilities available to the Business to conduct his case and I am not persuaded an order in the terms he seeks is appropriate. The Court will make an order for the wife to return the Volvo motor vehicle to the husband. This has been taken into account in the adjustments already made.
It is appropriate that the wife should be liable for her share of the reports obtained in the parenting proceedings and this should be reflected in the minutes the parties will be asked to bring in.

Chattels

Unfortunately in this matter the small things proved as intractable as the big things. The issue of the division of chattels was a further example of this.
In his affidavit field 9 February 2009 the husband deposed:
“57.In relation to chattels, I have sought that the Wife make available to me certain contents of the former matrimonial home. I had my solicitors forward a letter to the Wife’s lawyers regarding this issue. Annexed hereto and marked with the letter “CT13” is a copy of the list provided. The Wife has not responded to the substance of the letter sent and, to date, the only item made available is the family crest and this was not made available until after the Order made on 8 December 2008.
58.I had hoped the issue of chattels would be resolved by agreement but his has simply not been the case due to the Wife’s failure or refusal to even respond and I therefore seek that the contents in the list be made available to me for collection.”
Save as set out above there was no evidence led by the parties on this issue before the Court. Whilst the Court was handed a list by Counsel for the husband during the hearing, (which was refined in final submissions identifying those chattels that remained in dispute) there were no valuations provided to the Court on the chattels or submissions on behalf of the wife resisting the husband’s claim over the chattels identified above.
Given this, and that a cursory examination of that list makes clear those items are of sentimental and only minimal value, there will be orders allowing the husband to collect the following:
·framed picture – hand sketch of clown;
·Maltese glassware vases – contemporary pieces;
·stone carving of woman and child in kitchen;
·Madonna carved on wooden back board in main bedroom given to husband by grandmother;
·wooden jewellery box given to husband by father to store watches; and
·computer – 2 gig flat screen monitor with personal files on it.
Finally, whilst there had been an issue regarding monies in an account for the benefit of the children at the conclusion of the hearing the Court was told at the conclusion of the hearing the parties had come to an agreement that the parties would hold those accounts (one each) on trust for the children. Such an order is appropriate.

Conclusion

This has been a difficult matter and the Court remains concerned that the parties appeared to approach this matter with little regard to either the costs involved or ensuring some proportionality to the matters in dispute.
In answer to questions from the Court an estimate was proffered that the parties had between them expended over a quarter of a million dollars in legal fees. This wisdom of and point of doing so will no doubt be something the parties reflect on in the future.
The parties will be requested to bring in minutes to give effect to these reasons for decision having afforded the Trustee of the husband’s superannuation fund procedural fairness. Those orders will also need to facilitate the removal of the wife from involvement in the Business and the above division of property. The matter will be adjourned to a date to be fixed for the purposes of making final orders to give effect to these reasons.

I certify that the preceding two hundred and seventy-four (274) paragraphs are a true copy of the reasons for judgment of O’Sullivan FM

Date: 18 December 2009

on 26 March 2009.

The wife retain the former matrimonial home (unencumbered)	$1,200,000
A payment to the wife in the sum of:	$435,440
Super split of 50/50 seeing a split to her of:	$81,682.50
Total	$1,717,122.50