VICKERS & PHILLIPS (No.2)
[2016] FCCA 389
•26 February 2016
FEDERAL CIRCUIT COURT OF AUSTRALIA
| VICKERS & PHILLIPS (No.2) | [2016] FCCA 389 |
| Catchwords: PRACTICE AND PROCEDURE – Whether or not to admit valuation shortly before the trial – whether or not to grant an adjournment of the final hearing for the second time due to valuation issues – further application for adjournment partway through the proceedings. |
| Legislation: Family Law Act 1975 (Cth), ss.74, 75, 79 Federal Circuit Court Rules 2001 (Cth), r.1.03 |
| AON Risk Management Services Ltd v Australian National University (2009) 239 CLR 175 Vickers & Phillips [2016] FCCA 313 W & W [2000] FamCA 1302 Pierce v Pierce (1998) FLC 92-844 Williams & Williams [2007] FamCA 313 Norbis v Norbis (1986) 161 CLR 513 NHC & RCH (2004) FLC 93-204 Beklar & Beklar [2013] FamCA 327 Stanford & Stanford (2012) 247 CLR 108 Hickey & Hickey & Attorney-General (Intervener) (2003) FLC 93-143 Bevan & Bevan (2013) FLC 93-545 Weir v Weir [1992] FamCA 69 Black & Kellner (1992) FLC 92-287 Vass & Vass [2015] FamCAFC 51 |
| Applicant: | MR VICKERS |
| Respondent: | MS PHILLIPS |
| File Number: | MLC 7196 of 2014 |
| Judgment of: | Judge Harland |
| Hearing dates: | 4 & 5 February 2016 |
| Date of Last Submission: | 5 February 2016 |
| Delivered at: | Melbourne |
| Delivered on: | 26 February 2016 |
REPRESENTATION
| Counsel for the Applicant: | Ms Williams |
| Solicitors for the Applicant: | Kenna Teasdale Lawyers |
| Counsel for the Respondent: | Mr Stavris |
| Solicitors for the Respondent: | James Harris Lawyers |
ORDERS
That within fourteen (14) days of the date of making these orders, the parties do all such things and sign all documents necessary for the funds held in the husband’s lawyers’ trust account to be distributed to the husband.
That within fourteen (14) days of the date of these orders, the wife pay to the husband the sum of $2,000.
That unless otherwise specified in these orders and save for the purpose of enforcing any monies due under these or any subsequent orders:
(a)Each party be solely entitled, to the exclusion of the other party, to all property (including choses-in-action) in the name or possession of the party;
(b)Each party forego any claim or claims he or she may have to any superannuation benefits belonging to or earned by the other party;
(c)Insurance policies and share portfolios remain 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)Each party forego any claims he or she has or may have to any employment related benefits, including but not limited to redundancy/retrenchment payments or entitlements, earned or received by the other;
(f)Each party be solely responsible for any liability in their own name; and
That in the event that either party should fail, neglect or refuse to sign or execute any deed, document or instrument required by or to give effect to these orders then pursuant to Section 106A Family Law Act that the Registrar of the Federal Circuit Court of Australia, Melbourne Registry shall be and is hereby authorised, empowered and directed to sign and execute such deed, document or instrument in the place and instead of such party and to thereafter do all things and acts as are necessary to give validity and operation to same.
IT IS NOTED that publication of this judgment under the pseudonym Vickers & Phillips (No.2) is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT MELBOURNE |
MLC 7196 of 2014
| MR VICKERS |
Applicant
And
| MS PHILLIPS |
Respondent
REASONS FOR JUDGMENT
This is a property dispute listed for final hearing before me for the second time. I have considered all of the evidence but only refer to the evidence relevant to the issues in dispute.
Before dealing with the property issues it is necessary to address issues of practice and procedure. To place these issues in context I will outline the history of the proceedings.
The proceedings were commenced by the husband on 14 August 2014. The parties entered into interim consent orders at the first return date on 7 October 2014 that provided that:
1.By 4pm on 21 October 2014, each party must provide the other party with a list of documents that they require the other party to produce by way of financial disclosure.
2.Subject to any objection to production, each party must provide the other party with copies of all documents within their possession, power or control and reasonably requested pursuant to Order 1 by no later than 4pm on 21 November 2014.
3.Unless within 14 days of these Orders the parties have confirmed in writing an agreement as to the current market value of the property situate at Property R, New South Wales (“the property”), the parties immediately do all acts and things and sign all documents necessary and required to jointly engage an appropriately qualified single expert to prepare a sworn valuation report of the property, such valuation to be filed with the Court not less than seven days prior to the Conciliation Conference, with the parties to share equally the cost of the valuation report.
4.The parties and if represented their legal representatives must attend a Conciliation Conference with a Registrar of the Federal Circuit Court of Australia at 11am on 5 February 2015.
5.At least seven days before the Conciliation Conference, the parties must exchange with the other party and provide to the nominated Registrar, copies of:
a)An Outline of Case document;
b)A copy of a market appraisal for any asset, the value of which is in dispute;
c)A Statement of their current superannuation interest(s);
d)A copy of the actual Orders required to give effect to their settlement proposal; and
e)Written confirmation that:
(i)All relevant documents have been exchanged between the parties; and
(ii)The superannuation trustee of any fund that may be subject to a splitting order has been accorded procedural fairness.
6.The matter is adjourned for mention at 10am on 25 February 2015.
7.Until further order, the parties personally or via their servants or agents, be restrained from transferring, diminishing the value of, dissipating, encumbering or in any way dealing with any assets in their name, possession or control pending further order of the Court or agreement between the parties, save in the ordinary course of business or to meet daily living expenses.
The parties attended a conciliation conference on 5 February 2015. At the conciliation conference the wife provided a valuation of the husband’s business to him. The Registrar noted in the conciliation conference outcome report that there was a change in facts raised that day that were based on an investigation of the husband’s finances by the wife’s adversarial expert. The Registrar further noted that the report was made available to the solicitors for the husband on that day. The Registrar recorded that the conference proceeded as an assessment only because of these issues. It is most unfortunate that the wife ambushed the husband with this material on the day of the conciliation conference. It would have been far better to have provided the report prior to the conciliation conference so the husband could have considered it and meaningful settlement discussions could have occurred on that date, and failing that, could have sought in advance of the conciliation conference an adjournment pending the release of that report. Conciliation conferences are an important settlement tool. The conciliation conference could not be conducted effectively because of entirely new issues being raised on the day of the conference.
The matter was then listed for a directions hearing on 26 February 2015. Judge Newbrun conducted that directions hearing and made procedural orders with respect to the hearing and the legal practitioners filled out his standard orders and directions sheet with the valuation directions for property crossed out. The wife did not seek any orders with respect to valuing the business. The matter was listed for hearing before me for two days commencing on 29 June 2015.
When the matter was listed before me on 29 June 2015, the wife sought an adjournment of the hearing because she wanted to obtain a valuation of the business. The wife’s counsel indicated that the wife had recently engaged new solicitors. The wife had engaged a valuer, but indicated that it would take at least a month to obtain the valuation. Her counsel submitted that it was not possible to determine the property issues without the valuation and that there was no real prejudice to the applicant if the adjournment was granted. The wife complained about her former lawyers and engaged new lawyers a week before the hearing in June 2015.
The husband’s Counsel opposed the adjournment on the basis that the husband had come to Court ready to proceed with the hearing on that day and that he would be prejudiced by the continuing litigation. He further submitted that the issue of the valuation had been raised many times previously and that it had been the subject not only of the conciliation conference notes but also correspondence between the lawyers. He tendered a letter between the parties’ solicitors in support of that submission. In addition, it was noted that the valuation issue was not pursued when the matter was mentioned before Judge Newbrun.
Weighing up the issues of prejudice, the Court acceded to the respondent wife’s request for the adjournment. The orders made on 29 June 2015 stated that:
1.The proceeding is adjourned for further hearing on 4 and 5 February 2016 at 10am, allowing for the respondent to obtain a valuation of the applicant’s business.
2.The respondent is to file and serve the business valuation by 11 December 2015.
3.Each party has liberty to apply for mention on 7 days written notice.
4.The parties are to file and serve any further material upon which they intend to rely at the final hearing by 25 January 2016.
5.By 4.00pm on 2 February 2016, each party file and serve an outline of case document including the following:
a)a list of the documents to be relied upon;
b)a brief chronology;
c)a table listing all of the assets, liabilities and financial resources claimed to be part of the asset pool, with the values contended for by that party;
d)the main contentions on disputes as to:
(i)what items are to be included in the pool; and
(ii)the value of each asset in the pool;
e)a list of contributions claimed or contended for;
f)a list of other factors relied upon (s.75(2) factors);
g)the percentage adjustment contended for; and
h)a precise statement of the orders sought.
6.The respondent pays the costs of the application fixed at $5978 with the sum to be paid at the conclusion of the proceedings.
The Court noted that:
A.Each party will comply with any reasonable request from the other party’s valuer, including the provision of documents.
Application in a case
The respondent wife filed an application in a case on 7 October 2015. That application was returnable on 5 November 2015. The argument did not proceed. The parties entered into further consent orders requiring further disclosure documents to be provided:
1.That within seven (7) days the husband provide to the wife’s solicitors copies of the documents listed in the letter from CDP & Co Accountants dated 10 September 2015 being Annexure “V-9” to the wife’s Affidavit filed 7 October 2015.
2.That the wife within fourteen (14) days provide copies of the following documents to the husband’s solicitors:
a)(omitted) Home Loan Account (no.: (omitted)) for the period 1 June 2015 to date;
b)A current statement of the wife’s (omitted) shareholding;
c)The wife’s Income Tax Return and Notice of Assessment for the final year ending 30 June 2015; and
d)The wife’s (omitted) Account (no.: (omitted)) for the period 1 June 2015 to date.
3.That the wife’s Amended Application filed 19 October 2015 and the husband’s Response to an Application in a Case filed 30 October 2015 are otherwise dismissed.
4.Each party shall continue to use their best endeavours to comply with the consent order (as to provision of documents) made 29 June 2015.
5.That the costs of the parties of this day and in respect of their said Application in a Case and Response to an Application in a Case be reserved.
6. Certify for Counsel.
It was noted that in the orders of 5 November 2015 that:
A.The husband reserves his right to seek the wife pay the costs payable to his accountants in respect to paragraph 1 hereof, at trial.
B.The parties each reserve their rights to argue at trial as to the completeness of their disclosure.
Oral application to rely on late affidavit of valuer
At the beginning of the hearing, Mr Stavris sought leave to rely on an affidavit annexing a valuation report which had not reached the Court file because it had been filed the day before.
The trial directions and the liberty to apply made on 29 June 2015 remain in force. No approach was made to Chambers to relist the matter prior to the hearing with respect to the valuation issue. Nor was an approach made to Chambers to seek an extension of time to file the valuation.
It is most unfortunate that it seems necessary to remind legal practitioners time and time again that directions for filing of material are not suggestions but are orders of the Court. The Court expects those orders to be complied with. Such orders are made to assist in a timely progression and disposal of proceedings. Serial non-compliance with case management orders seriously compromises the Court’s ability to deal with cases effectively.
Mr Stavris submitted that it was not as prejudicial to the husband as it would have been if it was an entirely new issue. He argued that the husband was on notice of the valuation issue and that some documents have been provided previously. It is quite clear in the affidavit material that the husband took issues with several aspects of the valuation report. It is also clear from his client’s own affidavit filed on 29 June 2015 that she deposed to the report she obtained from Ms C to being a report about the business activities of (omitted) Pty Ltd, not a business valuation. When asked if the conclusions and the figures in the report were the same as earlier conclusions and figures, Mr Stravris conceded that they were not. Given that fact, his submission was without merit.
It is well known that the Federal Circuit Court is a busy trial Court with an extremely heavy workload. The lack of insufficient judicial and other resources to be in a position to complete matters in a timely fashion have received much media attention of late. Currently, I am listing hearings in 2017. That is not an optimal situation for parties, particularly bearing in mind the objectives of the Federal Circuit Court to provide a quicker, cheaper and less formal court process; see rule 1.03 of the Federal Circuit Court Rules 2001 (Cth). Those objectives do not mean that the parties are not obliged to prepare their cases properly with admissible evidence.
Seeking to rely on a valuation which was served on the husband shortly before the hearing is unfair. This Court does not permit trial by ambush. This Court provides for evidence in chief to be provided by way of affidavit. That way both parties are on notice of the case that they have to meet. It would be a serious breach of procedural fairness to the husband to allow the wife to rely on the valuation.
The husband is entitled to properly consider evidence that the wife seeks to rely on including preparation of cross-examination and also consideration of whether or not to instruct his own valuer to critique the report or to obtain his own adversarial expert. Unlike the Family Court, the Federal Circuit Court Rules 2001 (Cth) do not require parties to engage single experts unless leave is granted to rely on adversarial experts.
The husband objected to the admission of the report arguing that the valuation issue had been raised for some time. It is not fair to the husband to expect him to be able to deal with the report at this late stage. It is not a prejudice that can be cured without adjourning the proceedings. That in turn carries its own prejudice.
The hearing was adjourned over six months ago to provide the wife the opportunity to obtain a valuation. I refused to admit the late valuation into evidence.
First adjournment application
The wife’s counsel then sought an adjournment of the hearing. He argued that the Court could not properly determine the issues in dispute between the parties without a valuation. It is important to note that the husband’s position all along has been that the business does not have a value other than providing him with a good income. I will address the issue of the nature of the husband’s business when considering the substantive issues in dispute between the parties later in this judgment.
As will be apparent from the chronology set out above, a significant factor in exercising my discretion to refuse the application for an adjournment is the fact that the hearing was previously adjourned over 6 months ago for the same reason. Whilst both parties accuse the other of not providing full disclosure, there is no evidence before me that the delay in obtaining the report is due to any fault by the husband. The principles stated in AON Risk Management Services Ltd v Australian National University (2009) 239 CLR 175 are important. The comments by French CJ at paragraphs 4 and 5 are equally applicable to this case. He said:
“…the history of these proceedings reveals an unduly permissive approach at both trial and appellate level to an application which was made late in the day, was inadequately explained, necessitated the vacation or adjournment of the dates set down for trial, and raised new claims not previously agitated apparently because of a deliberate tactical decision not to do so. In such circumstances, the party making the application bears a heavy burden to show why, under a proper reading of the applicable Rules of Court, leave should be granted.
In the proper exercise of the primary judge's discretion, the applications for adjournment and amendment were not to be considered solely by reference to whether any prejudice to Aon could be compensated by costs. Both the primary judge and the Court of Appeal should have taken into account that, whatever costs are ordered, there is an irreparable element of unfair prejudice in unnecessarily delaying proceedings. Moreover, the time of the court is a publicly funded resource. Inefficiencies in the use of that resource, arising from the vacation or adjournment of trials, are to be taken into account. So too is the need to maintain public confidence in the judicial system…”
I refused to allow the adjournment. In my view to do so would have been a miscarriage of my discretion in circumstances where the wife already had the benefit of an adjournment some 6 months previously to obtain a valuation. Mr Stavris made a second adjournment application after he finished cross-examining the husband. I will address my reasons for dismissing that application after discussing the husband’s business.
Recusal application
For completeness, I record that after the morning adjournment the wife made an application for me to recuse myself from further hearing the proceedings. I delivered ex tempore reasons for refusing that application: Vickers & Phillips [2016] FCCA 313.
Background
The husband’s counsel raised several objections to the wife’s affidavits on the basis of hearsay, unqualified opinion and argument. Sensibly, the wife’s counsel conceded that they were not admissible. It was not necessary to go through them individually. Some of the inadmissible material concerns the business and the wife’s opinions about its value and saleability. This is in her affidavit filed in Court on 29 June 2015. She is not qualified to give that evidence. In this case the husband also filed an affidavit late, being an affidavit in response filed on 2 February 2016. I did not grant the husband leave to rely on that affidavit and I have not read that affidavit. I also have some concern about the affidavit filed by the wife making new allegations particularly at paragraph 4 which were hearsay and irrelevant.
Both parties were previously married. The husband has two children from a previous relationship; X aged 22 and Y aged 15. The wife has one child from a previous relationship; Z aged 27. They did not have children together.
The parties met in 2006. They started living together in (omitted) 2007. They did not mingle their finances prior to living together. They married on (omitted) 2008. They separated on the husband’s case in July 2013 and on the wife’s case in August 2013. Nothing turns on this. Their relationship lasted for 6 years.
Initial contributions
Both parties seek recognition for initial contributions.
The legal principles applying to initial contributions are conveniently set out in in the cases of Pierce v Pierce (1998) FLC 92-844 and Williams & Williams [2007] FamCA 313.
In Pierce v Pierce at paragraph 28 the Full Court said:
“In our opinion it is not so much a matter of erosion of contribution but a question of what weight is to be attached, in all the circumstances, to the initial contribution. It is necessary to weigh the initial contributions by a party with all other relevant contributions of both the husband and the wife. In considering the weight to be attached to the initial contribution, in this case of the husband, regard must be had to the use made by the parties of that contribution.”
In Williams & Williams the Full Court states at the paragraph 26:
“We think there is force in the proposition that a reference to the value of an item as at the date of the commencement of cohabitation without reference to its value to the parties at the time it was realised or its value to the parties at the time of trial, if still intact, may not give adequate recognition to the importance of its contribution to the pool of assets ultimately available for distribution between the parties Thus where the pool of assets available for distribution between the parties consists of say an investment portfolio or a block of land or a painting that has risen significantly in value as a result of market forces, it is appropriate to give recognition to its value at the time of hearing of the time it was realised rather than simply pay attention to its initial value at the time of commencement of cohabitation. But in doing so it is equally as important to give recognition to the myriad of other contributions that each of the parties has made during the course of their relationship.”
The wife says that when they started living together they moved into a property the husband owned with his first wife at Property K.
Much time was spent cross-examining the husband about his property settlement with his first wife. The property settlement took place before the parties started living together except for the sale of the Property K property. The husband gave evidence that the sale of the Property K property was delayed because the husband needed to live close to his children to spend time with them.
The wife owned her unit at Property R in Sydney. She still owns that property. In his first affidavit filed on 14 August 2014, the husband acknowledges that the wife owns the Property R property which was subject to a mortgage. He said he did not know the value of her equity in her property.
I do not accept the evidence of the wife that she did not know that that was an issue in dispute as it was identified early in the proceedings. As she still owns the property, she could have arranged for a historical valuation along with the current valuation. It was clearly identified in the husband’s affidavits including the first affidavit filed that the value of her property at the commencement of relationship was in issue.
The other document she needed to obtain or at least make an effort to obtain, was the amount of the mortgage at the beginning of their relationship.
She does not refer to any steps she took to obtain that information before the hearing. The comments in Williams’s case referred to above is significant here.
In her case outline the wife also sought to exclude her Property R property from the matrimonial pool. That position was properly abandoned at the hearing. On the wife’s reasoning, the husband’s business should be excluded even if a value was attributed to it
The Property R property could never simply be ignored. An asset by asset approach was not urged upon me by either party. I note the comments in Norbis v Norbis (1986) 161 CLR 513 which observed that whether an asset by asset or global approach is applied by the court, the outcome should be the same. Even if the property was not included as an asset it would then be a significant factor under section 75(2). The issue is the weighting that this initial contribution by the wife should be given. Given the length of the marriage, this is a significant contribution. But in the wife’s first affidavit, she says the Property R property had a value of $340,000 at cohabitation. She says that was based on an appraisal she received by a real estate agent.
In her case outline she attributed a value of $370,000. Then she could not explain the $30,000 difference. She also said that she did not recall being asked to produce a document showing the amount of the mortgage as at cohabitation. Again, it is clear that that is an issue that the wife has been on notice of since the case began. It is curious why the parties when instructing the valuer to give a current value of the Property R property, did not also ask the same valuer to provide a historical valuation of the property. There is no evidence before me to suggest that that is something the husband’s solicitors raised and the wife refused rather, it seems that it was an oversight by both parties’ lawyers.
During cross-examination the wife said that her Property R property should be excluded from the pool because the husband did not make any contributions to that property whatsoever. The husband puts this in issue in his affidavit, saying that sometimes he paid the rates and other expenses. It is not disputed that the property was rented out throughout the relationship. The husband was not challenged in cross-examination about his evidence that occasionally he paid the council rates and other expenses for the Property R property when the rental payments did not cover all expenses.
The husband identifies assets he owned at the beginning of the relationship in his first affidavit as being a property at Property K. The husband says his property was sold in about May 2008 for approximately $530,000. He says the net proceeds were used to finalise the property settlement between himself and his first wife. He says he used funds he received from settlement to complete the settlement with his first wife and to purchase the former matrimonial home.
The husband owned his business at the commencement of the relationship and still works in the business called (omitted) Pty Ltd. I will address the business under a separate heading as this is the most controversial aspect of the hearing.
Property C property
The parties bought the property at Property C in 2008. The parties moved into this home. The husband says this property was purchased for $740,000. The parties funded most of the purchase price with a loan from (omitted) bank. The wife contributed $20,000 and the husband contributed the rest which was around $36,000. The parties carried out renovations to this property. The husband says that he spent about $80,000 on the renovations in 2010 and that he funded the renovations from his business. The husband gave evidence that his business had capacity to support those payments in addition to paying mortgage and day-to-day living expenses.
The husband was shown his tax returns for the financial years ending 30 June 2010 to 30 June 2012. Those tax returns show a taxable income of $79,921 in 2010, $99,143 in 2011 and $37,437 in 2012. I do not have any documents in evidence showing accumulated savings. The wife says the renovations were about $40,000. She does not say how the renovations were paid for. Neither of them set out their source of knowledge for the figures they give. They are bare assertions and of little assistance to the Court.
The best that I can take from the evidence is that the parties carried out renovations at a significant cost. Given the parties’ respective incomes, it is more likely on the balance of probabilities that the husband funded the cost from his business income. I cannot accept the husband’s evidence that the renovations cost $80,000. The wife said she estimated that the renovations cost about $40,000 because she was working at (employer omitted) at the time and was able to get materials at cost prices and because the kitchen was done by the husband’s brother-in-law at the time, they only needed to pay for materials. The wife agrees that the renovations were funded by the husband from income from the husband’s (business omitted) account or savings he had at the time.
(business omitted) Pty Ltd
The husband established (business omitted) Pty Ltd in 1991. It is a (omitted) business specialising in (omitted). He says he set up the business as a sole trader. In 1996 he restructured the business and it is operated through the (omitted) Pty Ltd family trust. He says the trustee is (omitted) Pty Ltd and he is the sole director and shareholder. In his first affidavit, he said that the annual turnover was between $200,000 and $250,000.
The wife’s counsel spent considerable time on the issue as to the value of (omitted) Pty Ltd. The wife’s counsel argues that (omitted) Pty Ltd must have had a value at the date of cohabitation because in the property settlement the husband received the business and a relatively modest amount of cash and the wife received everything else. The difficulty with the wife’s counsel’s argument, as pointed out by the husband’s counsel, is that this is merely conjecture as there is no information as to the basis upon which the settlement was made including the value of the properties and any adjustment contributions and section 75(2) factors. There is nothing in the wife’s material suggesting that there was some inequitable distribution between the husband and his first wife. Even if that was the case, it is difficult to see how that would have bearing on this case. The husband was entitled to enter into whatever arrangements he liked with his first wife. The only relevant issue should be whether or not (omitted) Pty Ltd had a value at the time of cohabitation. There is no evidence that the wife made any enquiries of the husband as to the details of the settlement.
The husband was cross-examined some length about his business. The husband’s evidence is that his business does not have a value as it is his income earning. He says if he does not work, he does not earn any money. It is a business where he goes to various (clients omitted). He agreed that it is specialised work. He also agreed that he made up the techniques and the tools. He has not patented the techniques or tools. He was asked about a competitor (business omitted). The husband said they came and went and he believed they had gone bankrupt. He said he had not had anything to do with that business.
The husband gave evidence that he does not have any contracts with any of the (clients omitted) and that he gets work because of his reputation and efficiency as well as turning up promptly to do the jobs. He agreed that he had a good reputation and said that he had worked very hard to keep that because if he did not, he would not have any work. It is the only business he has. It is his only source of income.
Currently he employs his son and is training him. He pays his son $650 a week.
The husband started the business in 1990. The business was well established long before the parties started their relationship.
The husband gave evidence that he separated from his first wife in 2004. He says there was a property settlement in 2006 or 2007. The husband was asked a series of questions about the property settlement which took place. He said the factory was sold in 2005. It is apparent from his evidence that his initial affidavit referred to the property at Property K and cash he received from that because that was the only part of the property settlement which was outstanding at the time of cohabitation. A party is not required to disclose assets disposed of prior to cohabitation as they could not be relevant to issues in dispute. The wife did not make a request for this information. In any event, unless there was information as to how a property settlement was arrived at, it does not take the matter much further. It is certainly not possible to assume that the husband’s business must have had a value given he did not receive much cash from the sale of Property K. The wife’s counsel pointed out that although there has been many court appearances in this matter, there has never been a request for disclosure about the property settlement and that it was only raised at the final hearing. There is some merit in that submission however, in any event the real issue is this: was a value attributed to (omitted) Pty Ltd at the time of their property settlement and if so, what was the value? The husband’s counsel continued to ask various questions about the assets that the husband and his first wife had at the time of the property settlement. As is apparent that the husband was trying to remember the figures but it was a long time ago. Those questions did not go to the heart of the issue and I will not set them out.
The husband gave evidence that the lawyers at the time determined that (omitted) Pty Ltd did not have a value and therefore it was not worth obtaining a business valuation.
The husband’s counsel pointed out that the husband has an obligation to disclose his assets at the beginning of the relationship. Of course, it applies equally to the wife with respect to her property. This obligation cannot extend to a time before the relationship on the basis of relevance.
In his second affidavit filed on 24 June 2015, the husband addresses the valuation obtained by the wife and served on him at the conciliation conference. He gives explanations for the concerns the valuer raised and also annexes an 8 page letter from his lawyers to the wife’s lawyers dated 23 February 2015. This is shortly after the conciliation conference. The letter details issues with respect to documents in some detail. They also respond to issues with respect to the valuation report and provide further business records including various ledgers. They also raise queries with respect to aspects of the valuer’s report including the fact that the valuer raised an issue about withdrawals which were in fact made into the wife’s account. They also recorded that the wife had made a request for discovery from the husband for this account when in fact it was her own account.
In response to the ‘unknown deposits’ the valuer identified they point out that these deposits are not unknown but are accounted for in the ledgers attached with that letter. This is significant because the husband was cross-examined about this.
The wife was cross-examined about her understanding of the husband’s business. She said at one point the husband’s brother worked in the business. She said that she would help the husband with the paperwork and at times, would do the invoices and go to the bank to deposit cheques. She said she did not know how the books worked and was not involved in entering the information in QuickBooks but would take the deposit books to the bank and write the slips withdrawals that were on the deposit book. It is surprising that her counsel spent so much time cross-examining about these issues when the wife says she assisted the husband which was consistent with the husband’s evidence. She also said she would put invoices in envelopes and post them. In answer to a question about what years she provided this assistance for, she said it was most of the time, that it was not easy and that it was done at night at home. She said that maybe she spent an hour a month doing that manual work. She said she did it on and off throughout the relationship. She conceded that during their relationship he did not have a (omitted) although she says he had one before their marriage. She also conceded that he did not have employees apart from his son. She also conceded that it has a mobile van which does not carry any stock. She also said she was not aware of the husband having any contracts with customers. She accepted that his livelihood depends on his personal skill and ability to do a good job and that if he does not, he would not be given further work.
Ms Williams gave the analogy that he is really like any other tradesmen such as an electrician or a bricklayer. Mr Stavris objected to this and said that his evidence was that he had unique skills and is a specialised tradesman. In my view, specialised or not, the analogy is a good one.
At that point, somewhat extraordinarily, Mr Stavris submitted that the trust the husband set up to run the business could be a sham. He did not ask any questions about this of the husband and in my view, there was no basis for making that submission.
Second application for adjournment
The wife made a further application for adjournment after the end of her counsel’s cross-examination of the husband. The basis for the application was not clear until the wife’s counsel responded to the husband’s counsel’s submissions opposing the application. It then became clear that the application was not because of the refusal to admit the valuation into evidence but that in light of the husband’s answers in cross-examination about his accounting practices, the wife wanted to obtain further material to put to the valuer.
I am not satisfied that the cross-examination of the husband raised issues such that the Court could not determine the property issues between the parties.
Parts of the cross-examination appeared to be misconceived and was more directed at seeking to audit the business which is a different, and much more expensive exercise than valuing the business for family law purposes. I do not accept the submission that the husband was evasive about his business practices. I find he was answering Mr Stavris’ questions as best he could. It is clear that he places much reliance on his accountant. His evidence was clear and consistent that all is deposited into the only account (omitted) Pty Ltd has.
There is no evidence that suggests that the wife’s valuer sent a request for information about what accounting software the husband used. This would have been a simple and obvious inquiry to make if Ms C thought it was important. As Ms Williams pointed out, the wife issued subpoenas to the (omitted) bank but that subpoena did not ask for any records of deposit slips which again, she could have easily requested if her accountant considered it was important. The fact is the wife and her advisers had plenty of time to request that sort of information and did not do so. It is far too late to complain about it at the trial. Ms Williams submitted that Ms C become an advocate for the wife rather than an expert witness. She said that the affidavit annexing the report the wife sought to rely on was in fact sworn by Mr M who says he assisted Ms C. She is not a deponent of the affidavit. She also referred to mistakes Ms C made which included failing to take into account GST. The husband’s lawyers addressed this in their letter to the wife’s lawyers dated 23 February 2015. Ms Williams referred to allegation which was an allegation that there were withdrawals from the (omitted) Pty Ltd account to an unknown account which was in fact the wife’s own account.
Ms Williams submitted that the adjournment application was really an attempt to fix defects in the wife’s case. She further submitted that it was far too late to do that.
Mr Stravris submitted that he was renewing his application to adjourn based on the following evidence:
(a)The revelation when the husband was cross-examined that there were hand written invoices. This is not significant given that the husband was cross-examined on the subpoenaed documents from (omitted), which were tendered and marked as exhibit I. The husband explained that he issued hand written invoices on the spot and entered the details of hand written invoices onto QuickBooks. He said he only issues a typed version of the invoice from his QuickBooks records if a customer requested a replacement invoice. The subpoenaed material included both handwritten copies of hand written invoices and typed invoices. He had written invoices matching the corresponding typed invoices.
(b)He also emphasised that the letter of 23 February 2015, whilst addressing the issue of unexplained deposits, did not state that those deposits were cheques. Again it is difficult to see the relevance when the purpose of the valuation is not to conduct an audit but to value the business. He complains that they do not provide a reconciliation of individual cheques. I am not satisfied that there is any evidence that the husband has failed to deposit cheques he has received in the course of his business. His evidence is that most of his payments are received by way of EFT deposits which are easily identified. If he had more than one cheque, he deposited them in a batch and whilst he identified the particulars of each individual cheque on the deposit slip (a detail usually required by banks), the total figure would appear on his bank statements without the details of the individual cheques being shown. I do not see anything particularly unusual or suspicious about that. He also submitted that the fundamental problem with the case was the lack of any value placed on the business at the time of cohabitation. I do not see anything particularly unusual or suspicious about that. He also submitted that the fundamental problem with the case was the lack of any value placed on the business at the time of cohabitation.
I do not accept that submission as it is clear that the husband’s case is that the business has never had any sale value, rather it provides him with his income earning capacity. He says there is only personal goodwill. He has no contracts. There is no evidence to suggest that this is not the case. Furthermore this is a six year relationship. There is no evidence that the business has operated any differently than it has previously except for the fact that the husband’s oldest son is working in the business and is being trained by him. His son is paid a wage and that is shown in the business records.
(c)Mr Stavris submitted that the wife has been hamstrung in obtaining the valuation and complains that the husband has been obstructive. The evidence does not support either of those contentions.
If the case was adjourned to enable the wife to obtain a further valuation that would involve further legal costs for both parties and would mean that the Court would have to find a third final hearing date for this case. On the evidence as it stands, on the balance of probabilities, it is likely that the position would be no different. It is for these reasons that I refused to grant the second adjournment application.
Given the nature of the evidence of the husband’s business, it is doubtful that a further adjournment would achieve much apart from adding to the stress parties invariably feel when they are involved in protracted court proceedings and further costs. The reason for this is that the evidence supports a finding that the business does not have a value because apart from the truck, the business is made up on the husband’s personal good will. Whilst that gives him a very good income, it is not something he can sell. I refer to the Full Court decision of W & W [2000] FamCA 1302 which considered this issue. In that case, the husband ran his business through a company. He had a business partner who owned 50% of the shares. At paragraphs 67 – 70 and 74, the Full Court said:
“We think it was open to his Honour to reject the submission that because the business relies wholly on the skills of the directors the goodwill is worth nothing. Such a proposition ignores the fact that “goodwill” in relation to a business may attach to such features as the business name or its location, and many small businesses, which rely entirely on the skills of their operators (e.g. professional practices) are considered to have some goodwill. As Mr B said in his report “...an ordinary person prefers taking over an existing business, rather than setting up a new business”. Certainly, an important aspect of that is the set up of an existing business, which would usually include its tangible assets, and possibly some intangible assets other than goodwill, but the mere fact that a business of a particular kind exists in a particular place and has an established business name and clientele who habitually resort to, is, or at least may be, an intangible asset (categorised as “goodwill”) of some value. As Mr W says: “The reality is that goodwill exists because a business has a demonstrated capacity to earn cash flows exceeding the cash flow which one would normally expect if one were to invest the same level of tangible and identifiable intangible net assets in a similar business starting from scratch.”
“At the same time, however, we think it was important for his Honour to recognise what is really adverted to in the evidence of Mr B, particularly the statement quoted in paragraph 62 hereof, and in his oral evidence quoted in paragraph 64 hereof, namely that there is a significant element of personal goodwill attaching to both the husband and Ms L in this case, which is clearly not transferable, and which, in the case of the husband at least, is really part of his earning capacity rather than property.
The difference between commercial goodwill and personal goodwill is described, thus, by Mr W, with particular reference to the valuation of professional partnerships:- “The goodwill of professional practices may be attributable to the combined personal attributes of the partners which revolves around their skills, reputation and personal relations between each other and their clients. Alternatively it may reflect commercial goodwill which relates to their clients’ favourable attitudes towards the practice as a whole. This favourable attitude may have been gained through the reputation of the firm or through prior connections and dealings with the firm. The value of commercial goodwill is reflected in the advantages that a prospective partner would obtain by entering into a practice with a recognisable name, established clientele, a range of services, research and precedent databases, well trained staff and recognised programmes and procedures. Personal goodwill attaches to the individual and is attached to that person’s own ability, skills, experience, training and reputation. As a general rule personal goodwill is likely to be disproportionally higher than commercial goodwill in a sole practice or small specialist practice of say two or three partners whereas commercial goodwill is likely to be of more value in a larger practice trading under a well recognised name or national or international affiliation.”
“With respect to his Honour, we think that in saying, as he did (in paragraph 100) that “the husband’s earning capacity is quite a different thing from the value of the goodwill of the business”, he failed to appreciate the important distinction between commercial goodwill and personal goodwill and failed to have regard to that evidence of Mr B to which we have referred in paragraph 68 hereof. In valuing the goodwill of the business as he did, we think that his Honour effectively treated the personal goodwill attaching to the husband as part of the commercial goodwill attaching to the business, and this resulted in the adoption of a grossly inflated value for the business, for the company and for the husband’s share in the company.
That argument really covers much the same ground as we have already covered in dealing with grounds 3 and 4. We think it was open to his Honour to find that the husband’s share had some value in his hands because it conferred on him some benefits which he could not have obtained as a sole trader (e.g. the benefit of Ms L’s input into the company of which she too was a shareholder, and the benefits flowing from the continued use of the company name and reputation, in the conduct of the business, rather than his own or some other name which he might need to adopt and take time to attract clients to). However, we do not think that it was open to his Honour to place a value on that share in the husband’s hands by simply capitalising the adjusted net profits of the business, adding the value of the net tangible assets, and dividing it by two because the husband was a 50% shareholder in the company. As we have said above, to do so involves attributing entirely to the business whatever personal goodwill attaches to the husband which, on any view, would be substantial in this case.”
This case is different to W & W’s case as there is no business partner, no assets apart from the truck, no contracts and a specialised skill of the husband. Mr Stravris referred to a competitor of the husband who went out of business. That does not support his case.
Other contributions
The parties renovated the former matrimonial home in 2010. The husband says he had contributed about $80,000 towards renovations from his business earnings. The wife disputes that he contributed that sum.
Both parties made contributions to the other party’s children. The husband’s children spent part of the time in their household of about four nights a fortnight and the wife’s adult son spent two periods of time living with them full time.
The wife deposes to depositing her income after she returned to work in 2011 into her personal bank account which she used that for things like presents and hairdressing expenses. She referred to it as her pocket money. She agreed that she did not contribute to mortgage, rates or utilities expenses and did not pay the running expenses for her car apart from paying registration on one occasion.
The wife’s son Z lived with the parties for one year in 2007 and again from late 2011 until the parties separated in mid-2013. In her affidavit, the wife says that Z was in employment and did not require any financial support. This is not really accurate given that Z did not contribute anything towards the bills and did not pay board. This is not a criticism of her son but it is not correct to say that they were not providing financial support for him as they were subsidising his living.
The wife was cross-examined about a letter she wrote to her son which has a handwritten date of 25 August 2012 6:22pm and is exhibit M in the proceedings. In that letter she refers to direct financial assistance she and the husband gave him including helping him with a car purchase and paying his outstanding Citylink invoices. She also refers to the husband lending him $12,000 to buy a car. She says she asked him to make weekly repayments but he failed to do so. She refers to the husband giving him considerable financial assistance including the trip to (country omitted). It is clear that the wife was embarrassed that this letter was brought up in the hearing and she was defensive about it. Before she was asked a question, she started to say that not everything in the letter was true. She says she made up the figures in the letter to make it sound good. That does not make any sense because her son would know about the sums he had been given. When Ms Williams suggested to her that it was not correct to say that the parties had not made any financial contributions towards Z, the wife said the husband helped him buy a new car. She says she had forgotten about the assistance that they had given him and she conceded that the husband had loaned Z $12,000 to buy a car. Again the husband was not challenged in cross-examination about his evidence that he provided financial support.
Wife’s employment
The wife worked as an (occupation omitted) for (employer omitted) earning $50,000 a year until February 2010. She did not work for 12 months. The wife says she stopped working full time to assist with the husband’s children and did most of the housework. She says from May 2011 she began working part-time for (employer omitted) earning about $15,000 a year. She says she paid her income into their joint account. Later in that same affidavit (being her first affidavit) the wife says from 2011 her income was paid into her own account which she says she used for household incidentals and gifts for family members. The wife is working part-time in Queensland earning about $20,000 a year.
The wife says she is guaranteed 52 hours a week from her employer but her hours vary each fortnight depending on the rosters she is given She says she is given notice close to a fortnight in advance but can also receive calls at the last minute to fill in if a co-worker is unwell. She says she has not considered registering with the (employment omitted) agency to look at getting more hours and says she is hoping to get more hours with her current employer.
Credit card debt
The parties are in dispute about the level of credit card debt they had when they separated. The wife acknowledges they had a credit card debt of $7,000. The husband tendered documents showing additional credit card debt, which are marked Exhibits B to D showing the following credit card debts:
a) $24,704.38 owing to (omitted) bank as at 6 August 2013;
b) $4,273.95 owing to (omitted) bank as at 3 July 2013;
c) $7,212.79 owing to (omitted) bank as at 7 July 2013.
These amount to $36,191.12 in total.
The husband opened a (omitted) bank credit card account in August 2014. He transferred the balance of the (omitted) bank account into this account. His (omitted) bank credit card account was $7,038.98 as at 21 July 2014. This is shown in exhibit F as a bank account statement for the husband’s (omitted) bank account. It shows a credit of $35,000 being paid into the account 24 March 2014. It then shows a series of the debits being payments to credit cards. The husband’s evidence is that these are payments to the credit cards debts referred to in the previous paragraph.
The wife was shown those credit card statements during cross-examination and agreed that the parties and her son went on holiday to (country omitted) and another holiday to (country omitted). She also accepted that the statement clearly shows the deposit of $35,000 in March 2014. The husband gave evidence about being aligned to his parents to pay the credit card debts.
I am satisfied that the parties had credit debts when they separated totalling $43,191.
It is clear that the husband took over responsibility for those debts with assistance from his parents in the form of a loan of $35,000. In addition, he still owes $7,000 which is attributable to the debt at separation. He owes an additional $7,000 incurred after separation. He does not seek to add that sum back
The parties lived together in the Property K property for the first year of their relationship. The husband paid the mortgage and other expenses for the property. The wife said she did the food shopping and he covered bills.
The mortgage on the Property R property post separation and treatment of legal costs.
The wife refinanced the mortgage on the Property R property in April 2014. She was the sole borrower and she confirmed the husband did not have access to that account. The amount of the mortgage at that date was $199,124. The mortgage facility also enabled her to draw down a further $126,875. The wife was cross-examined about various withdrawals from that account. The mortgage has increased by approximately $100,000 since that time. The husband seeks to only include the mortgage amount as at April 2014 and not the increase. In support of that argument, he refers to the injunction which was made preventing either party from encumbering the assets apart from to pay for daily living expenses. The wife has used some of those funds for her legal costs. It is not clear just how much of the increase represents legal fees. The wife said that legal fees are daily living expenses. Her counsel did not refer to any authority in support of that submission and it does not accord with ordinary meaning of daily living expenses. Those types of expenses are typically reflected in part N of financial statement whereas the liability for legal fees should properly be recorded in the liability section. It is not an ongoing long-term expense but rather a short-term one during the life of family law proceedings. When the wife was cross-examined about this, she said she thought they were daily living expenses and she had no other way to pay them. There is no evidence that the husband has any liability for legal fees and presumably he has paid them from his income.
I accept that the wife used some of those funds to pay for living expenses and to repay a friend for moving and associated expenses she had when she moved to Brisbane. That expenditure is reasonable.
During cross-examination the wife identified payments for legal fees and/or expert expenses totalling $15,000 prior to October 2014. She identified the further amounts of $7,000, $5,000 and $5,906. There was a $7,000 payment made in March 2015 and the $20,000 sum paid on 1 June 2015, approximately a month before the first scheduled final hearing. The wife said she could not remember what those funds were for and would not concede that they could have been for legal expenses. Given the significant sums involved, it is not credible that she would not remember what those funds were for. The timing of those payments is suggestive of them being the legal and all experts fees given that the conciliation conference took place in February 2015 and the final hearing was scheduled to take place in June 2015. She conceded that the $20,000 figure was for legal fees when faced with a document showing it was. I find that both figures were for legal fees.
The wife relied on NHC & RCH (2004) FLC 93-204 and Beklar & Beklar [2013] FamCA 327 in support of her submission that the wife’s paid legal costs should be added back. The wife’s counsel quite properly conceded that this was the correct approach. I do not need to discuss it further.
The wife could not explain inconsistency between her case outline dated 3 February 2016 and the most recent (omitted) Bank statement. Her case outline gives a figure of $255,935 for the mortgage whereas her mortgage statement shows that as at 29 December 2015 the mortgage balance was $296,641. After looking at the two documents the wife said she made a mistake with the figure for $255,935. I accept that explanation and given that the mortgage statement is in evidence that is the figure that should be used.
The figures identified by the wife total $59,906. I will add those figures back to the pool.
No further legal fees were identified since that date although she will have incurred further fees since then for the preparation of this hearing.
Legal Principles
Part VIII of the Family Law Act1975 is the part of the Act dealing with property, spousal maintenance and maintenance agreement. The major provisions relating to marital property division are contained in ss.79(1); 79(2); 79(4); & 75(2) of the Act.
Pursuant to s.79(1) the Court is authorised to make such order as it considers appropriate in order to alter the interest of the parties to a marriage in relevant property.
The expression “property” is defined in s.4(1) in relation to the parties to a marriage or either of them as meaning “…property to which those parties are, or that party is, as the case may be, entitled, whether in possession or reversion.”
Pursuant to s.79(2) the Court is actively prevented from making such an order unless it is satisfied that it is just and equitable to do so in all the circumstances prevailing. This follows from the use of the prohibitory words “shall not” in the relevant section.
Section 79(4) provides the mechanics of how a Court is to make an order altering marital property interests.
Paragraphs (a), (b) and (c) categorise contributions made by marital partners, which are relevant. Paragraph (d) directs the Court to take into account any order regarding the earning capacity of either party to the marriage concerned.
Paragraph (e) directs the Court to consider a list of matters contained in s.75(2), which are germane to spousal maintenance or the prospective positions of the parties concerned by reference to their respective financial resources, means and needs. Finally, paragraphs (f) and (g) apply to child support and previously made parenting orders, as relevant. There is some overlap between these various provisions and not all will be applicable in every case.
Until the High Court decision in Stanford & Stanford (2012) 247 CLR 108, the position in respect of the process to be applied to the resolution of matrimonial property cases was said to be well settled with a preferred approach as set out by the Full Court in Hickey & Hickey & Attorney-General (Intervener) (2003) FLC 93-143 at 78,386 [39].
The High Court considered the operation of s.79 in the matter of Stanford. In this case, the majority stated at [35]-[36] that:
“It will be recalled that s 79(2) provides that "[t]he court shall not make an order under this section unless it is satisfied that, in all the circumstances, it is just and equitable to make the order. Section 79(4) prescribes matters that must be taken into account in considering what order (if any) should be made under the section. The requirements of the two sub-sections are not to be conflated. In every case in which a property settlement order under s 79 is sought, it is necessary to satisfy the court that, in all the circumstances, it is just and equitable to make the order.
“The expression “just and equitable” is a qualitative description of a conclusion reached after examination of a range of potentially competing considerations. It does not admit of exhaustive definition. It is not possible to chart its metes and bounds.” [Footnotes omitted]
The High Court found three fundamental propositions with respect to the application of s.79, which can be summarised as follows:
1.Firstly, in order to ascertain whether it is just and equitable to make a property settlement order, it is necessary to identify the existing legal and equitable interests of the parties in the property. The High Court emphasised the word ‘existing’.
2.Secondly, although s.79 gives the court a broad power to make property settlement orders it may not be exercised in an unprincipled fashion. There must be no assumption that the parties’ interests are or should be different to their existing interests.
3.Thirdly, when considering whether making a property settlement order is just and equitable the court must not assume that one or the other party has the right to a property adjustment order. The court must give separate consideration to s.79(2) in addition to the matters referred to in s.79(4).
In Stanford the High Court indicated that, in the vast majority of matrimonial property cases, the requirements of s.79(2) will be readily satisfied, largely as a result of a consideration of the circumstances of the parties concerned, particularly the nature of their separation.
The High Court also pointed out that what is just and equitable is different in every case.
Stanford casts doubt on the correctness of adding back notional amounts to the pool for the purposes of property settlement. The Full Court confirmed this in Bevan & Bevan (2013) FLC 93-545. The Full Court said at paragraph [79]:
“We observe that “notional property”, which is sometimes “added back” to a list of assets to account for the unilateral disposal of assets, is unlikely to constitute “property of the parties to the marriage or either of them, and thus is not amenable to alteration under s 79. It is important to deal with such disposals carefully, recognising the assets no longer exist, but that the disposal of them forms part of the history of the marriage – and potentially an important part. As the question does not arise here, we need say nothing more on this topic, save to note that s 79(4) and in particular s 75(2 (o) gives ample scope to ensure a just and equitable outcome when dealing with the unilateral disposal of property.”
Both parties seek property adjustment orders. Some of their property is in joint names. I am satisfied that it is just and equitable to make property orders, adjusting the parties’ legal and equitable interests.
Assessment of witnesses
I do not accept the wife’s counsel’s submissions that the husband was evasive when answering questions in cross-examination. He is very good at running his business but for the financial aspects. I found the husband to be an unsophisticated business man who relies on his accountants. He is not a good record keeper. In my experience, this is not unusual where someone runs a business as a sole trader.
The wife’s counsel submitted in closing arguments that the husband may be in breach of his trust obligations and there are “plenty of authorities” on those issues. He said he would forward them to Chambers. He did not email any authorities to Chambers. In any event, it is not relevant to the issues I have to determine.
For the most part, the wife did her best to answer questions in a straightforward matter. The only time she was defensive and less forthcoming was when she was cross-examined about the letter she wrote to her son.
It is clear from the wife’s ancestor questions about her financial statements that the wife does not have a clear grasp of her finances. I am satisfied that she did her best to answer those questions
Property
The parties legal and equitable interests consists of the following:
assets
ownership
$
Property R W $540,000 Proceeds of sale of Property C J $179,000 (business omitted) Pty Ltd H Nil (omitted) Shares W $2,494 (omitted) Toyota W $12,000 Wife’s paid legal expert expenses W $59,906 Total ASSETS $793,400 Liabilities Property R mortgage W $296,641 (omitted) bank credit card J $7,000 Loan from husband’s parents J $35,000 Toyota finance W $10,698 Total Liabilities $52,698 Net assets $740,702 Superannuation Superannuation H $91,000 Superannuation W $84,000 Total Superannuation $175,000
The parties agree that they should keep their own superannuation interests which are almost equal.
Each party complains about the other’s disclosure or lack of it. These are issues which have been ventilated on previous occasions before the hearing.
The Federal Circuit Court Rules 2001 (Cth) about disclosure are well established and should be well known to practitioners. Both parties have a positive and ongoing obligation to provide disclosure. It is not a passive exercise where a party simply provides documents in answer to a request. Mutual complaints about non-disclosure are common. The cases discussing the consequences of deliberate non-disclosure are well known such as Weir v Weir [1992] FamCA 69 and Black & Kellner (1992) FLC 92-287. I am not satisfied that either party’s failure to disclose justifies making an adjustment on the basis of non-disclosure.
There were two main areas of controversy between the parties which touched on the non-disclosure issue. Those are the value of the wife’s initial contributions and the value of the husband’s business. I will address these topics in turn. Somewhat surprisingly, the husband was not asked about the value of the truck he uses for his business and it is not included in any figures in his case outline document. Neither party filed updated financial statements. In my view, parties should as a matter of course file updated financial statements before a final hearing. They are affidavits and therefore covered by the usual trial directions. The wife did file an updated financial statement prior to the June 2015 hearing.
I cannot impose an arbitrary figure for the husband’s truck. I have no evidence about it. Similarly, I have no evidence about the wife’s legal and expert costs after June 2015 and cannot guess that amount either. Given there are issues in this regard, both parties do not propose to address that any further.
The husband also tendered a printout showing his current bank account balances. The wife did not provide evidence of her current bank account balances but given that the parties have been separated since mid-2013, I do not propose including current bank balances in the matrimonial pool for division between the parties. I also do not propose to include debt which relates to post separation expenditure.
As indicated earlier, I find it is appropriate to add back the credit card debt of $7,000 incurred prior to separation and the $35,000 the husband borrowed from his parents to pay the joint credit card debt. I refer to the comments of the Full Court in Vass & Vass [2015] FamCAFC 51 at paragraphs 135 – 137:
“Ground 16 of the Amended Notice of Appeal provides: The learned Trial Judge erred in law and in his discretion in that he added back into the property of the parties the sum of $75,000 being the sum of $50,000 repaid to the Husband’s parents and the sum of $25,000 used by the Husband to pay the mortgage and associated household expenses.
At the hearing of the appeal, this ground was only faintly pressed, if at all. We therefore propose to deal with it very briefly.
At [50] to [65] of the First Reasons under the heading “Add-backs,” the trial judge held that $25,000 withdrawn by the husband from the parties’ bank accounts post-separation should be added back into the pool of assets, and further concluded that $50,000 which the husband had, post-separation, paid to his parents, purportedly in repayment of a loan from them, should also be added back.”
Findings on contributions
I am satisfied that the wife made minor contributions towards the husband’s business in assisting him with paperwork from time to time. I am similarly satisfied that the husband provided minor assistance to the wife with respect to her Property R property.
The wife’s initial contribution being the equity in her Property R property is significant and must be given great weight. The husband’s initial contributions were much more modest.
I find that the husband made far greater financial contributions throughout the relationship in terms of his income and also provided financial assistance to the wife’s adult son.
The wife made some financial contributions and assisted with homemaking duties and also provided assistance to the husband with the care of his children.
Weighing up all of these factors I consider the wife should receive an adjustment of 17% in her favour of the non-superannuation assets for contributions.
Section 75(2) factors
If the wife was successful in her argument to exclude the Property R property, it would have been a significant factor pursuant to s.75(2). It is important to avoid double counting therefore as it is included in the pool of assets, it will not be considered under this section.
Section 75(2)(b) requires the Court to consider the income, property and financial resources of the parties and their mental and physical capacity for employment.
I am not satisfied that the wife’s earning capacity has been impacted by the marriage.
The husband continues to have child support obligations for his youngest son and continues to have his care part of the time.
I find that only a small adjustment pursuant to s.75(2) is warranted given the funds the wife is receiving. I will make an adjustment of 3% of the non-superannuation for s.75(2) factors.
Conclusion
It is just and equitable to make an adjustment of the parties’ property interests in this case. Neither party’s proposal reflects a just and equitable outcome. The husband’s approach undervalues the wife’s initial contributions and the nature of that contribution. The wife’s proposal undervalues the significant contributions the husband made during the relationship.
The end result is that the wife will receive 70% of the asset pool. The net assets excluding superannuation total $444,063. She will keep her Property R home, her shares, and her car. She will be responsible for the mortgage and the finance on her car. With the addback of her paid legal costs, she is receiving $310,844.10.
The husband will retain the remaining joint credit card debt and the debt owing to his parents. He will receive most of the proceeds of sale. The husband would need to pay the wife $3,781.10 but for the outstanding costs order of $5,978. As there is the outstanding costs order, the wife owes the husband $2,196.90.
I am mindful that the amount held on trust may be slightly more because of interest if it has been invested but that would also apply to the matrimonial credit card debt the husband has taken responsibility for.
I will round the amount and order the wife to pay the husband $2,000 within 14 days.
Considering all of the relevant factors I am satisfied that the outcome is just and equitable.
I certify that the preceding one hundred and twenty-nine (129) paragraphs are a true copy of the reasons for judgment of Judge Harland
Date: 26 February 2016
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