Viney and Viney

[2008] FMCAfam 186

FEDERAL MAGISTRATES COURT OF AUSTRALIA

VINEY & VINEY [2008] FMCAfam 186

FAMILY LAW – Property settlement – husband’s business interests – contributions – spousal maintenance.

Family Law Act 1975, ss.72, 74, 75(2), 79(4)

Hickey and Attorney-General for the Commonwealth of Australia (Intervener) (2003) FLC 93-143
Robb v Robb (1995) FLC 92-555
Ryan and Hancock [2003] FamCA 125

Applicant: MS VINEY

Respondent: MR VINEY

File Number: BRC 2094 of 2007

Judgment of: Baumann FM

Hearing date: 25 July 2007

Delivered at: Brisbane

Delivered on: 12 March 2008

REPRESENTATION

Counsel for the Applicant: Mr Waterman

Solicitors for the Applicant: Connollys Lawyers

Counsel for the Respondent: Mr Murphy SC

Solicitors for the Respondent: Murdoch Lawyers

ORDERS

THE COURT ORDERS ON A FINAL BASIS BY CONSENT:

1. That the husband pay to the wife the sum of $260,000.00 (two hundred and sixty thousand dollars) within 30 days of the date hereof.

2. That within 30 days of the date hereof the husband transfer to the wife his interest in the residence at Property D (the former matrimonial home) subject to the liability to Suncorp Metway Ltd in respect of the loan secured by Registered Mortgage [X] (the mortgage).

3. That pending the compliance with paragraphs 1 and 2 hereof, the husband pay:-

   3.1to the Toowoomba Regional Council the rates as they fall due on the former matrimonial home;

   3.2to QBE Insurance the insurance premiums on policy [X] as they fall due on the former matrimonial home at the current level of coverage;

   3.3all mortgage payments inclusive of any arrears.

4. That contemporaneously with the husband’s compliance with paragraphs 1, 2 and 3 hereof, that the wife indemnify the husband and keep the husband indemnified against any liability in respect of the mortgage referred to in paragraph 2.

5. That on or before 1 January 2009 the wife secure the husband’s unconditional release from any liability to Suncorp Metway Ltd in respect of the loans secured by Registered Mortgage [X] and indemnify the husband in respect of that liability.

6. That the husband retain the Landrover Discovery motor vehicle registration [X] that is currently in his possession and the husband shall do all necessary acts and things and pay, or cause to pay all moneys necessary to finalise an outstanding claim in respect of the Landrover being a claim by Ms J for $994.71 in respect of an accident that occurred on 26^thFebruary, 2008 with the husband to indemnify and keep the wife indemnified against any liability in respect of such claim.

7. That the wife make available for collection from the former matrimonial home, by the husband or his agent at a time to be nominated by the husband on 48 hours notice following the husband’s compliance with paragraphs 1, 2 and 3 hereof, the following items:

   ·A collection of fish prints

   ·The husband’s watch

   ·Two home video tapes

   ·A TV cabinet made from recycled timber

   ·A timber outdoor setting

   ·Timber work benches located in the shed

8. That apart from the items referred to in Paragraph 7 hereof that the wife otherwise retain the furniture and contents in her possession located in the former matrimonial home and her superannuation entitlement.

9. That subject to the husband’s compliance with orders 1, 2 and 3 hereof that:-

   9.1the wife abandon any claim to and the husband be solely entitled to his interests in [V] Investments Pty Ltd and [V] Holdings Pty Ltd;

   9.2the wife abandon any claim to and the husband be solely entitled to his interest in superannuation with [L] being Policy No [X].

10. That all other applications be dismissed and the matter removed from the pending cases list.

11. That there be no order as to costs.

    IT IS NOTED that the husband will cause to be made available for collection by the wife’s father, Mr B, from the premises of [V] Investments Pty Ltd, Property B, upon 7 days notice to the husband, the following items of property of the wife’s father, namely:-

1)   Metal tool box (4” x 4” x 8”);

2)   Compressor and assorted items in tool box;

3)   Canopy for Nissan 4 x 4.

THE COURT ALSO NOTES the parties intended these Orders, shall as far as practicable finally determine the financial relationship between them and avoid further proceedings between them.

a)Both parties agreed that the settlement as represented by these Consent Orders represents a just and equitable resolution of the financial matters in dispute between them.

b)Both parties agree that it is the intention of these Consent Orders that the same should end finally all matters of a financial nature and dispute between them and that the same is intended to be in full and final settlement and discharge of all claims that each may have against the other pursuant to Part VIII of the Family Law Act1975.

c)That each party requests the Court make the Consent Orders as set out herein as evidence by their execution of these Minutes.

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

FEDERAL MAGISTRATES
COURT OF AUSTRALIA AT
BRISBANE

BRC 2094 of 2007

MS VINEY

Applicant

And

MR VINEY

Respondent

REASONS FOR JUDGMENT

Introduction

1. In September 2000 the Applicant wife Ms Viney and the Respondent husband Mr Viney commenced cohabitation.  After a relatively short relationship, the parties finally separated in December 2005.  During the course of the relationship the parties married in 2001 and two children were born to the parties – [A], now aged four and [B], now aged three.

2. At the time of cohabitation the wife acknowledges the husband was a man of some financial substance – having with his brother P created a sizeable business in the rural city of Toowoomba.  These business operations began as early as 1986.

3. Although the parties entered into consent final parenting orders in December 2005, the property proceedings launched in the Family Court of Australia in 2005 have required judicial determination.  To a large extent this was caused by the inability of the parties to reach agreement on the value of the husband’s interests in two corporate entities.

4. The establishment of that value, which companies over 70% of the net pool, occupied most of the trial time with both parties relying on separate valuation experts.  I deal with this issue below.  I apologise to the parties for my delay in delivering these reasons.

5. Within the matrix of the well established method of analysis I deal with the competing proposals of the parties:-

   ·The wife seeking a 35% share of the pool as contended by her;

   ·The husband seeking orders, the effect of which is a 23.3% share for the wife on the pool as contended for by her and more than that on the reduced pool contended for by the husband.

Principles

1. The preferred or usual approach to determining property proceedings under s.79 of the Act was the subject of a succinct summary by the Full Court in Hickey and Attorney-General for the Commonwealth of Australia (Intervener) (2003) FLC 93-143) at [39] where the Court said:-

   “39.  The case law reveals that there is a preferred approach to the determination of an application brought pursuant to the provisions of s79.  That approach involves four inter-related steps.  Firstly, the Court should make findings as to the identity and value of the property, liabilities and financial resources of the parties at the date of the hearing.  Secondly, the Court should identify and assess the contributions for the parties within the meaning of ss79(4)(a), (b) and (c) and determine the contribution based entitlements of the parties expressed as a percentage of the net value of the property of the parties.  Thirdly, the Court should identify and assess the relevant matters referred to in ss.79(4)(d), (e), (f) and (g), (“the other factors”) including, because of s79(4)(e), the matters referred to in s75(2) so far as they are relevant and determine the adjustment (if any) that should be made to the contribution based entitlements of the parties established at step two.  Fourthly, the Court should consider the effect of those findings and determination and resolve what order is just and equitable in all the circumstances of the case:  Lee Steere and Lee Steere (1085) FLC 92-626; Ferraro and Ferraro (1993) FLC 92-335; Davut and Raif (1994) FLC 92-503; Prpic and Prpic (1995) FLC 92-574; Clauson and Clauson (1995) FLC 92-595; Townsend and Townsend (1995) FLC 92-569; Biltoft and Biltoft (1995) FLC 92-614; McLay and McLay (1996) FLC 92-667; JEL and DDR (2001) FLC 92-075 and Phillips and Phillips (2002) FLC 9.-104.”

The Husband’s Business Interests Generally

1. The history associated with the husband’s business development, most of which occurred prior to the commencement of cohabitation, is not seriously challenged.  To provide some context to the discussion on the valuation issues which follow, I note and accept that:-

   a)The husband left high school at 14 years of age and commenced an apprenticeship in his father’s business.  The husband was involved in a number of businesses with his brother P and his father D.

   b)In the mid 1980s a business known then as [H] was the origin of two separate activities – [E] [E]and [W][W].  Importantly in 1986, the business [W] took up a [L] agency.

   c)In or about 1992 the husband and his family purchased a business known as [T] which was eventually controlled by D and P.

   d)[E] and [W] were operated for many years from premises in [R] Street, Toowoomba, owned personally by the husband and his brother.

   e)The need to corporatise was deemed, on accountancy advice, appropriate for these growing enterprises.  As a result:-

   i)[V] Holdings Pty Ltd (“[V] Holdings”) was established in June 1993.  This company is essentially used to hold the trading operations [E] and [W].

   ii)[V] Investments Pty Ltd (“[V] Investments”) was established in 1999 and was established essentially to hold the real property from which the businesses would operate.

   f)[V] Investments purchased land at 500 Property B, Toowoomba for $300,000 comprising just over two acres.  It was developed and the businesses have been operating from that location since January 2001.  When the previous jointly owned former business premises in [R] Street was sold for $170,000 later in 2001, the proceeds were used to pay debts including construction expenses on the Property B property.

   g)I accept the husband’s evidence that throughout the time the husband and P have operated the businesses they have drawn modest salaries preferring to reinvest profits into repayment of debt and the acquisition and improvement of plant and equipment (rather than leasing or otherwise financing such equipment).

   h)The husband holds three of the issued six shares in [V] Holdings – the other three shares being held by P (2) and his wife J (1).  All shareholders are directors.

   i)The husband holds one of the issued two shares in [V] Investments – the other share being held by P.  Both are directors.

Business and share valuations

1. After these proceedings were launched in the Family Court of Australia in December 2005 by the wife, the parties agreed to engage a single valuation expert, Mr T of [Y] Accountants, to provide an opinion as to a value of the various entities, from which the husband’s interests for inclusion in the matrimonial pool of assets could be ascertained.  Those valuations have been filed before the Court.

2. In short, the methodology adopted by Mr T for the trading entity [V] Holdings was the capitalisation of the Future Maintainable Earnings approach.  It is necessary, in such a commonly used approach, to calculate the likely future earnings of the business and apply a capitalisation rate which is a reflection, in the opinion of the valuer,

   
   

   of the risk associated with the investment.  It also reflects the opportunities in the business.

3. Furthermore, the value assessed adopting a capitalisation of FME methodology is to be compared with the net tangible business assets.  Where the capitalised value exceeds those net business assets, the difference is referred to as “goodwill”.

4. Mr T regarded the appropriate methodology for [V] Holdings to be its net tangible assets plus the value of goodwill for the business. As a result of leave being given by this Court to adduce further evidence of an expert valuer, the husband engaged Mr F of [X] Accountants to prepare a report.  His report dated 30 April 2007 is before the Court.  Mr F took the view that [E] should be valued on a net realisable assets basis; that [W] should be valued by applying the capitalisation of future maintainable earnings approach; and that [V] Investments should be valued on a net realisable assets basis (as did Mr T).

5. To assist the parties, and the Court, the two expert valuers were ordered to confer and to file a Statement identifying the areas of agreement and disagreement.  Rather than deal extensively with the voluminous reports where small areas of difference emerge, the case and cross examination of both experts focused on the areas of disagreement which were distilled from the conference of joint experts.  This was a sound and sensible approach by Counsel and significantly reduced the hearing time to merely a few hours.

6. I adopt a similar approach, namely I intend to decide on each of the relevant areas of disagreement identified in the Joint Statement filed

   
   13 June 2007

   .  Again for context, the Statement at Table 2, which I reproduce in these reasons reveals the net position after the conference for the business entities being:-

Mr T	$1,518,937
Mr F	$1,146,179

“Table 2: comparative summary of assessments after conference

Mr T $	Mr F $
Parties’ Interests	Parties Interests
[V] Holdings Pty Ltd -    Shares -    Loan Account [V] Investments Pty Ltd -    Shares -    Loan Account Taxation & Realisation Costs [V] Holdings Pty Ltd [V] Investments Pty Ltd Net Position	1,693,256 (33,113) 582,238 19,217 2,261,598 483,908   258,753 742,661   1,518,937	[V] Holdings Pty Ltd -    Shares -    Loan Account [V] Investments Pty Ltd -    Shares -    Loan Account Taxation & Realisation Costs [V] HoldingsPty Ltd [V] Investments Pty Ltd Net Position	1,262,33 (33,113) 524,014 19,217 1,772,450 377,259 249,012 626,271 1,146,179

”

1. For the reasons which follow, it will be necessary for Mr T, as the Court expert initially engaged, to prepare for the Court, a valuation which adopts the elements I have determined on the evidence to be appropriate.  I am conscious of the slight delay this will cause (and again apologise to the parties for the delay in delivering these reasons) and the additional costs, however after careful consideration I regard this as the proper course, rather than myself attempting to incorporate those elements into the equation and run the risk of an inappropriate application of the principles thus causing an incorrect net position.

Joint statement of experts

1. I chose to deal with the issues sequentially as set out in the Statement under the heading “Main Issues of Disagreement”.

[W]

Allowing a commercial salary for the directors

1. It is common ground that the day to day operations of the business [W] have for over 17 years been managed by a trusted employee Mr W.  Mr W swore an Affidavit filed 4 July 2007 which was relied upon by the husband.  Mr W was not required for cross examination.  Mr W was also available to the expert valuers to discuss the business operations.

2. Mr T believes that because of their lack of daily involvement in the business (which had a turnover to 30 June 2006 in the vicinity of approximately $2,600,000 pa), it is not appropriate to make any allowance for proprietor’s salary.  Mr F has included a deduction for a salary of $24,000 which he says reflects the commercial worth of their involvement.  Although the daily involvement is small – this does not mean, and I infer, that the proprietors do on a regular basis given intellectual consideration to the business.  They clearly trust Mr W – however, in the end, it is the proprietors money, cash flow and reputation in the industry which is at stake.  A modest allowance for a proprietor’s salary as set by Mr F is fair in my view.

Representative years

1. The difference in approaches is clear with Mr T relying upon the adjusted earnings achieved in the year ended 30 June 2006, whilst Mr F’s assessment is based on an average of the earnings for the years ended 30 June 2005 to 30 June 2006 and the annualised results for the period to March 2007.

2. The valuation in net profits is not, in the scheme of things, significantly different mathematically – Mr T assessing the net profit as $486,940 and the future maintainable earnings at $430,245 and Mr F opining the profit to be $515,778 and the future maintainable earnings as $424,359.

3. I have formed the view, based on the cross examination of the experts, that I should adopt Mr F’s approach of assessing an average for this long running business of the 2005, 2006 and annualised 2007 figures rather than Mr T’s approach of an adjusted 2006 assessment.  Mr F’s approach is consistent with usual valuation methodology and texts.  It is difficult for me to discern the reasons for the slight variations in the “adjustments” to the net profit (eg. $1,613 in Interest Received; $32,235 in [G] Rentals in Advance; allowance for depreciation of $15,733).  The cross examination of the experts did not descend to that level of detail.

4. Allowing as I do (for reasons already given) for a proprietor’s salary – I would be prepared to accept the other adjustments identified by Mr F.  This suggests a FME for the business should be accepted as $424,359 pa unless further adjustments are permitted.

Discount for marketability

1. This issue in its simplest characterisation is at the heart of the difference in the net position for the entities – namely what capitalisation rate should be applied.

2. Mr T says a rate of 30% is appropriate.  Mr F had the advantage, perhaps, of critiquing Mr T’s assessment when concluding, for the reasons set out in paragraphs 87 to 90 of his report, that the appropriate capitalisation rate is 45%.

3. Mr W’s Affidavit sets out the changes in the business environment in which the business has and will operate.  In particular he says:-

   ·[W] distributes [G] without the benefit of any long term contract with [L];

   ·“over the last six months the retail market for [G] has tightened as [L]’s major competition, [X] have become more active in the market”;

   ·the business [W] have lost a number of bigger customers through competitors cutting prices;

   ·the drought has had an affect over the last few years;

   ·over the last two years “we have secured a lot of business directly or indirectly out of the building of the [X] Power Station near [X]”.  That source of work has really “dried off” and Mr W is not aware of any other major projects.

4. These factors are alluded to by Mr F at paragraph 87 of his report and Mr T at paragraph 12 of his report.

5. Although there was little difference (not really explained) between the base capitalisation rate (Mr F says 33%; Mr T says 30%) the dispute really is founded on Mr F’s view that he considers “a discount of 30% to be an appropriate allowance for the impact of the marketability of the business” as a result of the factors in paragraph 87.

6. Additional to the matters referred to at paragraph 87 is the acquisition of [L] by the major Australian Company Westfarmers.  Westfarmers apart from its operation of the Bunnings Warehourse chain also now operates Coles.  The effect on the major retailing activities of [G] supply by [W] as a result of this market change (remembering no long term contracts as a supplier of [L] exist) is a further uncertainty.

1. On balance, after the thorough cross examination of the two experts, I found Mr F more persuasive on this issue.  Although I cannot readily understand the difference between 30% and 33% adopted as the base capitalisation rate, I do accept the ultimate professional opinion advanced by Mr F that a capitalisation rate of 45% should be applied.

Core tangible asset – employee leave entitlements

1. I agree with the approach adopted by Mr F on this matter, namely to include the entitlements as a surplus liability and make no adjustments to the future maintainable earnings for the reasons he advanced.

[E]

Loan – [T]

1. Mr T has included in the value of [E] (as a component of [V] Holdings) a loan of $58,328 to [T] on the basis that it is unrecoverable.  It is clear that the “loan” was made some 10 years ago to a family related entity.

2. The evidence of the husband and his brother P makes it clear on balance, that although the loan is “on the books”; it is not likely to be demanded and/or recoverable.  In an operation with the turnover this Group has, it is not unusual for assistance to be provided to related entities.  Clearly the husband’s father helped him and his brother in the early years of their business life and this “loan” made 10 years ago is of like assistance.  I am comfortable in accepting the views of the husband and his co-director brother P, that the loan or assistance given of $58,328 is not likely to be recovered.

[V] Holdings Pty Ltd

Discount for lack of control

1. The debate between the experts on this issue become whether the husband with 50% of the shareholding has “shared control” and, as a result, this means no “lack of control” in the sense advanced by Mr F.

2. The discount is applied to the value of the husband’s shareholding – such value of course being determined by the application of the principles already discussed above.

3. I agree with Mr F that in a trading entity like [V] Holdings a hypothetical purchaser would be accepting a risk, when being in a shared management position, that disputes could arise and that could have a consequence on the value such purchaser would attribute – not to the underlying assets (which is where the capitalisation rate is applied) but to the actual interest acquired, namely a 50% shareholding.  In my view, as I shortly discuss, the character of the underlying assets and nature of the business is also a factor.  Simply stated – the more issues which the directors and shareholders have to agree upon the higher the likelihood of a dispute arises.  Although not referred to in the evidence, I also note that a hypothetical purchaser of the husband’s interest in [V] Holdings would also face a board of directors where the purchaser would likely be outnumbered – P and his wife J may well vote as “a block”.

4. For these reasons I agree with Mr F that it is appropriate to apply a modest discount of 10% to the husband’s share value in [V] Holdings.

Realisation costs – winding up

1. I am not convinced, on the whole of the evidence, that a differential rate should be applied as opined by Mr F (3% for goodwill and property and 10% for plant and equipment). I agree with the position adopted by Mr T to apply a 3% realisation cost for all the business assets.

Taxation consequences – notional wind up

1. Having determined the earlier issues the process of calculating the underlying tax consequences should be a relatively simple task.

[V] Investments Pty Ltd

Discount for lack of control

1. Although I was prepared to accept the view in respect of [V] Holdings that a discount for lack of control was appropriate, I do not do so for this company.

2. The company is a relative passive investor – it has essentially one asset – the business premises. P’s wife J is neither a director nor a shareholder.  In evidence, the brothers hold the interest in the real property through this corporate entity, akin to holding as “tenants in common in equal shares”.

3. They have been in business together for many years and the decisions which are capable of causing a difference of view in this entity are significantly less than those likely in the trading entity [V] Holdings.  Accordingly I would not discount the husband’s shareholding in [V] Investments for his “lack of control”.

Realisation costs – notional wind up

1. Again, through the application of the principles and determinations made by me, this calculation should not be difficult.

Taxation consequences – notional wind up

1. Whilst both experts agree on the process of calculation, it seems different results are obtained because:-

   a)Mr F has assumed that the husband has greater than $150,000 of other income before applying the income attained from the notional winding up of the company;

   b)Mr T has allowed for the lower income tax rates between $52,000 and $150,000.

   Based on the evidence about the modest earnings of the husband, I am content to follow the approach that is contended for by Mr T on this issue.

Summary

1. As I indicated, it would assist the Court if Mr T could, at the cost initially of the husband, determine the valuation of the husband’s interests based on the determinations I have now made.  He offered to do so in his Affidavit filed in the Court  It is likely that the ultimate figure will be closer to that opined by Mr F (of $1,146,179) in Table 2 because the major differentiating factor is the capitalisation rate applied to the FME of [W].

2. For completeness it seems that the motor vehicle used by the wife (which she does not wish to retain) is company property.  I have, for that reason, not separately included it in the pool of assets – satisfied it finds its proper place in the value of the corporate entities.

Pool

1. Arising from the comments made above in respect of the husband’s Business Interests and subject to the joint expert Mr T providing an assessment of value adjusted for the determinations I have made, I propose to calculate a notional pool of assets and liabilities to permit me to undertake a general discussion of the likely effect of the order I propose to make.

2. I am satisfied this is a sound approach to adopt because:-

   a)Ultimately, until I determine the form of order, the real affect of the order and whether it achieves justice and equity can not be affirmed; and

   b)The valuation of Mr F is likely to be in the “ball park”, because although there are a number of smaller adjustments to his calculations (eg discount on the husband’s [V] Investments shares), the major difference being the appropriate capitalisation rate has been determined to be that preferred by Mr F.

3. There are some other issues relating to the constitution of the pool that I deal with:-

Furniture

1. Whilst I accept the husband lives currently either in a shed or a company caravan, I think it is reasonable to adopt the wife’s estimate of furniture and personalty in the husband’s possession which has its origin in the period of the relationship at $500.  I deal below with the husband’s application for some specific items set out at paragraph 5 of the proposed final orders incorporated in the Response filed 19 July 2007.

Partial property order

1. By consent, this Court ordered on 16 April 2007 that “for the purpose of providing the wife with an interim property distribution” the husband was permitted to drawdown on the Suncorp Metway mortgage with a total drawdown of $82,000 being distributed:-

   ·As to $74,000 to the wife’s solicitors

   ·As to $8,000 to be held in Trust to pay interest on the drawdown with the wife entitled to the remainder, if any.

2. On the basis of the parties consent to the order, it is appropriate that the sum of $82,000 be included in the pool as an “add back” the wife has had the benefit of and with an order to be made for the wife to be entitled to any balance of the “interest account” of $8000 not yet used.  The loan on the home at the hearing incorporates the drawdown.  Exhibit 1 confirms the transaction.

Husband’s loan account

1. The husband asserted his loan account to [V] Holdings has increased from virtually nil at separation to a figure of $113,316.59 at the time of the hearing.  The husband, in cross examination, properly conceded that most of the loan account represented draw downs for legal expenses.

2. Both experts appear to support the inclusion in the net assets of [E] of a loan account balance of $33,113.  If it represents an asset of the entity it is only proper that the liability which the husband has should be brought into account in the matrimonial pool.  Without definitive evidence of the extent to what the difference between the loan account balances of $33,133 and $113, 316 (approximately $80,000) comprises other than legal expenses incurred, I am content in accepting the husband’s concession.  It would not be, in my view, proper to include the loan account at the higher figure where:-

   ·It was mostly, if not completely used for legal expenses (including I accept some joint expert fees); and

   ·The experts agree that the amount to be incorporated in the valuation is the lower figure.

3. For completeness, in the context of the turnover of the entities in the group, no useful purpose is achieved from trying to dissect some individual company transactions involving the purchase of a caravan (for use “on site”); the purchase and reimbursement of the BMW motorcycle or the sale of the company Mercedes Benz.

4. Also the brothers’ decision to use company assets and cashflow to support their decision to loan funds of $157,000 to their parents in circumstances where the loan comprises part of the net assets of [V] Investments requires no further investigation by the Court.

5. On the basis of the findings made I adopt a notional pool as follows:-

Assets

Home at Property D

$580,000

Furniture

-    wife

-    husband

$10,000

$500

Notional value (pending clarification) of husband’s interests in [V] Group

$1,146,179

Partial property distribution (wife)

$82,000

Superannuation

-    husband

-    wife

$45,022

$600

$1,864,301

Liabilities

Loan on home

$265,000

Husband’s loan account

$33,113

$298,113

Net Notional Pool

$1,566,188

1. Both Counsel agreed that the modest superannuation entitlements of the parties be incorporated in one pool with all other assets.  No splitting order was sought.

Contributions

1. It is not challenged that at the time of cohabitation the husband had assets identified as:-

   a)An unencumbered home at Property H, sold in July 2001 for $125,000

   b)Furniture; a Honda motorcycle said to be worth $8000; a superannuation policy with [L]; some modest savings;

   c)His interest in the companies [V] Holdings and [V] Investments which the husband estimated “would have been valued at $500,000”.

2. I would observe that the businesses were also the source of his income and the reservoir from which he and his brother continued to develop their financial strength and security.

3. The wife, aged five years younger than the husband, was working as a self employed [X] from her private residence.  She was then the primary carer of her children [C] and [D], who were aged 12 and 7 at cohabitation.  Apart from modest savings, some furniture and a car (which was ultimately traded in at a value of $8000), the wife had no assets of significance.

4. Clearly the husband’s assets were overwhelmingly superior at cohabitation and the quality of his assets secured long term benefits to the family.  The wife concedes that in early 2001 the husband discharged a debt on her car.  The wife’s income was modest (the wife concedes under the minimum tax threshold), so that when the parties decided in April 2001 to purchase the property (still owned) at Property D, it was the husband’s financial position which supported the application for finance (some of it bridging) to acquire the home for $251,000.

5. The bridging loan was partly discharged with the proceeds of sale of the husband’s home at Property H.  The loan payments were all met from the income received by the husband from his business.

6. Extensive renovations were performed to the Property D property which are detailed at paragraph 13 of the husband’s Affidavit.  This represented non-financial contributions by the parties.  The husband acknowledges the efforts of the wife’s father, Mr B, who was a retired registered builder.  Mr B estimates (having sworn an Affidavit filed 10 July 2007), that he spent a total of 198 hours (including travel time) on construction of the rumpus room (12 days), construction of the pool fence (six days) and construction of the house deck (four days).  Mr B was not required for cross examination.  I accept he devoted these days, without payment, to the works described and would assess that as, in essence, being a contribution by the wife.  The wife concedes the majority of materials were paid for from additional loan funds borrowed in December 2002 from Suncorp and also by use of some company accounts with a Hardware.

7. The husband was really the sole source of direct financial contributions to the relationship.  His contributions, when added to his initial contributions simply overwhelm the wife’s contributions as home maker and parent and her other non-financial contributions.

8. The wife readily acknowledges how hard the husband worked in his businesses.  They involved long hours, often for periods “on site” away from the home.  This of course increased the obligations the wife carried, at times single handedly, in caring for the young children.  She says she suffered “chronic morning sickness” during both pregnancies making it difficult to work.  I am satisfied on the evidence the wife’s contribution as home maker and parent was significantly superior to the husband’s contribution in this role.  The wife of course was also responsible for the care of her two older children [C] and [D].  It is not disputed that the wife has received virtually no support (financially or otherwise) from the biological fathers of the two older boys.

9. In assessing the contribution based entitlements to the pool of assets as I have notionally found it to be, I take into consideration the financial and non-financial contributions, of a direct and indirect character set out above to separation.

10. Post separation the wife has continued to reside in the former matrimonial home with the children.  The husband has maintained mortgage payments as well as other payments of rates, insurance and the like.  An order made by Registrar Ammala dated 1 February 2006 characterises such payments as “spousal maintenance”.

11. The wife has also continued to have the use of a company Land Rover vehicle.  The wife through her Counsel has indicated she does not wish to take the vehicle as part of her property settlement.

12. The wife in her material (particularly paragraphs 83, 91, 92 and 93) asserts that the husband has acted vindictively and with the intention to cause “maximum stress and pressure on me”.  Clearly the incident on 3 December 2005 would have been traumatic for all participants – followed as it was by the mother being detained in the watch house and initial removal of the children (then aged one and two years) from her care.

13. However these assertions, even if proved and corroborated to the requisite standard (which they have not), fall within the realm of “conduct” which has limited relevance (if at all) in these proceedings.  They at best relate to conduct post separation and to the impact, stress and financial strains caused to people litigating with limited resources.  The “Hogan” type order made on 16 April 2007, after the proceedings had been transferred to this Court by the Family Court of Australia, went some way towards supporting the wife’s needs and to assist in the discharge of her legal expenses.  The husband has also paid Child Support as assessed (save for one month the wife alleges, without corroboration), to September 2006 at approximately $140 per week which increased to $921.75 per month from April 2007.  It is not clear to me, on the evidence, what level of payment was made between September 2006 and April 2007.

14. Certainly post separation the husband continued, as he had for the many years pre-marriage and during the relationship, devote himself to the business.  There was an increase in his superannuation entitlements of about $10,000.

15. Mr Waterman, Counsel for the wife, submitted that the increase in value of the husband’s business interests during the period of the relationship (to the extent they can be reliably assessed) was significant.  He says the wife’s non-financial contributions allowed the husband to pursue with vigour his business and the wife should share in the increase.

16. I am not required to make a finding about the value of the husband’s interests at separation.  The husband gives his own estimate.  However the wife’s contention fails to give proper recognition not only to the value of the businesses at separation but the quality and nature of that asset.  It seems somewhat “artificial” to me to seek with a “going concern” to attribute a value to it at separation and then to assume that any increase is the same as – for example – letting a fixed deposit of $500,000 accrue interest without withdrawals.

17. In final submissions, the wife says her contributions ought to be assessed at 15% - the husband, through his Counsel says 7.5%.  I regard the proper contribution based entitlements to be 10% to the wife and 90% to the husband.  It bears restatement that the parties were only together as a couple for just over five years with the post separation period to trial being about 18 months.

Section 75(2) factors

1. The wife is five years younger than the husband and at age 38 has a reduced and limited opportunity to generate an income because orf her primary care role for [A] and [B].  The wife wishes to maintain that role and the Court must take into consideration the desire of the wife to do so (s.75(2)(1)).  In any event, despite the wife’s wish to maintain that role, the husband’s apparent lack of opportunity to maintaining an interaction with his young children (despite the consent order) consigns the wife to that continuing emotional commitment.

2. I take into account the father’s payment of child support – which I believe, on the evidence, he will continue into the future to make.  However, the current quantum of child support as administratively assessed at just over $100 a week per child, will not meet the children’s likely continuing needs.  This is even more the case where the father is not exercising regular time with the children.  If he did so he would meet the costs of the children when they are with him and the mother would, during that time, enjoy a slightly reduced financial burden.

3. Whilst the evidence makes it difficult to confidently predict if the husband’s lack of time with the children will continue, the husband says at paragraph 2.34 of his Affidavit in Reply sworn 23 July 2007 that:-

   “I have tried to spend time with the boys subject to the restrictions of my temporary accommodation (being a caravan) and work commitments but [Ms Viney] has consistently been inflexible in allowing me time with the boys when work commitments meant I was not available to have them in the times prescribed by the orders.”

4. The husband says he remains committed to “playing a significant role in the boys’ lives” however the husband’s very strong work ethic suggest to me that usually work will come first, and that even if he spends more time then he currently does, the mother will most likely continue to bear the overwhelming responsibilities to these children.

5. I do not ignore the continuing additional responsibilities that the wife carries, solely in this regard, for her older sons – particularly [C] who suffers kidney disease and is a possible candidate in the future for dialysis or a transplant.  The mother describes the effect of this condition on [C] and how it is likely to impact on her at paragraph 53 of her Affidavit which was generally admitted by the husband.

1. At this point I should note that both parties luckily enjoy good health.

2. The husband has a superior earning capacity – as much is conceded by the husband.  The extent of that superior which existed, as already noted, at the time of cohabitation is not only reflected in the current income and benefits available to the husband (which Mr Murphy submitted was at least $57,000 pa gross as the wife submits to be the case), but also the security of it continuing.

3. The wife has limited skills – mainly as a [X] – but by the time she reasonably believes she can re-enter the work place fully in 2010 (when her youngest child can commence school), she would have not maintained those limited work skills for over seven years.  She will offer herself to a competitive workplace.  Her hours of employment even then will continue to be modified by her need to be available for the children.  The husband has not faced this limitation to any significant degree in his working life to date, and will not on the history be significantly so affected in the future.  In any event as a self employed person he, I infer, has greater flexibility available to him.

4. I do not ignore that both parties say they have suffered a drop in living standards.  Furthermore, the result of the orders I will make will be that the husband has a significantly greater share of the pool than the wife – although that was also the case at the commencement of the relationship.  I acknowledge that a small position of the husband’s retained property is his interest in the [L] Superannuation Fund which he will not be able to access for some years.  I also take into account the significant debts created by both parties for payment of legal expenses.

5. The age of [A] and [B] means that the wife’s impediments to earning income are likely to continue for at least the next 15 years or so – even though, as the boys get older, some extra flexibility for the wife is likely to accrue.

6. The factors set out above compel an adjustment in the wife’s favour in the region of 15% to 20%.

7. The fair adjustment to the wife is ameliorated to some degree by an allowance in the husband’s favour for his financial support and provision of accommodation, payment of private school fees and the like made to support his step-children [C] and [D].  There is nothing in Robb v Robb (1995) FLC 92-555 that mandates an adjustment in every case involving step-children. This adjustment is made under s75(2)(o) of the Act.

8. Mr Murphy, in final submissions, as a guide using the current child support figure calculated that a “direct contribution of $55,000” was made.  He acknowledged, as the Full Court in Ryan and Hancock [2003] FamCA 125 noted, such a relationship “between a step-parent and a step-child is not a one way street.  Nor is it one upon which it is necessarily appropriate to put any commercial value.”

9. Taking all these matters into consideration I would allow an adjustment in the wife’s favour of 15% - or put another way on the pool notionally calculated at $1,566. 188, a payment passing from the husband to the wife of approximately $235,000.  I regard this as fair in this case.

Just and equitable

1. Based on the notional pool set out at paragraph 54 of these reasons, if the wife were to receive an entitlement of 25% of the pool, or $391,547 the effect of the order would be:-

Equity in Property D home	$315,000
Furniture	$10,000
Partial property distribution	$82,000
Superannuation	$600
$407,600
Less payment to the husband	$16,053
TOTAL	$391,547

1. Mr Murphy indicated that his client would not seek for the wife to pay his client any funds – his client contends for the order in the Response and Case Outline that the wife should take a transfer of the Property D home from the husband and secure for the husband a release of his liability under the home mortgage.  If she is unwilling or unable to do so then the home should be sold and the net proceeds would be the entitlement of the wife.

2. Although the wife says she did not wish to retain the car in her current possession, the husband did not resile from the offer to cause [V] Investments to transfer the Land Rover Discovery to her.  Because I am not pronouncing the order today, waiting for the preparation of a new assessment of valuation by Mr T (see paragraph 43 of these reasons), this will enable the wife to reconsider her rejection of the offer for her to retain the car.  If the wife says she wishes to retain the car, an order in the form of the husband’s response (other than the costs order, which I have not decided), would appear to achieve justice and equity.

3. The wife would have a home and a car.  If she is unable to ultimately afford the mortgage payments, then she could sell the home, pay her debts, and still have funds available to consider reaccommodating herself.  Considering her previous financial position at the time of cohabitation and the shortness of the marriage, I would regard this as within the range of an equitable result.

4. I would order that the husband be entitled to recover the collection of fish prints. It seems the husband at trial did not press for other items referred to in paragraph 5 of the final orders sought.

Spousal maintenance

1. The wife presses for an order that the husband pay to the wife, by way of spousal maintenance the sum of $745 per week “until such a time as the wife commences full time employment”.

2. The wife says she intends and expects to be able to return to some full time employment from the beginning of 2010 when [B] begins full time schooling.

3. Based on the wife’s filed Financial Statement upon which she was not challenged, she estimates her personal weekly expenses as:-

Food	$100
Household Supplies	$5
Home Repairs	$20
Gas	$25
Electricity	$35
Telephone	$100
Petrol	$40
Clothing	$20
Medical/Dental Expenses	$14
Entertainment	$40
Holidays	$20
Chemist	$10
Lawnmowing	$12.50
Cleaning	$25
Repairs	$10
Books	$8
Gifts	$19
Hairdressing, Toiletries	$25
Insurance	$6.5
Credit Card	$58
TOTAL	$593

1. In circumstances where:-

   a)I am required to disregard any entitlements to income tested benefits;

   b)I have formed the view that it is not unreasonable for the wife to remain occupied in her full time duties as a parent for the two young boys, at least until the beginning of 2010;

   c)And the other relevant factors referred to in s75(2).

   I am satisfied the wife is unable to support herself adequately within the meaning of section 72 of the Act. Section 74 empowers the Court to make a maintenance order it considers proper.

2. The husband says he is unable to afford to pay the wife the sum sought of $745 per week.  That sum is quantified at paragraph 115, which includes the claim in the Financial Statement and additionally:-

Rates	$39.92
Building Insurance	$13.50
Vehicle Expenses	$99.50
TOTAL	$152.92

1. On the wife’s own evidence, the husband has only ever taken a modest income from the business for reasons already noted in these reasons.  Based on his current income after allowance for reasonable living expenses, taxation and child support, his Financial Statement deposes to a slight excess of income over his expenses ($916.16 - $779.00).  His current expenses include payments which he required to make under the consent interim order of Registrar Ammala.

2. The husband has shown a capacity to drawdown on future earnings in the business (or extending loan accommodation) to pay extensive legal expenses.  I do not accept that when these proceedings are concluded the husband cannot seek (with some level of optimism) further financial support from the bank to enable him to secure alternate accommodation – particularly where his liability under the home mortgage is likely to be discharged or refinanced by the wife.

3. In my view, the husband cannot on the evidence afford to pay the wife $745 per week without continually drawing on his loan account or arranging with is brother’s concurrence a sizeable increase in the salary he draws from the business.  I am not satisfied he can do so – even if it is reasonable for him to continue to draw excess to income.  I do not regard that as proper.

4. The husband has demonstrated a capacity to pay the interim maintenance award.  The order I regard as appropriate is for him to continue to do so until January 2010.  I would not require him to pay, by way of spouse maintenance, the interest on the $82,000 drawn down for the wife.  To round off the figures, I propose to order that the husband pay the bank interests on a loan of $200,000 until 31 January 2010, together with the house rates and home insurance to that date.  The evidence is not clear whether the current debt allowed at $265,000 is on a fixed or variable rate arrangement.  I have no difficulty in the husband securing the best arrangement for this loan.  If the wife chooses to sell the home before January 2010 (when the bank would probably require discharge of the mortgage), the husband’s equivalent payment shall continue to be paid to the wife until 31 January 2010.  This will assist the wife in meeting expenses until the opportunity to return to full time employment arises.

Conclusion

1. I will hear submission from the parties as to the form of the order subsequent to the received valuation of Mr T being received.

2. If the parties agree that revision by Mr T is not likely to alter the form of the final order, then after receiving those submissions I will give either party liberty to apply for pronouncement of orders.

3. Otherwise the matter will be adjourned until 9:30am on 27 March 2008 for that purpose.

I certify that the preceding one hundred and four (104) paragraphs are a true copy of the reasons for judgment of Baumann FM

Associate: 

Date:  5 June 2008