Vassalo and Graham - [2012] FamCAFC 70

FAMILY COURT OF AUSTRALIA

VASSALO & GRAHAM

[2012] FamCAFC 70

FAMILY LAW – APPEAL – PROPERTY – where the wife appeals against the calculation of the value of the parties’ property as found by the trial Judge – where the wife asserted the trial Judge was in error in not finding that certain alleged loans from the husband’s parents should be ignored as liabilities for the purposes of determining the value of the husband’s interest in two companies – where the Full Court found that it was within the trial Judge’s discretion to ignore the loans to the husband’s companies – where the wife asserted that the trial Judge erred in dealing with the accident compensation monies received by the husband as a s 75(2) matter, and that the trial Judge should have treated the monies as an asset of the parties, particularly in circumstances where they had been used to partially discharge debts which had been taken into account in calculating the value of assets of the parties – where the Full Court found that the trial Judge made a s 75(2) adjustment on account of the compensation monies – where the wife asserts that the trial Judge erred in not adding back into the asset pool certain expenditure by the husband set forth in an exhibit tendered in the proceedings by the wife – where the Full Court found it was open to the trial Judge not to adopt the “add-back” approach particularly because of the lack of firm figures put to the trial Judge – appeal dismissed – no order for costs.

Family Law Act 1975 (Cth)

Aleksovski v Aleksovski (1996) FLC 92-705, (1996) 20 Fam LR 894
Biltoft and Biltoft (1995) FLC 92-614, (1995) 19 Fam LR 39
Cerini & Cerini [1998] FamCA 143
Marker & Marker [1998] FamCA 42

APPELLANT:

Ms Vassalo

RESPONDENT:

Mr Graham

FILE NUMBER:

ADC

2195

2007

APPEAL NUMBER:

SOA

2010

DATE DELIVERED:

31 May 2012

PLACE DELIVERED:

Canberra

PLACE HEARD:

Adelaide

JUDGMENT OF:

Finn, Thackray and Strickland JJ

HEARING DATE:

27 July 2011

LOWER COURT JURISDICTION:

Family Court of Australia

LOWER COURT JUDGMENT DATE:

6 August 2010

LOWER COURT MNC:

[2010] FamCA 724

REPRESENTATION

COUNSEL FOR THE APPELLANT:

Mr Berman SC

SOLICITOR FOR THE APPELLANT:

Townsends Solicitors

COUNSEL FOR THE RESPONDENT:

Mr Heinrich

SOLICITOR FOR THE RESPONDENT:

Nicolas & Co Lawyers

Orders

The appeal be dismissed.
There be no order for costs in relation to the appeal.

IT IS NOTED

that publication of this judgment by this Court under the pseudonym

Vassalo & Graham has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).

THE FULL COURT OF THE FAMILY COURT OF AUSTRALIA AT ADELAIDE

Appeal Number: SOA 64 of 2010
File Number: ADC 2195 of 2007

Ms Vassalo

Appellant

And

Mr Graham

Respondent

REASONS FOR JUDGMENT

This is an appeal by Ms Vassalo (“the wife”) against an order made by Fowler J on 6 August 2010 in property settlement proceedings between the wife and Mr Graham (“the husband”). The order appealed (Order 4) required the husband to pay the wife the sum of $160,185.00 simultaneously with the transfer by her to him of a property, S, in South Australia (with the husband assuming responsibility for the mortgage on that property).
The orders made by his Honour gave effect to his determination that the net value of the parties’ property (including superannuation interests), which he had found to be $680,514.00, should be divided equally between the parties on the basis of their contributions to the date of the trial, but with a 15 per cent adjustment then being made in favour of the wife on account of the matters contained in s 75(2) of the Family Law Act 1975 (Cth) (“the Act”). Thus the net value of the parties’ property was divided 65 per cent to 35 per cent in favour of the wife.
The husband opposes the appeal and seeks to maintain the trial Judge’s orders.

Brief Background

By way of background it need only be said at this stage that the husband was aged 42 and the wife 40 at the time of the trial Judge’s orders. They had commenced a relationship in 1986 and married in January 1990. They had three children born respectively in 1994, 1996 and 1999.
His Honour accepted the wife’s evidence that they had separated in January 2006. His Honour also found that during the relationship they had received financial and other assistance from each of their parents.
In 2004 the husband was involved in a serious car accident and ultimately received $280,000.00 by way of compensation shortly before the trial, which was in May 2010.
During their relationship the parties established two cleaning businesses operated under the names of SC Pty Ltd and RO Pty Ltd.
The wife initiated property settlement proceedings by an application filed on

26 April 2007.
Orders were made by consent on 7 August 2007 which included provision (Orders 1 and 2) for the wife to take responsibility for the day to day running of SC Pty Ltd, and the husband of RO Pty Ltd. In addition, there was an order (Order 6) which restrained each party in relation to his or her dealings with the company which was under his or her control, and in particular with the income of that company.
Following the restraining order, the husband established another company,

G Pty Ltd. According to the findings of the trial Judge

(at paragraph 30 of his reasons) it was “more probable than not” that the husband established this new company in order to avoid the restrictions imposed by the restraining order. The new company took over some of the business of RO Pty Ltd.
On 27 August 2008 orders were made, again by consent, for “interim property settlement” whereby each party became the owner of the company under his or her control, and amongst other things for the discharge of the greater part of the earlier restraining order.
Again according to the findings of the trial Judge (at paragraphs 32 to 39 of his reasons) following the separation of the parties, the husband’s father had provided financial support for the husband (and/or his companies) through loans from a company, N Pty Ltd, which was the corporate trustee of the husband’s father’s family trust (the Graham Family Trust) which had been established in 1997. Those loans totalled a sum in the region of $550,000.00 to $580,000.00 at the time of the trial (see paragraphs 38 to 39 of the trial Judge’s reasons).
The trial Judge conducted the final hearing of the property settlement proceedings on 10 – 14 May 2010. He delivered his reasons for judgment and made his orders on 6 August 2010.

Issues raised by the appeal

As argued, the wife’s appeal was directed to the following issues:
·the treatment of the alleged outstanding loans from N Pty Ltd (of $283,347.00 and $270,932.00) to the husband’s companies, G Pty Ltd and RO Pty Ltd, and therefore the consequent value of those companies;
·the exclusion of the husband’s compensation monies of $280,000.00 from the so-called “pool”; and
·the exclusion from the “pool” of various items which were set out in a document identified as Exhibit 2.
It will thus be seen that the appeal is primarily directed to the calculation of the value of the parties’ property, the so-called “pool”. A challenge to the trial Judge’s contribution assessment was abandoned at the commencement of the hearing of the appeal.

The value of the parties’ property as found by the trial Judge and his s 75(2) adjustment

Because the appeal is directed to issues relating to the calculation of the value of the parties’ property, it will be useful at this introductory point if we set out the schedule provided by his Honour of his findings concerning that property (as it appears in paragraph 82 of his reasons):

Assets	($)
[S property, South Australia] (h)	660,000
[A1 property] (h, w)	300,000
[A2 property] (h, w)	300,000
[1966 motor vehicle]	5,500
[1968 motor vehicle]	8,000
[motor bike]	150
Household contents and personal property (h)	28,695
Household contents and personal property (h)	7,055
Household contents and personal property (w)	15,710
Wife’s jewellery (w)	5,185
Husbands jewellery (h)	2,100
[RO Pty Ltd] … and [G Pty Ltd] (h)	0
[SC Pty Ltd] (w)	0
Superannuation	0
Husband’s Superannuation [A] (h)	9,512
Husband’s Superannuation [B] (h)	15,174
Wife’s Superannuation [T] (w)	6,163
Wife’s Superannuation [C] (w)	13,520
Wife’s Superannuation [D] (w)	1,546
Total Assets	$1,378,310
Liabilities	($)
St George Bank Loan of the husband and the wife […] secured against [ S property, South Australia]	97,059
St George Bank Loan – [A1 and A2 properties]	359,975
St George Bank Loan – [S property, South Australia]	240,762
Total Liabilities	$697,796
($)
Nett Asset Pool (inclusive of Superannuation):	$680,514

It will also be useful having regard to the discussion which follows in relation to the issues which arise on the appeal, if we set out in full at this point

his Honour’s reasons for making an adjustment of 15 per cent in the wife’s favour on account of the matters in s 75(2) of the Act:
91. I take into account the following matters:
a)The fact that since separation the husband has had available to him the drawings he has made from the business and that those drawings are significantly higher than the drawings available to the wife.
b)The wife has had the continuing care of the children of the marriage and that her contribution to the support of those children has been significantly more than the contribution of the husband. The evidence particularly in relation to the open declaration of the husband’s income seems to suggest that she will continue to bear the major burden of such support for some time.
c)The husband has received significant advances on favourable terms which have been procured from or with the assistance of his parents. He has had free access to funds so provided and arrangements for their repayment are flexible.
d)There is no evidence that the wife has the like capacity to access such funds.
e)The husband has the ownership of a company built up by the joint efforts of the parties to the marriage which on all accounts has a higher potential for profit and turnover than does the business operated by the wife. It has developed contacts with significant clients.
f)The husband has suffered injuries but there is no credible evidence that they will provide a significant inhibitor to his capacity to derive income given the nature of the business which he operates.
g)The wife’s capacity to earn income will to some extent be affected by the role that she will it seems continue to undertake as the primary carer for the children at least for a time.
h)The husband has received compensation for injuries in the sum of $280,000 which has been utilised by him to reduce liabilities incurred since the date of separation. In part the loss giving rise to the compensation was a loss suffered by both parties to the marriage.
…
92.For all the reasons referred to above I find that it is appropriate the wife should receive a further 15% of the assets and a division overall of 65% of the available assets.

The loans to the husband’s companies and the value of those companies

It will be seen from the above schedule that his Honour accepted a nil valuation for each of the two companies controlled by the husband (being RO Pty Ltd and G Pty Ltd) and also for the company controlled by the wife (SC Pty Ltd) and as will later be seen his Honour appears to have considered that in so doing he was accepting the evidence of the single expert, an accountant, Mr M. In his valuation of the husband’s companies, Mr M had taken into account as liabilities of the companies the loans made to them by or through N Pty Ltd.
By Ground 1 of her grounds of appeal the wife asserts that his Honour “was in error in not finding that the alleged outstanding loans to [N Pty Ltd] in the sum of $283,347 and $270,932 should be ignored as liabilities for the purpose of determining a value of the husband’s interest in [G Pty Ltd]…and [RO Pty Ltd]...”, and by Ground 4 she asserts that his Honour “erred in accepting the evidence of [Mr M] in respect of the value of the husband’s interest in [G Pty Ltd and RO Pty Ltd] being nil.”
The submissions made in support of these grounds were, in summary, that the husband had not provided adequate disclosure of his financial affairs; that the funds which were the subject of the loans to the husband’s companies had, at least in part, been used by the husband for non-business purposes; that while Mr M report had in fact shown a combined deficiency of $249,000.00 for the husband’s companies, it was the trial Judge who had attributed a nil value to the companies; and that the loans to the husband’s companies should have been ignored, with a positive value then being attributed to the husband’s companies.
During the course of argument before us, the important question arose as to whether the matters raised by the wife on appeal in relation to Grounds 1 and 4 had been raised before the trial Judge. We therefore begin our discussion of these two grounds by examining the extent to which the issues that are the subject of these grounds were raised at trial. We will do so with particular reference to the material to which we were taken by both counsel in support of their respective positions, being either that the issues sought to be raised on appeal had been raised at trial, or had not been raised at trial. Our examination of this material will also be relevant to determining whether there is substance in Grounds 1 and/or 4.

Pre-trial material relevant to the valuations of the companies

By a joint letter dated 23 October 2009 the solicitor for the husband and the solicitor for the wife instructed the expert, Mr M, to update a valuation report which was dated 20 July 2009 and which related to the wife’s company (SC Pty Ltd) and the husband’s companies (RO Pty Ltd and G Pty Ltd) to include the figures for the financial year ending 30 June 2009.
Mr M’s updated report was dated 1 February 2010. He explained at the commencement of that report (paragraph 1.9) that he had relied in preparing the report on material provided by each of the parties, but that he had “audited none of these documents” and that his report was “qualified to that extent.”
Mr M went on to say (at paragraph 1.11) that the scope of his work had to some degree “been limited by the poor quality of the accounting records provided” to him. He also observed that the parties disputed “the bona fides of some of the transactions that form part of the financial statements provided” to him, but in his opinion, it was outside the scope of his engagement to provide opinions in relation to those matters.
Using the net tangible assets valuation method, Mr M concluded in his updated report (paragraphs 7.1 to 7.14) that the wife’s company, SC Pty Ltd, had a deficiency of net assets at the end of June 2009 of $120,000.00, and that the husband’s companies, RO Pty Ltd and G Pty Ltd, had a combined deficiency of net assets of $249,000.00. He explained (at paragraphs 7.6 and 7.12) that the deficiency in the wife’s company largely arose because of bank loans amounting to $210,000.00, and in the husband’s companies largely because of loans amounting to $554,000.00 (which were the loans from or through N Pty Ltd). (See Consolidated Balance Sheet for the husband’s companies at appendix 10 to the updated report).
Following the preparation of Mr M’s updated report, the wife swore and filed an affidavit on 9 April 2010 (that is, about one month prior to the trial) in which she stated (at paragraph 108) that she did not accept the values determined by Mr M in his original and updated reports for the husband’s companies, RO Pty Ltd and G Pty Ltd, because the reports were “influenced by the [husband’s] provision of inaccurate and misleading financial information.” The wife then went on in her affidavit to raise particular matters of concern to her about the husband’s financial affairs and to explain where such matters had been raised in letters by her solicitors to the husband’s solicitors. In a list of what the wife claimed were the parties’ assets (at paragraph 139 of her affidavit) the wife described the value of both the husband’s companies as “True Value Not Known”. She did not list her company, SC Pty Ltd, as an asset, but only showed its liability of $120,000.00 as a liability of the parties.
Relevantly for the present purposes, the wife also stated in her affidavit (at paragraph 138) that she had recently discovered that the husband had “formed a new company, which he operates from the matrimonial home called [Business F].” She asserted that the husband had “never provided disclosure in relation to this new business interest.” She further asserted that at a meeting at the Child Support Agency, the husband had “stated that he had formed this company in order to ‘repay’ the loan he alleges is owed to his parents.”
In the “Case Outline Document of the Wife” (the “wife’s Case Outline”) filed for the trial, it was stated under the heading “Liabilities” at page 7:
There are significant issues in respect of the treatment by the single expert as to the value to be attributed to the main entities namely [SC Pty Ltd], [RO Pty Ltd] and [G Pty Ltd]. [Mr M] (the single expert) is of the view that each of the respective entities are significantly in debt and therefore have a negative value. The husband has failed to disclose relevant information in respect of income and financial circumstances of the business under his control.
It is the intention of each of the parties that their respective entities will continue to trade and accordingly any deficiency of liability over asset is contingent only and should be ignored for the purposes of determining the value of [sic] the owner of a trading entity and even if not able to produce an economic rate of return.
There is a significant argument in respect of the allegation of the husband that the sum of $547,883 is owed to his parents for business and legal fees. The wife does not accept that there is any loan outstanding and the husband has failed to disclose and/or [sic] discovery any document in support of the said loan notwithstanding that the same has been asked for and not provided.
In the schedule of assets contained in the wife’s Case Outline, neither the wife’s company nor the husband’s companies were included as assets, although an unspecified liability was shown for the wife’s company and a tax liability for one of the husband’s companies.
In the “Outline of Case of the Husband” (the “husband’s Case Outline”) filed for the trial, it was stated (at page 7) that the “various companies and businesses owned by the parties have no positive value. Their net position is negative in that there are loan and other debt liabilities that need to be brought to account to some extent”.
It was also stated (also at page 7) that since separation the husband had accumulated substantial loan liabilities, which had been incurred for living expenses and for his businesses.
The schedule of assets included in the husband’s Case Outline showed the husband’s companies and the wife’s company as assets but with “nil” values.

Submissions and evidence at the trial concerning valuations of companies

In his opening address at trial the wife’s Counsel told his Honour that in relation to the assets and liabilities of the parties, that there was “some complexity…that arises in respect of the valuation process of the…entities, [SC Pty Ltd] in the control of the wife…[and] [RO Pty Ltd]…/…[G Pty Ltd], which is under the control of the husband.” (Transcript, 10 May 2010, page 3).

Later in his opening address Counsel referred specifically to the

N Pty Ltd’s loans to the husband’s companies and submitted that they were monies which the husband had borrowed from his parents “significantly post-separation” to pay legal fees, “presumably” living expenses and “to set up and continue to operate the various cleaning businesses.” Counsel continued:
They are not matters about which the wife has had any involvement, understanding, agreement or consent nor was she consulted in respect of them and it’s our position, your Honour, that at the end of the evidence your Honour will reject that those loans should be brought to account in terms of the specific purpose for which [Mr M] [sic] has used them, namely, as a genuine business related liability which is brought to account against the assets.
…
When your Honour hears the evidence in respect of it we say that your Honour will be inclined, ultimately, to ignore those loans which would – which then, your Honour, bring the negative value of [RO Pty Ltd] / [G Pty Ltd] into positive territory. Now, your Honour we don’t – there’s no concession about that and the husband’s case has always been, your Honour, that there is a genuineness about these loans and that they ought to be – that they ought to be brought to account and that some way or another the wife ought to be liable and responsible for them.
And I think, your Honour – and I’m just having a look. To be fair, your Honour, this has been our live issue since at least the filing of the – well, certainly the balance sheet that I referred your Honour to on the 14^th of October 2008 because your Honour will see on that balance sheet and possibly the subsequent one at item 32 on the balance sheet, Loan Owed to Parents for Business – 547,883…
(Transcript, 10 May 2010, pages 11 – 12).
During the course of the husband’s lengthy oral evidence-in-chief, and in relation to the wife’s claim in her affidavit that he had formed another business with his father (as part of her claim that the husband had failed to provide full and frank disclosure of his financial affairs), the husband informed the Court that his father was registered as the proprietor of a business operating under the registered business name of Business F, through which the husband as agent would buy and sell equipment and then provide any profit on the sales to his father as a means of repaying his borrowings from his father, but that “not very much” business had so far been done. An objection by Counsel for the wife that this evidence should have been in affidavit form appears not to have been ultimately pressed.
Under cross-examination the husband provided the following answer in response to a question concerning Business F:
[MR BERMAN]: If we jump over [G Pty Ltd], and we go to the entity that has been disclosed by you but is in the registered name of your father, being [Business F], and that business effectively has its start date of 1 July 2009, your counsel has tendered documents to his Honour which effectively show that there has been no income, and that is not a trading entity either, as far as you are asserting?
[MR GRAHAM]: Correct.
(Transcript, 12 May 2010, page 43).
Later in the course of the husband’s cross-examination, the following further exchange occurred concerning Business F:
[MR BERMAN]:      Look, Mr [Graham], I’ll cut to the chase in respect of this. Can I put this to you that - and, again, I’m sorry, what’s the name of this company ---
[MR HEINRICH]:     It’s not a company.
[MR BERMAN]:      Business?
[MR GRAHAM]:      [Business F].
[MR BERMAN]:      [Business F]?
[MR GRAHAM]:      [Business F].
[MR BERMAN]:      [Business F] - that was really intended to be your alter ego, wasn’t it?
[MR GRAHAM]:      No.
[MR BERMAN]:      Another entity involved in the industry in which you have experience and expertise?
[MR GRAHAM]:      No.
[MR BERMAN]:      It had nothing to do with your father other than name only, did it?
[MR GRAHAM]:      No, I disagree.
[MR BERMAN]:      You disagree?
[MR GRAHAM]:      Yes.
[MR BERMAN]:      Do you accept that your evidence during the course of these proceedings about the setting up of this business is the first time that you have disclosed an arrangement or a basis for the setting up of this company or business, namely, your father seeking some method by which a return could be achieved?
[MR GRAHAM]:      Yes.
[MR BERMAN]:      And can I put this to you: it’s a bit like the way you set up [G Pty Ltd]. It was designed to hide; to not disclose a business venture?
[MR GRAHAM]:      No.
(Transcript, 13 May 2010, pages 22 – 23).
For the sake of completeness in relation to the issue of Business F, we mention here that in his final address to his Honour, Counsel for the wife submitted that the setting up of Business F was an attempt “to divest, to separate, to remove from the scrutiny of the wife a further business arrangement…” (Transcript, 14 May 2010, page 53, lines 24 – 26).
We now return to the evidence concerning the value of the husband’s companies and the loans to those companies. When the expert, Mr M, gave his oral evidence, he was questioned by Counsel for the wife in relation to the effect on the valuation of the husband’s two companies if the loans from, and through, N Pty Ltd were removed:
[MR BERMAN]:   But [Mr M], the task, as I understand it, that is the result of a consideration of updated appendix 10 is that at the bottom right-hand corner of that document there is a net asset value of 248,000 – sorry, a deficiency of value of $248,822?
[MR M]:           Yes.
[MR BERMAN]:   And that’s the figure that is translated into what I might describe as the executive summary of your report, as representing the value of the combined entity [RO Pty Ltd] and [G Pty Ltd]?
[MR M]:   Yes.
[MR BERMAN]:   I’m right about that, aren’t I?
[MR M]:   Yes.
[MR BERMAN]:   Okay. And in order to get to the simple arithmetic of that – and if we were – if I’m asking you to consider the value of the entity – that is, that’s the process that I’m asking, and not worry about whether or not these moneys might be reflected in the other assets of the parties. Am I right in saying that in effect, by every dollar that those loans to [N Pty Ltd] are reduced, that would have the corresponding increase, if you like, on the bottom line, being the value of 248,822?
[MR M]: Yes.
[MR BERMAN]:   So if it should turn out, for instance, that not one dollar – and I’m not saying that’s necessarily the evidence; it neither is or isn’t – but if I put that to you by way of the hypothetical that not one dollar of the [N Pty Ltd] loans were in fact used or should be brought to account in respect of the property business of [G Pty Ltd] and [ RO Pty Ltd], that would in fact move the value from a negative into a positive, would it not?
[MR M]: Yes.
[MR BERMAN]:   Yes?
[MR M]:           But I must say, I think I would resist that on the basis that – the proper question I think is what was in fact done with those moneys, because the exclusion of as much as 554,000 seems too much to me from the other assets and liabilities reflected in the updated appendix 10.
…
[MR BERMAN]:   What’s the validity, if there is validity, in a negative value being attributed to an entity that continues to trade? So if the evidence is that each of the parties in respect of their own entities intend that their businesses will continue to trade, in terms of a valuation process what’s the status of a negative value?
[MR M]:          I think that’s an interesting question. I understand that the role of valuation of assets of this kind is to arrive at the value to the owner. That’s what the court is seeking to be – to find in a just and equitable way, and a finding of a deficiency of assets reflects the – I think in this case the reality that this business, this trust, has more liabilities than it has assets, and that those liabilities include sums of moneys owed to banks and trade creditors; it I think is appropriate to have regard to the liabilities, but ultimately that’s a matter for the court. The answer to Mr Berman’s question is, what is its validity; I think its validity can be found in the substance of the liabilities. Whether the liabilities are in fact real and would be payable, I have concluded that those liabilities are real and payable.
(Transcript, 14 May 2010, pages 6 – 8).
Then in the course of his final submissions, and having put before his Honour as Exhibit 26 a schedule of assets which attributed a positive, combined value of $305,457.00 for the husband’s two companies, Counsel for the wife submitted that the deficiency of $249,000.00 shown in Mr M’s last report for those companies should not be accepted. This was because that deficiency was attributable to loans of $554,000.00 which even though they might be “genuine liabilities” should not be brought into account but rather left as a matter between the husband and his father’s company, N Pty Ltd. (Transcript, 14 May 2010, pages 57 – 59).
Before us Senior Counsel for the wife explained that the figure of $305,457.00 was the figure reached if the negative value of $248,822.00 arrived at by Mr M for the value of the companies was deducted from the total loan figure of $554,279.00. (Transcript, 27 July 2011, page 13).
In reply to the final submissions of Counsel for the wife, Counsel for the husband raised an objection to the wife’s seeking at that late stage and after the husband’s case had closed, to attribute a positive figure for the value of the husband’s companies and without having had Mr M do that exercise. Counsel submitted that if the wife was to be permitted to proceed with such a case, there should be an adjournment apparently to permit proper calculations to be made.
The adjournment was opposed on behalf of the wife, and it was refused by

his Honour on the basis that the need for adjustment to the valuation of the husband’s companies had been sufficiently raised in the wife’s “case outline document” and in argument during the trial.

Conclusion in relation to whether issues raised on appeal were properly raised at trial

The above examination of the written material which was before the trial Judge and of the oral evidence and submissions to him has satisfied us that the issues raised by the wife on appeal in relation to the value of the husband’s companies and of the loans from N Pty Ltd were issues properly raised before the trial Judge, although the asserted positive value of some $305,000.00 was only put in final submissions.

The complaint in relation to Business F

Notwithstanding the oral evidence which emerged at the trial concerning the business known as Business F (as set out above) and the oral submissions made to his Honour by Counsel for the wife (also set out above), his Honour made no reference in his reasons for judgment to that business. This omission by his Honour was a source of some complaint before us by Senior Counsel for the wife, although no ground of appeal was directed to the matter.
While it might perhaps have been useful had his Honour made some comment about this matter, nothing in our view, could ultimately turn on his failure to do so. It can be assumed that given his Honour’s failure to mention the matter, he must have considered it to be of little or no consequence, which would be a conclusion open to him given the husband’s evidence. We will not concern ourselves further with this issue, but rather will return to the real issue of the valuation of the husband’s companies.

The trial Judge’s conclusions concerning the N Pty Ltd loans and the value of the husband’s companies

In the course of outlining the background history to this case in his reasons for judgment, his Honour can be read as accepting the wife’s case in relation to the husband’s motives for establishing G Pty Ltd:
30.It was suggested by the wife, and I find it more probable than not, that the husband, following restrictions created by the injunctive order [made on 7 August 2007] being imposed, set up an alternate company so that he could undertake his enterprise without the restrictions imposed on [RO Pty Ltd] and himself in relation to that company. He established [G Pty Ltd]. That company took over some of the business which had been the property of [RO Pty Ltd] and developed a new business utilising the contacts and reputation of [RO Pty Ltd].
His Honour then set out the evidence concerning the provision of money to the husband by his father through the father’s company, N Pty Ltd, in the following paragraphs:
32.Since the parties’ separation, the husband’s father has been significantly involved in the continued financial support of his son. The husband’s father made available through his entities monies for the use of the husband. They were referred to in [Mr M’s] report on the husband’s company and are shown in the following terms, namely:
a)Loan [N Pty Ltd] of $270,932; and
b)Bank Loan ([N Pty Ltd]) of $309,210.
…
34. The husband’s father deposed:
“[i]n about 2007 the company commenced loaning monies to [Mr Graham] in respect of expenses incurred by him for legal and accounting fees in relation to his family law proceedings. As at the 30 June 2009 it paid $59,000.00 towards [Mr Graham’s] fees.”
35.It was further deposed by the husband’s father that the husband approached him following the parties’ separation claiming he needed money to meet his liabilities, as he was having problems in gaining access to funds, and further monies were provided.
36.It is further asserted by the husband’s father that in or after July 2008 the husband informed him that he did not have sufficient assets to borrow monies and that he was not able to obtain plant and equipment and operate [G Pty Ltd] and he requested a loan. The husband, it seems with the guarantee of [N Pty Ltd], obtained a loan from the Macquarie Bank and which was later replaced by the Bank of South Australia.
37.In August 2009 the Bank of South Australia offered loan facility of up to $650,000 to [N Pty Ltd] for the purpose, inter alia, of “Loan to assist with business set up and divorce costs for [Mr Graham]”. The husband was a guarantor of the facility.
38.The husband’s father deposed that of that amount the company [N Pty Ltd] had lent the husband, [RO Pty Ltd] and [G Pty Ltd], since the date of the parties’ separation, a total of $547,883. The husband’s father said that the arrangements with the husband were that he and his two companies were to repay a sum of $250,000 and reimburse the monthly interest payments and repay the balance.
39.The monies were provided to the husband by him utilising a facility he had been granted of drawing on an account in the name of the father’s Trust. The amount shown in the expert’s report as owing to the father’s entity is $580,142.
His Honour then explained each party’s case in relation to these liabilities to the husband’s father’s company. We note in passing that nothing would seem to turn for present purposes on the slight variations in the figures for the total value of the liabilities in question:
41.There is no issue that the debts are real. It is in issue as to whether they have been procured for business purposes and whether they are properly included in the balance sheet as a debt for company related purposes.
42.Rather it is asserted by the wife that the monies so borrowed and shown as a business debt were funds utilised by the husband for his own purposes and that the husband has wasted capital that might otherwise have been available for division between the parties.
43.The issues for determination by the Court importantly include a question of what value the parties’ assets should be found to have. Central to the determination of that issue is a finding sought by the wife that the interests of the husband in two companies should be found to be of greater value than that ascribed to it by an independent expert.
44.The Court did not have the benefit of being provided with documents, which other than allowed it to see the financial position of both the companies owned by the husband and the company owned by the wife other than through a glass darkly.
45.It seemed that each of the parties treated their companies as their private fiefdom and paid scant attention to the independent existence of a corporate entity in utilising their funds held by those entities in and for purposes not related to them, but rather related to the parties themselves or their children.
46.It seems that the husband embarked on an expansion plan for his companies, [RO Pty Ltd] and [G Pty Ltd], which was not successful and which involved the spending of significant money. The husband also used company funds to pay his legal and accounting fees and some of his child support obligations as well as for his own support. The wife made a similar use of funds of [SC Pty Ltd], although it is asserted that this did not take place to the same extent.
47.Ultimately, the wife asserted that the husband’s company was worth more than asserted and that her own company was of no or little value. The husband asserted that each of the companies should be taken at no value in accordance with the determination of an independent expert.
…
56.The Court at the commencement of the hearing was provided with a balance sheet for its consideration. Ultimately two balance sheets were prepared, one by each of the parties.
57.The differences between the parties as to the inclusion of assets in the balance sheet were reduced to only a consideration of the proper value to be attributed to the interests of the parties in the companies which had been the subject of the partial property settlement and, whether or not the compensation received by the husband which had been utilised to reduce post separation debt, was to be added into the balance sheet. In effect the wife wanted attributed to the husband’s companies a value of $305,457.
It is clear, in our opinion, from the above paragraphs from his reasons that

his Honour well understood that it was the wife’s case that the [N Pty Ltd] loans should be excluded from the valuation of the husband’s companies and that those companies should be given a positive value of $305,457.00.
Having explained the wife’s case, his Honour then recorded Mr M’s evidence in relation to the value of the companies and the alleged outstanding loans in the following way:
60.The expert evidence was that the companies did not have any value. The value was assessed on a net tangible asset backing basis, the valuer concluding that, having regard to a proper return to be ascribed to the efforts of the proprietor working in the businesses and the trading results, there would not have been any profit upon which a future maintainable earnings valuation would have been conducted. In effect, the valuer asserted that there was no goodwill in either business and to find a value one was left with the consideration of the net tangible asset backing basis of valuing the shares.
61.That evidence was founded upon information provided to the valuer by the husband through his accountant.
62.The valuer did not undertake any audit of the company and took the figures at face value. It appears that the husband’s accountant equally did not undertake any audit of the figures and accepted the information provided to him by the husband.
63.The valuer acknowledged in evidence that, in coming to his conclusion, there was no value to be attached to the companies, he relied, inter alia, on entries in the balance sheet of outstanding loans to [N Pty Ltd] in the sum of $283,347 and $270,932. He made no further inquiries in relation to these amounts and accepted them as corporate liabilities which, on their face in the documents, they were.
64.These loans were not recorded in the year ending 30 June 2008 but were recorded in the year ending 30 June 2009. Accordingly, it seems that they arose in the financial year ending 30 June 2009.
65.The valuer, in making his valuations, has assumed that the loans contained in the balance sheet were loans relating to the business of the company.
66. It was put to the valuer by counsel for the wife that:
“[i]f it should turn out … that some or all of those loans are not liabilities of [G Pty Ltd], what’s the implication in respect of the valuation on an asset-based value of [RO Pty Ltd][…] and [G Pty Ltd], I suppose combined entity.”
67.The valuer replied to the effect that he did not think that it made any difference to his conclusion that the proper basis for valuation was a net asset backing basis.
68.He went on to reply that that assertion raised an interesting question of what the other side of the transaction would be. He observes that the taking away of the liability might have an impact on an expense of some kind.
69.The Court raised with the valuer that the loan might, in some circumstances, be balanced by a loan account, rather than expenditure.
70.The Court would, in those circumstances, have to have regard to the expenditure incurred by the husband in relation to his personal needs under section 75(2) of the Act but would alternatively in a balance sheet as between the parties have to include the husband’s liability to the company for such amounts.
71.Substantially the valuer however said that he would not remove the liabilities from the balance sheet because he had come to the conclusion that they were liabilities which were real and payable and accordingly should remain in the figures.

We consider that his Honour’s summary of Mr M’s evidence is accurate.
After outlining the expert evidence, his Honour turned to consider arguments put to him by the wife in relation to the treatment of the loans having regard to the use made by the husband of the borrowed funds, saying:
72.There nevertheless was the question of how the sum has been spent and whether that should be reflected in a loan account or perhaps director’s fees or salary, dividend or a combination of all, were the amounts spent by the proprietor on non business expenses. In the valuation, related party loan accounts were not considered.
73.There was further cross-examination of the expert dealing with the wife’s like drawings from [SC Pty Ltd].
74.The wife, as a result of her inquiries and investigation of documents which were available at all times to the husband, produced Schedule (Exhibit “2”), setting out what she claimed were amounts expended by all the companies other than for company purposes and, in particular, for the purposes of the husband or the children or the wife.
75.She argued that if that expenditure had not occurred the position of the company would be different and, in particular, the sums borrowed to meet that expenditure would not appear in the balance sheet as liabilities of the company.
76.Alternatively, it appears that if the sums were borrowed and the liabilities were there in the balance sheet that there should be a corresponding asset in the balance sheet in the form of a loan account in the name of the husband or the wife.
77.Were that to be the case in the circumstances of this case I would of necessity include such a loan account as a liability of the husband or the wife in the balance sheet as between the husband and the wife.
Then significantly for the present purposes, his Honour returned to the evidence of Mr M before concluding that he could not determine with any accuracy the value of the company based on the assertions of the wife:
78.The proposition was, in any event, put to the valuer that in the circumstances alleged by the wife the simple situation would be that the value of the company would rise to a positive value.
79.The valuer was not prepared to commit to that as a necessary result. He said that it would be necessary to see to the application of the funds individually to make a determination. In addition, since the parties used the companies’ funds as their own without formally taking a salary, it would be necessary it seems to make a determination as to how much of the sum utilised by the husband for his own purposes might be attributed to salary or director’s fees or dividend perhaps. It might be necessary in that event to make some allowance for tax on those payments.
80.These allocations might or might not leave a balance to be included in the assets of the company on loan account. I find that it is not possible for me to determine with any accuracy the value of the company based on the assertions of the wife. Any such assessment of value would be in the realm of speculation and I accept the evidence of the valuer in that regard.
81.What I can do, however, and what I propose to do, is to take into account the matters to which she has referred, (amongst others) in a consideration of the issues which arise under section 75(2) and including section 75(2)(o). It is a requirement of justice in this case that the substantial funds available to the husband and utilised for his purposes should be taken into account in this way. I accept, however, that the valuation of the companies should remain as found by the valuer to be nil.
It is very important for the present purposes to note that later in his reasons when he came to consider the s 75(2) matters, his Honour made a 15 per cent adjustment in favour of the wife for reasons which included the following:
91. …
c)The husband has received significant advances on favourable terms which have been procured from or with the assistance of his parents. He has had free access to funds so provided and arrangements for their repayment are flexible.

The challenge to the trial Judge’s conclusions concerning the N Pty Ltd loans and the value of the husband’s companies

In challenging before us his Honour’s refusal to delete the loans from and through N Pty Ltd from the valuation of the husband’s companies, and thereby arrive at a positive value for those companies, Senior Counsel for the wife continued to rely on an alleged lack of disclosure by the husband (submitted to be evidenced by his establishing G Pty Ltd to overcome the restraining order in relation to RO Pty Ltd, and his failure to disclose the existence of Business F), and also on the concessions by the husband that he had used the company funds to pay his legal and accounting fees and child support obligations (as recorded by his Honour at paragraph 46 of his reasons).
Senior Counsel also relied on what might be described as the personal or family nature of the loans in question and on the approach that a court can take to such loans according to the principles contained in the Full Court’s decision in Biltoft and Biltoft (1995) FLC 92-614.
However, even if it be assumed that it was open to his Honour to ignore the loans from and through N Pty Ltd to the husband’s companies, and to determine his own valuations for those companies, we have not been persuaded that his Honour’s discretion miscarried in not doing so. In this regard it must be remembered that his Honour made a relatively significant s 75(2) adjustment of 15 per cent to the wife on account of a range of matters which included the advances which the husband had received from, or through, his parents. This was a course open to his Honour in circumstances where he was not prepared to increase the value of the parties’ assets on account of such matters.
As the passages earlier set out from his Honour’s reasons demonstrate, he was well aware of the limited financial disclosures to the expert and to the Court by the parties, particularly by the husband. He was also well aware of the source of, and use made by the husband of, the N Pty Ltd loans and of the wife’s contentions as to how those loans should be treated, including the variation of the expert’s negative valuation of the husband’s companies to a positive figure of $305,457.00. But it is also very clear from his Honour’s reasons that he had regard to Mr M’s reservations concerning the validity of a valuation which would simply delete the value of the loans without making other adjustments.
His Honour well explained, in our view, in paragraphs 79 and 80 of his reasons the difficulties with such a valuation and why a valuation arrived at by such a course would be in “the realm of speculation.” It cannot be said that his Honour was in error in rejecting that course – indeed he may have been at greater risk of error had he adopted that course. His subsequent s 75(2) adjustment ensured that his discretion did not miscarry in relation to the advantage that the husband had obtained from the N Pty Ltd loans. Grounds 1 and 4 have therefore not been established.
It will be convenient if we now turn to consider the complaints contained in the grounds of appeal directed to his Honour’s treatment of the accident compensation monies received by the husband as these complaints have some relevance to the matters just discussed.

The husband’s compensation payment

When setting out the background facts in his reasons for judgment, the trial Judge recorded in paragraph 18 that in 2004 the husband had been involved in a serious motor vehicle accident; that “a day or so before the trial” he had received compensation in the sum of “about $280,000”; and that he had applied this sum “to the reduction of debt which had been incurred since separation”.
It later emerges from paragraph 40 of his Honour’s reasons that the debt which the husband paid off, at least partially, with the compensation monies was the debt to N Pty Ltd, to which extensive reference has just been made in these reasons.
We also mention that we were informed at the hearing of the appeal that the husband had in fact been involved in four accidents in the period 2002 to 2008 and that the sum of $280,000.00 represented compensation for all four accidents. But nothing turns on this, and in any event, it will be seen that later in paragraph 86 of his reasons his Honour recognised that there was more than one accident.
After referring in paragraph 18 of his reasons to the receipt by the husband of the compensation monies, his Honour continued:
19.No evidence was adduced which would bind the Court to the effect that the sum so paid represented other than compensation for existing loss rather than estimated future loss.
20.In these circumstances and having regard to the husband’s basis for his claim for compensation, it seems that the loss was a joint one to some extent at least. In any event, the payment of the sum cannot be ignored. I will take it into consideration when turning my attention to considerations under section 75(2) of the Family Law Act 1975 (Cth) (“the Act”).
21.Reference was made in the particulars supplied by the husband in support of his claim for compensation as to the effect of the husband’s accident on the wife and the pressure bought to bear on her to work in the circumstances where he was unable to work himself.
Later at paragraph 57 of his reasons, his Honour indicated that there was a dispute between the parties as to whether the compensation monies should be included in “the pool”. However, his Honour did not include them in the pool as can be seen from his schedule of assets and liabilities set out earlier in these reasons at paragraph 16. He explained his reasons for not doing so in the following paragraphs:
86.The husband has received compensation for injuries he received in several accidents. However, in relation to that compensation the husband particularised in his claim in Exhibit “21” and spoke of:
a)the loss that he had suffered and the fact “that his spouse’s income had suffered because of his incapacity”
b)“The plaintiff carried out the more physically arduous activities of the two businesses whereas the spouse was responsible for the financial/administrative aspects of the businesses. His disabilities arising from the two accidents affected his ability to conduct the more arduous activities of the two businesses, to the extent that he has had to seek further assistance from his spouse…”; and
c)“The extra pressure put on his spouse in having her carry out additional duties to her financial and administrative duties, contributed to a breakdown in the marriage.”
87.There seems little doubt that the loss which was incurred by reason of the husband’s incapacity was in some ways a joint loss.
88.The compensation that the husband has received since separation is in the order of $280,000 and has been used by him to repay debt owing to his father’s family trust.
89.That debt was incurred and reflected in the balance sheets of the companies and was the subject of debate, as herein set out. I am urged by the wife to add this sum back into the balance sheet of [sic] husband and the wife but, as I have indicated to counsel, it is not my practice to add non-existent sums to balance sheets. However, I will take it into account in my considerations of the justice of the case, and in particular that the husband has had this money, that it represents a loss which was suffered by both the husband and the wife and that it has been utilised in the reduction of liabilities of the husband incurred post separation.
Then later in paragraph 91 where he listed the matters which led him to make a 15 per cent s 75(2) adjustment in the wife’s favour, his Honour included the following:
91.…
h)The husband has received compensation for injuries in the sum of $280,000 which has been utilised by him to reduce liabilities incurred since the date of separation. In part the loss giving rise to the compensation was a loss suffered by both parties to the marriage.

The grounds of appeal directed to the trial Judge’s treatment of the compensation monies

Ground 5 of the wife’s grounds of appeal simply asserts that his Honour “erred in excluding compensation received by the husband in the sum of $280,000 from the pool of assets.” No explanation of the asserted error is provided in that ground. However, Grounds 6 and 7 then assert:
6.That it was not open to the learned Trial Judge to find that the compensation received by the husband a day or so before the trial was for existing loss rather than estimated future loss and that in any event, even if such evidence was adduced, it would have had the effect of excluding the said compensation payment from the pool of assets.
7.That the learned Trial Judge erred in both excluding the compensation monies received by the husband from the pool of assets but then not taking into account the effect on the pool of the husband using that money to repay debt to the husband’s father in circumstances where that debt was brought to account in order to assess the value of the husband’s interest in his business entities.
We have some difficulty understanding Ground 6 because it seems to misunderstand his Honour’s reasons for not including the compensation monies in “the pool”. As we understand his Honour’s decision, the reason why the monies were not included in the pool was because they were no longer available to the parties, and indeed this reason appeared to be recognised in the oral submissions of Senior Counsel for the wife (Transcript, 27 July 2011, page 46, line 10).
However, the real gravamen of these grounds of appeal as it emerged from the oral submissions of the wife’s Senior Counsel was that the compensation monies should not just have been dealt with as a s 75(2) matter, but rather should have been treated as an asset of the parties, particularly in circumstances where they had been used to partially discharge debts which had been taken into account in calculating the value (albeit a nil value) of assets of the parties (being the husband’s companies).
Although there is clearly some substance in this complaint, we would not be disposed to allow the appeal on this basis. This is because if the compensation monies of $280,000.00 were to be added back as an asset of the parties, the parties’ respective contributions to those monies would then have to be considered and, as was submitted by Counsel for the husband in his written summary of argument, the husband would have to be found, on the basis of authorities such as Aleksovski v Aleksovski (1996) FLC 92-705, to have made virtually the entire contribution to that asset. This alteration in the overall contribution assessment would be likely to require some adjustment in favour of the wife in the s 75(2) context.
However, the trial Judge has already made a significant s 75(2) adjustment for the wife for matters which include the husband’s receipt of the compensation monies. It is true that that adjustment was made in relation to a pool which did not include the compensation monies. But when it is remembered that the husband’s contribution entitlement to a larger pool which would include the compensation monies, would be sufficiently substantial that the overall outcome is likely to be little different from his Honour’s award, a new trial on account of this matter could not be justified. This is not a matter which we could safely redetermine (thereby avoiding a retrial) given the lack of findings in relation to contributions to the compensation monies.

The failure to add back items contained in Exhibit 2

The final matter to be considered arises out of Grounds 2 and 3 which assert:
2.That the learned Trial Judge erred in not adding back into the asset pool the difference in expenditure between the parties as set forth in “exhibit 2” tendered in the proceedings in circumstances where the learned Trial Judge found that “it more probable than not that the husband following restrictions created by the injunctive order being imposed, set up an alternate company so that he could undertake his enterprise without the restrictions imposed on [RO Pty Ltd] and himself in relation to that company.”
3.That the learned Trial Judge failed to explain adequately or at all why the add-back as evidence by “exhibit 2” should not form part of the pool of assets.
At the conclusion of the wife’s oral evidence in chief her Counsel tendered and his Honour admitted as Exhibit 2 a bundle of documents which were indentified as “Summary of [the wife’s] and [the husband’s] Drawing Accounts and Spreadsheet Attached” (Transcript, 10 May 2010, page 53). The bundle (as it appeared in the Appeal Book) comprised some 26 pages. At the time of the tender Counsel for the husband advised his Honour that he could not object to the admissibility of the documents, but he added: “It’s what happens to them”. (Transcript, 10 May 2010, page 53, line 17).

The trial Judge’s approach to Exhibit 2

In his reasons for judgment his Honour first referred to Exhibit 2 in

paragraph 25, when in the course of recording the history of the case, he said:
25.The wife complained from time to time and in the proceedings of the drawings made by the husband from the companies which made their proper management difficult. She recorded the monthly expenditure of which she complained. These withdrawals are set out in Exhibit “2”.
26.In an endeavour to bring some order to the financial position the wife sought injunctive relief.
Then after explaining the restraining orders made on 7 August 2007,

his Honour continued:
29. Both parties breached those injunctions and, on the evidence set forth in Exhibit “2”, the husband more egregiously than the wife. Any expense which was not within the ambit of expenses permitted by the order were expenses requiring the consent of the other party before they were paid. The husband conceded in his evidence that he had spent money outside the limit permitted and had not procured the wife’s consent to such expenditure.
30.It was suggested by the wife, and I find it more probable than not, that the husband, following restrictions created by the injunctive order being imposed, set up an alternate company so that he could undertake his enterprise without the restrictions imposed on [RO Pty Ltd] and himself in relation to that company. He established [G Pty Ltd]. That company took over some of the business which had been the property of [RO Pty Ltd] and developed a new business utilising the contacts and reputation of [RO Pty Ltd].
Later while still recording the history of the case, his Honour said (emphasis added):
48.The wife provided detailed schedules of amounts withdrawn by the parties which she said were other than for the purposes of the company. The schedules were admitted into evidence. The husband said he was not able to agree to them because although he had had the opportunity to check them, he had not done so. The allegation and the schedules were before the Court earlier in the proceedings in a different form and the issue had clearly been enlivened at that time and was referred to again by the wife’s counsel in his opening remarks.
49.Exhibit “2” tendered in evidence in the early part of the proceedings was asserted to only be an update of earlier assertions and contained some corrections. However, the wife in her evidence conceded that some of the statements made in them were not correct. Exhibit “2” however contained a number of spreadsheets setting out transfers made from the accounts of the husband and wife, including in relation to [RO Pty Ltd] and [SC Pty Ltd] and which include sums asserted to have been made in breach of the injunctive orders, and which include an amount of $61,460 attributed to “[RO Pty Ltd] Transfers”.

His Honour referred again to Exhibit 2 when discussing the controversial issue of the valuation of the companies and the N Pty Ltd loans, saying:
74.The wife, as a result of her inquiries and investigation of documents which were available at all times to the husband, produced Schedule (Exhibit “2”), setting out what she claimed were amounts expended by all the companies other than for company purposes and, in particular, for the purposes of the husband or the children or the wife.
Thereafter his Honour made no further mention of Exhibit 2 in his reasons for judgment, and thus gave no reason for not at least expressly taking the contents of that exhibit into account in some way in his decision.

The wife’s submissions at trial and on appeal concerning the Exhibit 2 Add-Backs

During his final submissions to his Honour, Counsel for the wife had provided him with a schedule which was apparently supposed to show the wife’s contentions in relation to the asset and liability pool which his Honour should find. His Honour marked that schedule as Exhibit 26. Nowhere in that schedule does there appear to be an item representing the contents of Exhibit 2 which the wife contended and still contends should be added back as an item of property.
Furthermore, when Counsel for the wife addressed his Honour in relation to Exhibit 2 at some considerable length in a passage extending over some five pages of transcript (Transcript, 14 May 2010, pages 63 – 67), he also does not appear to have suggested the precise figure, or range of figures, which

his Honour might take from Exhibit 2 and insert as an “add-back” in the pool.
Indeed, Counsel appears to have conceded in the following passages from his address that the task of extracting a figure from Exhibit 2 (or from an annexure to the wife’s affidavit which contained similar material) might be too difficult, and that his Honour could treat the matter as a s 75(2) matter:
But of course, if your Honour decides that it is not an exercise with which in your Honour’s proper discretion your Honour feels comfortable, given that the state of the evidence – and the magnitude of this, and whether it’s the magnitude is set out in exhibit 2, or whether it’s the magnitude that’s set out in the FMV8 annexed to the wife’s trial affidavit, it has to be reflected, your Honour, in a section 75(2)(o) adjustment.
And we say, if there was any issue as to whether a 20 per cent adjustment in favour of the wife for section 75(2) has some relevance, some basis, some foundation, notwithstanding the children, and lack of child support, and all of the other things that – the resource that the husband has to [N Pty Ltd], we say to your Honour, relatively speaking, clear evidence that the husband has had the advantage of at least a couple of hundred thousand dollars of moneys of the parties in circumstances where at least part of it, and a substantial part of it, as quantified by the wife, was post-injunction, is, we say to your Honour, more than sufficient justification to at least bring it under section 75(2)(o). If your Honour pleases.
(Transcript, 14 May 2010, page 67, line 13 – 29).

Discussion of Exhibit 2 Add-Back issue

Although he did not expressly say that he was adopting the s 75(2) approach rather than an “add-back to the pool” approach, it is clear that this is what

his Honour did when he included the following as one of the matters which caused him to make a 15 per cent adjustment in favour of the wife:
91.…
a)The fact that since separation the husband has had available to him the drawings he has made from the business and that those drawings are significantly higher than the drawings available to the wife.
We observe at this point that the 15 per cent adjustment covered a significant range of matters as will have emerged from what has been said so far in these reasons. However, it is important to note that no ground of appeal raised the adequacy of the 15 per cent adjustment.
Notwithstanding the concession made in his final submissions at trial to the effect that his Honour could deal with the matters in Exhibit 2 by way of a

s 75(2) adjustment if he did not adopt the “add-back” approach, Senior Counsel for the wife continued in his oral submissions to us (Transcript, 27 July 2011, pages 37 – 44) to assert that his Honour had erred in relation to this matter.
The argument appeared to be that having found in paragraph 29 of his reasons that on the basis of the evidence in Exhibit 2 the husband had breached the injunctions (made on 7 August 2007) “more egregiously than the wife”, and then in paragraph 30 that it was “more probable than not” that the husband had set up the company, G Pty Ltd, to overcome the restrictions placed on RO Pty Ltd by the injunctions, his Honour should have added back a figure into the pool to reflect the figures in Exhibit 2. When pressed by us, Senior Counsel submitted that the figure should be $286,852.00, but he conceded that he could not tell us “where that figure came from” (Transcript, 27 July 2011, page 41, line 37).
Furthermore, Senior Counsel for the wife was unable (Transcript, 27 July 2011, page 42) to assist us as to what, if any, part of that figure might have represented the husband’s reasonable living expenses (see for example Marker & Marker [1998] FamCA 42, Cerini & Cerini [1998] FamCA 143).
More significantly perhaps, Senior Counsel was unable to provide us with any calculations which would show the changes that should be made to the figures in Exhibit 2 as a result of the concessions made by the wife under cross-examination concerning errors in Exhibit 2 (Transcript, 27 July 2011, page 43).

Conclusion in relation to Exhibit 2 Add-Backs

While it may well have been useful had his Honour explained expressly why he preferred to adopt the s 75(2) approach rather than the “add-back” approach in relation to the matters raised by Exhibit 2, we would certainly not be prepared to interfere with his orders on account of this issue. This is principally because of the lack of a firm figure put to us or to his Honour for insertion as an add-back. Clearly the interests of justice would militate against the grant of a new trial to enable this omission to be remedied.

Conclusion in relation to the Appeal

For the reasons we have given the appeal must be dismissed.

Costs

At the conclusion of the hearing of the appeal, and in accordance with our usual practice, we invited submissions in relation to the costs of the appeal in the event that the appeal should succeed or that it should fail.
In the event that the appeal was to fail, as it has, Counsel for the husband sought an order for costs.
However, given the not insubstantial issues raised in the appeal, we consider that the general rule contained in s 117(1) of the Act should prevail and that there should be no order for costs, leaving each party to bear his or her own costs.

I certify that the preceding ninety-three (93) paragraphs are a true copy of the reasons for judgment of the Honourable Full Court (Finn, Thackray and Strickland JJ) delivered on 31 May 2012

Associate:

Date: 31 May 2012