WASHBURN & PACINI

[2020] FamCA 100

FAMILY COURT OF AUSTRALIA

WASHBURN & PACINI [2020] FamCA 100

FAMILY LAW – PROPERTY – De facto relationship of approximately three years and one month – one child of the relationship – assessment of contributions – where Applicant seeks no adjustment of property interests – Applicant had net assets in excess of the Respondent at the commencement of cohabitation – consideration of factors under s.90SF(3) of the Family Law Act 1975 (Cth) – orders made.

Family Law Act 1975 (Cth) s 90SF

Chorn v Hopkins (2004) FLC 93-204
Trevi & Trevi (2018) FLC 93-858
Stanford v Stanford (2012) 247 CLR 108

APPLICANT: Mr Washburn

RESPONDENT: Ms Pacini

FILE NUMBER: MLC 8134 of 2016

DATE DELIVERED: 6 April 2020

PLACE DELIVERED: Melbourne

PLACE HEARD: Melbourne

JUDGMENT OF: Hartnett J

HEARING DATE: 13-14 February 2020

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr Puckey

SOLICITOR FOR THE APPLICANT: Lander & Rogers

COUNSEL FOR THE RESPONDENT: Mr Nehmy

SOLICITOR FOR THE RESPONDENT: Blackwood Family Lawyers

Orders

1. Within 90 days of the date of these orders (‘the date’) the Applicant pay to the Respondent the sum of $364,557.86.

2. In the event that the Applicant fails to make the payment to the Respondent by the date then the Applicant forthwith do all acts and things required to sell the real property at B Street, C Town in the State of Victoria (“the sale”) and upon completion of the sale, the proceeds of the default sale be applied:-

   (a)       firstly, to pay all costs, commissions and expenses of the sale;

   (b)       secondly, to discharge the mortgage and any other encumbrance affecting the real property;

   (c)       thirdly, such part of the payment that remains outstanding to the Respondent together with penalty interest as prescribed in the Family Law Rules2004 (Cth); and

   (d)       finally, the balance to the Applicant.

3. Unless otherwise specified in these orders and save as may be required in respect of the enforcement of these or any subsequent orders:-

   (a)       the parties otherwise retain absolutely to the exclusion of each other all other personal, business and real assets, furniture and chattels, shares and superannuation in their respective names and in their effective control;

   (b)       the Applicant and the Respondent forgo any claims which they each have to any long service leave, redundancy, retirement, retrenchment and like benefits, belonging to, or earned by the other;

   (c)       life insurance policies remain the sole property of the named owner;

   (d)       any joint tenancy between the Applicant and Respondent in any property whatsoever be and is hereby severed; and

   (e)       each of the Applicant and Respondent be solely liable for, and indemnify the other against any liability:-

   (i)        encumbering any items of property to which that party is entitled pursuant to these orders and/or

   (ii)       in that party’s sole name, including but not limited to, credit cards, loans, lease agreements and charitable commitments.

Note: The form of the order is subject to the entry of the order in the Court’s records.

IT IS NOTED that publication of this judgment by this Court under the pseudonym Washburn & Pacini has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).

Note: This copy of the Court’s Reasons for Judgment may be subject to review to remedy minor typographical or grammatical errors (r 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to r 17.02 Family Law Rules 2004 (Cth).

FAMILY COURT OF AUSTRALIA AT MELBOURNE

FILE NUMBER: MLC 9134  of 2016

Mr Washburn

Applicant

And

Ms Pacini

Respondent

REASONS FOR JUDGMENT

Preliminary

1. These reasons go to the parties’ competing property order applications. After some days of hearing in respect of their parenting order applications, the parties determined to enter into consent orders with respect to the parenting of their daughter Z born … 2014. Those orders are as set out in final orders made 3 December 2019. Those orders include, relevantly, the following:-

   …

   2. The father and the mother have equal shared parental responsibility for the child [Z] born … 2014.

   3. [Z] live with the mother.

   4. [Z] spend time and communicate with the father as follows:

   …

   (d) upon the commencement for [Z] at primary school in 2020:-

   (i) during each school term:-

   A. in each alternate week commencing the first week of the school term in Term 1, 2020, from after school on the last school day before the weekend until the commencement of school the following week;

   B. on each Gazetted Public Holiday, from after school or 3.30pm on the day before the Gazetted Public Holiday to the commencement of school or 8.30am on the day after the Gazetted Public Holiday;

   C. in the case of all pupil free days at [D] Primary School, from after school or 3.30pm on the day preceding the pupil free day to the commencement of school or 8.30am on the day immediately following the pupil free day;

   D. one additional weekend, to be agreed upon and failing agreement nominated by the father prior to the commencement of each school term, from after school on the last school day before the weekend until the commencement of school the following week;

   E. up to 4 times each school term, upon not less than 7 days notice in writing to the mother (to occur on a Monday, Tuesday, Wednesday, or Thursday) from the conclusion of school until 6.30pm on such days and changeover, where it does not occur at [Z's] school, to occur at the mother's residence, and the father shall ensure [Z] attends any pre-planned activity during such time spent.

   (ii) for the whole of the Term 1 school holidays;

   (iii) during each of the Term 2 and 3 school holidays from after school on the last day of term until 12.00pm on the day which is 7 nights before the next school term commences;

   (iv) for one half of the long summer holidays in each year as may be agreed in writing between the parents…

   (The order otherwise provided for special occasion days)

   …

   Schooling

   6.  Each of the parents forthwith do all acts and things to enable [Z] to be enrolled in, and attend at, [D] Primary School for commencement in 2020.

   …

2. What then followed was further litigation in respect of property matters about which the parties could not agree. In essence, the Applicant de facto husband (‘the Applicant’) sought orders that there be no further adjustment of property interests between the parties. The Respondent de facto wife (‘the Respondent’) sought an adjustment of property interests such that she receive, from the Applicant, a sum representing 27.5 per cent of the total net property assets available for division between the parties as calculated by her. In that calculation certain items of property were added back into the property available for division. The Respondent sought further orders in the event the Applicant failed to make payment of any sum ordered by the Court such that the real property situate at B Street C Town in the State of Victoria and registered in the Applicant’s sole name (‘the C Town property’) be sold. Any ordered sale of the C Town property was argued by the Applicant to not result in an order that provided for justice and equity as between the parties.

Background

1. The Applicant was born on … 1963 and is now aged 56 years. He retired to the E Region after the conclusion, in approximately 2004, of his earlier career as a finance professional. He then set about establishing his new career as a sole trader operating businesses of farming and share trading. The Applicant’s businesses are operated on and from the C Town property, it being a property purchased by the Applicant in approximately 1998. The C Town property is also the Applicant’s home. The property has established crops which are sold to another entity owned and operated by the Applicant being F Pty Ltd and/or to other producers. F Pty Ltd is a private company. The Applicant is the sole director and sole shareholder of F Pty Ltd. F Pty Ltd’s primary business is the production and marketing of a product. Otherwise, the Applicant is the sole director and sole shareholder of the private company, G Pty Ltd. G Pty Ltd is an entity which operates investments. The Applicant uses his past experience as a finance professional to operate.

2. Since at least the commencement of the parties’ cohabitation and continuing, the Applicant has declared a net taxable income below any taxation threshold in respect of his income personally, and in respect of his farming and share trading businesses. On his own evidence he has gone to some lengths to avoid the payment of taxation. On occasion he has sought to ‘minimise’, as he described it, any taxation liability by means of diversion of the income earned by his farming business (operated from the C Town property) to undisclosed third party bank accounts. He diverted approximately $160,000 in this manner. His living expenses are paid out of his farming business. So too, obviously, are all the business expenses which include the employment of a farm manager and occasional contractors. The Applicant claims to have a current net income of $195 each week from share dividends and from a family allowance government benefit he receives. The Applicant has not re-partnered.

3. The Respondent was born on … 1977 and is now aged 42 years. She is a professional working on a part-time basis, being 4 out of 5 days of the week. This part-time employment allows the Respondent to spend further time during the working week with the parties’ daughter, Z. Z resides with the Respondent during each of the school weeks. The Respondent’s employment allows her to pay for Z’s support and in part her own support. She and Z are otherwise financially supported in their household by Mr H who is the de facto spouse of the Respondent and step-father to Z.

4. The Respondent retrained (she was, prior to becoming pregnant with Z, working in a business) following separation of the parties and whilst supported by Mr H. She was recently able to obtain her 0.8 position with the J Service. Her income receipt is $1,100 gross each week.  

5. The parties commenced their cohabitation in May 2012, following their engagement in the month before. Prior to that time the Respondent had not had a child. Z is her only child. The Applicant however was the father of three children with three different mothers. His first child, Mr W, was born to Ms K on … 1989. His second child, Mr X, was born to Ms L on … 1989. His third child, Ms Y, was born to Ms M on 26 August 1999. The Applicant has seen little of his sons. Ms Y, his daughter, has a loving and much involved relationship with her father and with Z. Ms Y had a warm relationship with the Respondent prior to the parties’ separation.  

6. In May 2012, Ms Y was 12 years of age. She lived primarily with her mother and was cared for by each of the Applicant and the Respondent on those occasions that she spent time with her father and the Respondent both in Melbourne and at the C Town property.

7. In May 2012, the parties resided in rental accommodation in, firstly, Suburb N and then Suburb O. They each contributed to the rental payments, the Applicant paying approximately two thirds of such payments. The Applicant moved between these rental residences and the C Town property regularly. In March 2014 the parties commenced to reside together in the C Town property. In July 2014 Z was born. On 30 June 2015 the parties separated. Separation occurred approximately three years and one month after cohabitation had commenced.

8. The Respondent left the C Town property to take up rental accommodation in Suburb P. She re-housed herself and Z and re-commenced employment out of financial necessity. Despite Z being then 11 months of age, and breast fed each morning and night, the Applicant sought that he and the Respondent share the care of Z on a week about basis. He did not acknowledge then, and has trouble acknowledging now, that the Respondent was at the time Z’s primary carer and attachment figure. The Respondent agreed to an equal shared care arrangement for Z. I accept that was an agreement that was not satisfactory to the Respondent but urged upon her by the Applicant and occurred in the context of the Respondent being hopeful of a reconciliation with the Applicant. This arrangement was fraught and ultimately required to be judicially determined in June 2017.  By that time the parties had attended upon Mr Q and his expert opinion was available evidence in the then litigation before the Federal Circuit Court of Australia. That attendance upon Mr Q was repeated over the history of the litigation. The interim orders made by His Honour Judge O’Sullivan on 30 June 2017 provided, relevantly, that Z live with each of her parents in a nine night/five night regime in favour of the Respondent. That arrangement essentially continued until the making of the final orders as set out in paragraph one of these reasons. Until the making of those orders, the Applicant continued to seek that Z live with him and attend a school in his geographical vicinity.

Evidence Relied Upon

1. The Applicant relied upon the following material:-

   a)Fourth Amended Initiating Application filed 22 November 2019;

   a)affidavits sworn 30 September 2019, 25 October 2019 and 3 February 2020;

   b)Financial Statement sworn and filed 3 February 2020; and

   c)affidavit of Mr R, Registered Valuer, sworn and filed 3 February 2020;

2. The Respondent relied upon the following material:-

   a)a Further Amended Response filed 18 October 2019;

   b)an affidavit affirmed 18 October 2019;

   c)Financial Statement filed 11 February 2020;

   d)affidavit of Mr H (de facto partner of the Respondent) affirmed 16 October 2019. The evidence of Mr H was not challenged by the Applicant;

   e)affidavit of Mr S, Certified Practising Valuer and Director of T Valuers, sworn 22 November 2019.

3. There was also before the Court as evidence an affidavit (with annexures) of Mr U, Accredited Business Valuer and Director of V Pty Ltd, affirmed 26 November 2019. Mr U was a jointly appointed single expert in the proceedings.

Contribution at Commencement

1. At the commencement of cohabitation the Applicant had been engaged as a sole trader for some seven years. His declared income had been very modest in that time. He claimed to have assets of $1,915,770 owned personally by him; $580,073 being held in F Pty Ltd; and $528,979 being held in G Pty Ltd. A total of $3,024,822 of net assets owned by him.

2. The Applicant did not provide any retrospective valuation of the C Town property to assist in the assessment of his claim as to the value of his assets at commencement of cohabitation. Nor did he provide evidence to establish the then quantum of the mortgage encumbrance over the C Town property. The evidence before the Court was that as at 25 December 2012, some seven months after cohabitation commencing, the Applicant had a National Australia Bank Rural Mortgage encumbrance over the C Town property in the sum of $848,867. Despite the lack of corroborative evidence which could have been put before the Court by the Applicant, the Respondent, during the trial, did not challenge further that the Applicant had approximately $3,000,000 of net assets at commencement of cohabitation.

3. At the commencement of cohabitation the Respondent was working as a manager in a business and earning an income of $55,000 gross per annum. She resided in rental accommodation and had usual household furniture. She had modest assets being a car; cash and investments of $10,000 and modest superannuation entitlements.

4. During cohabitation and on 15 November 2012, the Respondent received as a gift from her father the sum of $60,000. She expended $10,000 of this amount on the purchase of a shareholding; $10,000 on the paying off of a National Australia Bank loan and some Visa card debt; and $10,000 on general living expenses incurred during cohabitation for the benefit of the parties and Z.

5. It is abundantly clear on the evidence and in the concession of the Respondent that the Applicant had net assets far in excess of the Respondent at the commencement of the parties’ cohabitation. 

Contribution - During

1. From the time the parties commenced to reside together they applied their respective income receipts and savings toward their joint living expenses. They supported each other and each contributed to the operations of their household and family unit.

2. During the period of the parties’ cohabitation whilst in occupation of the C Town property, the parties experienced some emotional and financial pressures. The Applicant’s own evidence, following the birth of Z was that he “was working long hours on the farm” and “making major capital improvements such as the construction of an insulated shed to store produce and the construction of a farming implements shed”.[1] Additionally, he was drinking heavily. He also claimed that the Respondent was drinking heavily. Whilst the Respondent does not disagree that she was drinking on occasion, her evidence is that her consumption of alcohol was not excessive as was the Applicant’s and in particular given her need to care for, and breastfeed, a newly born infant. Her evidence is accepted in that regard.

   [1] Affidavit of Mr Washburn sworn 30 September 2019, [371].

3. Whilst the Applicant was mainly engaged outside the home, the Respondent was engaged in the home in the cleaning and maintenance tasks with respect thereto; assisting the Applicant with the operations of his farming business as requested by him, being in a part time capacity during December 2014 and January 2015 (two days each week) and then between February 2015 and March 2015 for three days each week.  Importantly, the Respondent was engaged in the primary care of Z save that in order to work in the Applicant’s business, the Respondent was obliged to place Z in child care (at age seven months) for two days each week. The Respondent received a maternity leave payment of $9,000 and salary from the Applicant’s farming business in 2015 of $200 a day. All the funds received by her were applied by her toward the payment of family expenses for the benefit of the family.

4. Otherwise each of the parties contributed to the general household and cooking tasks, and the Applicant contributed to Z’s care when he was able. Both parties contributed to the welfare of the family in their respective activities. 

Contribution – In The Short Time Post Separation

1. Upon separation the Respondent used the monies remaining from those gifted to her by her father, in the sum of $30,000, to pay the required bond and rental in advance in respect of her new rental premises in Suburb P; other associated set up costs; to pay for legal costs and living expenses. She retained the vehicle she was then driving being a motor vehicle 1 which had been purchased in early 2014 for the sum of approximately $25,000. She had contributed (by the sale of her car) the sum of $4,000 toward its purchase. The balance had been funded by the Applicant through F Pty Ltd. The Respondent, on separation, had also taken with her some items of furniture for the benefit of herself and Z, being furniture not required by the Applicant and of no significant value. She commenced working, in July 2014, for BB Company as a manager in receipt of income and superannuation totalling $72,000 gross per annum.

2. In September 2015, being approximately four months after separation, the Respondent wrote to the Applicant requesting that he transfer to her the sum of $4,000 to assist her in her payment of her relocation costs incurred as a consequence of her departure from the C Town property. The total cost to her was approximately $14,000. The Applicant subsequently made a payment to the Respondent in the sum requested. 

3. In a dispute between the parties in 2016, concerning Z’s care, the Applicant removed the motor vehicle 1 from the Respondent’s possession. That action resulted in the Respondent demanding, during the course of litigation, a transfer of ownership of the vehicle. The Respondent used the vehicle to travel between the C Town property and Melbourne when transporting Z between the parties’ respective residences. The Applicant transferred such ownership in 2016. The vehicle now has a value of approximately $5,000.

Assets & Liabilities

1. The assets and liabilities of the parties are as follows:-

Asset

Value

Applicant’s real property

B Street C Town VIC

(value as agreed between the parties following a conference between valuers Mr S and Mr R)

$1,950,000

CC Street, DD Town

The Applicant has a one-half share interest with a value of $42,500

Applicant’s personal bank accounts

NAB Flexiplus mortgage account #...85

($1,002,389)

NAB Personal Account …22

$11,916

Applicant’s personal shareholding with PP Group

$64,418

Applicant’s businesses

Mr Washburn – sole trader

(a)     farm business plant and equipment as valued by EE Valuers in valuation report dated 22 November 2019 $56,970

(b)     Motor vehicle 2. At cost $81,979 with accumulated depreciation of ($55,821).

But agreed $55,424

Estimated $15,000

G Pty Ltd Pty Ltd

$2,000

F Pty Ltd Pty Ltd

Valued by Single Expert $875,851

Cost to remove and replace plants over 8 years

Valued by Single Expert ($183,000)

Applicant’s net non-superannuation assets  $1,831,720

Respondent’s assets and liabilities
CBA account #...44 and NAB account #..97	$1,107
NAB credit card account #...67	(E$6,150)
CommSec shares account #...53	$896
Motor vehicle 2	$5,000

Respondent’s Net Non-Superannuation Assets  $853

1. G Pty Ltd was valued by Mr U in the sum of $6,612. Mr U adopted a market value of $4,600 for 66,667 FF Ltd shares. Trading in those shares has remained suspended since 12 December 2018. They are not able to be sold.  For this reason the Court accepts that the value of the G Pty Ltd shareholding is $2,000 as argued for by the Applicant.   

2. The Court finds F Pty Ltd has a value as determined by Mr U in the sum of $875,851. The Applicant did not challenge that valuation but argued that the valuation should be reduced by approximately $179,851 to $696,000 on the basis that company bank accounts had been further depleted by the Applicant. He claimed the cash account had gone from $156,554 to zero dollars and that the cheque account had gone from $41,181 to $17,673 at trial. The Court determined to leave the valuation in the sum as determined by Mr U. The Applicant gave no proper accounting or accounting at all as to the application of those funds by him, indeed funds which may well have resulted in an increase in other parts of the business valuation. The Applicant’s removal of those funds from the company accounts was accompanied by a failure by him to provide full and frank financial disclosure to the Respondent as to his then application of such funds. The best and most comprehensive evidence is that provided by Mr U. 

3. The cost to remove and replace the plants in the farm is considered hereafter in these reasons commencing at paragraph 49. The Court accepted the unchallenged evidence of Mr U and rejects the estimate provided by the Applicant during the course of the trial of a cost of $479,995.

Superannuation

1. The superannuation of the parties, for which no splitting order is sought, is as follows:-

Description	Owner	Estimated Value
Super Fund 1 account #...45 at 30 August 2019	Applicant	$20,878
Super Fund 2 account #...85 at 30 August 2019	Applicant	$59,598
Total Superannuation of the Applicant		$80,476
Super Fund 3 account #...89 as at 2 February 2020	Respondent	$61,407

1. The Court notes the parties are content to leave these entitlements with the party to whom they belong. They are reasonably equal and require no further adjustment in the totality of the proceeding.

Add backs

1. The add backs argued for by the Respondent were as follows:-

   a)monies transferred by the Applicant to third party bank accounts - $159,827;

   b)shares claimed by the Respondent unilaterally disposed of by the Applicant post separation - $695,173;

   c)Applicant’s unilateral post separation increase in the mortgage account #...85 from $648,004 to current debt level - $354,385;

   d)wine collection – estimated $80,000;

   e)Motor vehicle 2 – estimated $15,000.

   These matters are dealt with commencing at paragraph 52 of these reasons.

CC Street, DD Town (‘the DD Town property’)

1. Before the Court (‘Exhibit A8’) was unchallenged single expert valuation evidence as to the valuation of the DD Town property as at 6 February 2017. Neither party sought a more current valuation. Both parties accepted that the land’s value had not altered.

2. The property is an unencumbered vacant native bushland of 2.99 acres approximately. The valuation report of Mr S of T Valuers provided a valuation of $85,000. The Applicant has sole proprietorship as to a 50 per cent share of the said property. Thus the value of his interest is $42,500. The remaining 50 per cent ownership of the property is held by a Mr FF who in all likelihood is deceased. His last known place of residence was at HH Sanitorium in 1950.

3. The property is zoned as a “Green Wedge Zone” with two overlays being a “Wildfire Management Overlay” and being a location affected by one or more areas of local cultural heritage sensitivity as described in the Aboriginal Heritage Regulations 2007 (Vic).

4. The Respondent has no desire to purchase the interest of the Applicant in this property. The Applicant would willingly transfer it to the Respondent for value. The Respondent argued for inclusion of the asset on the Applicant’s side of the ledger. The Applicant opposed this. He pointed to the evidence on page 11 of Mr S’s valuation which was as follows:-

   In our opinion, it may be virtually impossible to obtain a Planning and/or Building Permit from the [GG] Council to build any proposed new residence on the subject property.

   …

   Note: In our opinion, the combination of “Green Wedge Zone – Schedule 4 (GWZ4)” plus both Bushfire Management & Aboriginal Heritage Overlays being a mix of less desirable zoning/overlays that would place severe restrictions on obtaining a Planning permit and/or approval of Building Permit plans for any new residence by the local [GG] Shire Council so as such it would be extremely difficult to seek use of the property to build a new residence. In addition with only a 50% share held by [the Applicant] and according to the attached copy of Title, it may prove difficult to find a surviving beneficial owner for the other part 50% share in the subject property so as to be able to obtain a clear Title ownership for resale purposes.

   (emphasis omitted.)

5. The Applicant inherited his 50 per cent share of the land from his father and in October 1987. That was some 25 years before the parties commenced their cohabitation. No improvements to the property have been carried out at any time. Minimal annual rates have been paid with respect to the property, certainly inconsequential sums during the parties’ cohabitation.

6. The Court accepts the evidence of the Applicant as to his attempts to locate those who may have inherited the other half share of the property, and his attempts otherwise to deal with the land in some way, including in respect of its ownership by way of adverse possession, to make the holding of it achieve some value. To date that has not been possible.

7. The Court determines that given the above circumstances, this asset should be considered in isolation and remain without alteration such that no payment be made to the Respondent in respect of the Applicant’s interest in same. During the parties’ relatively short period of cohabitation, the Respondent made no contribution of any kind to this long held asset of the Applicant. Nor has she since. Added to that is the current, and perhaps continuing inability of the Applicant to sell and/or improve the property in any way, including fundamentally by building a structure on it. With no clear title held by the Applicant his prospects of selling this property are further diminished. For all of the above facts and reasons this asset should remain in the part ownership of the Applicant without an accounting to the Respondent in respect of such ownership.

Evidence of Mr JJ

1. Mr JJ’s evidence was unchallenged by the Respondent. Mr JJ is a Consultant who has attended upon the C Town property, in a professional capacity, on a number of occasions since 2015.

2. On 27 December 2018, Mr JJ observed some of the Applicant’s crops to be in the early stages of an infestation. On 18 January 2020, he attended the C Town property in company with the Department of Agriculture Victoria to observe their testing in relation to possible infestation in the crop. At that time an infestation was observed to be present.

3. The detection of the infestation in some plants makes inevitable its spread to “all plants grown on own roots”.[2] Thus the Applicant will be required, over many years, to remove his existing plants and replant progressively on American rootstock. This replacement program Mr JJ estimated in terms of lost production and additional costs to the normal costs of operating the farm on a per hectare basis. The lost production estimates were considered and adopted by Mr U in his report of 25 November 2019, as referred to hereafter. The additional costs to the normal costs of operating the farm were considered and adopted by Mr U in his correspondence of 14 February 2020, as referred to hereafter.

   [2] Affidavit of Mr JJ sworn 13 February 2020, 5.

Evidence of Single Expert, Mr U

1. Mr U’s evidence was not challenged in cross-examination of him, by either of the parties.

2. Mr U is an Accredited Business Valuer and Director at V Pty Ltd. He was engaged jointly by the parties as a single expert to assess the current value of the entities owned and operated by the Applicant. Mr U, in his report, did not assess the value of the Applicant’s personal share trading activities.

3. Mr U prepared a report dated 25 November 2019 which was in evidence before the Court. He also replied to correspondence subsequently sent to him (without the Respondent’s knowledge or consent) from the Applicant, dated 30 January 2020. Mr U’s reply is dated 14 February 2020. Ultimately the Respondent agreed to allow into evidence the correspondence of the Applicant dated 20 January 2020 and of Mr U dated 14 February 2020.

4. Based on the net assets methodology, Mr U assessed G Pty Ltd as having a net asset value of $6,612. This has already been considered in paragraph 26 of these reasons. 

5. Due to lack of profitability, the capitalisation of maintainable earnings methodology was determined by Mr U to be unable to be applied to assess the value of F Pty Ltd. Mr U concluded that a net assets method was an appropriate methodology to value F Pty Ltd. The main assets of F Pty Ltd as at 30 June 2019 were inventory (work in progress of $193,598 and finished goods of $483,607 as stated in the balance sheet) and a cash account of $156,554.

6. Mr U assessed the value of F Pty Ltd’s net assets to be $875,851. His evidence was not challenged.

7. In his report, Mr U expressly adopted the additional costs per hectare of operating the vineyard (as a consequence of the detection of phylloxera) as estimated by Mr JJ.[3] Those costs were estimated for removing and replanting the plants. Mr U assumed that one hectare per annum (of the vineyard of 4.4 hectares) would be remediated over eight years with the final year being only 0.8 hectare. Accepting the costs per hectare based on the information provided by Mr JJ, Mr U’s opinion was that a total cost of $47,904 would be incurred each year starting from year one for the first hectare. In year two, a total cost of $47,904 for the second hectare plus $4,761 would be incurred and in year three there would be a further cost (additional to the $47,904) of $1,190. The remediation would be complete in year eight. Mr U then applied an individual tax rate of 30 per cent as the farming business was under Mr Washburn sole trader and thereafter applied a discount rate of 5.23 per cent.[4] Mr U assessed the current value of the total costs for removing and replanting over eight years to be approximately $183,000. The Respondent accepted that the Court could include this liability in full at this time albeit that such costs shall be incurred over an eight year period, and not immediately.

   [3] Report of Mr U dated 25 November 2019, 19 [10.4]

   [4] Per Reserve Bank of Australia lending rates for small business, variable, weighted average rate on credit outstanding as of September 2019.

8. In his correspondence of 14 February 2020, Mr U indicated his belief that the lost production figures of 7381 kg/ha in years one and two and 1190 kg/ha in year three as estimated by Mr JJ “would provide a reasonable basis for estimating lost production”. The value of the lost production as determined by Mr U was the net present value of the margin that would have been earned on the production as costs will be avoided by not having a crop. As a minimum the costs avoided would be the harvesting costs. Mr U however did not have sufficient information provided by the Applicant to assess the value of the production losses arising from the replanting required to deal with phylloxera. Additionally, Mr U noted the non-profitability currently of the farming business (it had a nil value as determined by Mr U) and stated in that context that:-

   …reduced production on account of the infestation will further reduce profitability and hence the [farming] activity is unlikely to generate any taxable income in the foreseeable future. However should Mr Washburn generate taxable income from other sources, the losses from the [farming] activity may be able to be offset against such other income.[5]

   [5] Exhibit ‘R7’ at [6.2].

9. The Applicant sought at trial to provide his own estimate as to the cost described by the unchallenged single expert. He sought this amount be in the sum of $479,995 despite the current nil value of the farming business. The best evidence before the Court was that of the expert which is accepted by the Court.

Consideration of “Add backs”

1. The Applicant’s diversion of income in the sum of approximately $160,000, for which the Respondent argues there should be an ‘add back’, is already for the most part in the asset pool available for distribution. Those monies were returned to the Applicant’s accounts after the Respondent discovered what was occurring. The Applicant then applied approximately $28,000 of those funds to a renovation of a part of the C Town property. Otherwise the remaining funds he transferred to reduce the mortgage secured by the C Town property with some small amount applied to his living expenses. The monies were declared to Mr U for his valuation purposes. Whilst dishonest, and raising the issue of whether the Applicant is a credible witness when considering his evidence as to his financial position, those funds have already been returned to the pool of assets.

2. The Applicant traded in shares and his evidence is that he acquired same through margin lending and loan accounts. Around separation he had a $695,000 shareholding that he no longer has. He has, on his evidence, used the funds obtained to pay off the debt borrowed to secure such shareholding; to reduce the mortgage at various times; to pay for capital losses on the farming property; to pay living expenses; and to pay some of his legal fees as described below. There is again a failure by the Applicant to fully disclose the precise application of these funds. In particular, the Court is not able to determine what part of those monies went to the payment of legal fees and to consider such monies in a Chorn v Hopkins (2004) FLC 93-204 manner (see paragraph 54 hereafter) and/or as a s 90SF(3)(r) of the Family Law Act 1975 (Cth) matter. However, there is no evidence that the Applicant unilaterally disposed of his shareholding. His financial circumstances and those of his companies is such, and has been such, that the monies expended by the Applicant on his living and capital expenses must in fact have in part been sourced in the surrender of the shareholding. The Court does not consider it appropriate to ‘add back’ any of this sum but is mindful, when looking to s 90SF(3)(r) of the Act, that the Applicant has had some part of his legal fees paid through this source.

3. The Applicant has used $354,385 of mortgage funds additional to some of his share sales proceeds to pay his legal fees. He has paid fees in excess of $456,695 to Lander & Rogers and $46,560 to OO Lawyers (total $503,255). Additionally, he has accrued further legal fees to Lander & Rogers of at least $230,311. The sum of $354,385 shall, in the exercise of the Court’s discretion, be notionally added back to the asset pool. This is the sum sought by the Respondent. The primary authority for the add back of legal fees is Chorn v Hopkins (2004) FLC 93-204. In this case those legal fees were paid from a source which would otherwise have been property of the parties. The adding back (notionally) of these legal costs was re-confirmed by the Full Court of the Family Court of Australia in Trevi & Trevi (2018) FLC 93-858 wherein His Honour Justice Murphy, with whom Alstergren CJ and Kent J agreed, said that the principles in Stanford v Stanford (2012) FLC 93-578 were not offended (at [47]) by the add-back of the wife’s legal fees:-

   47.      The essence of a claim for addbacks is that the asserted sum/s should be added to the value of the existing property interests of the parties and, subsequent to the assessment of contributions, credited to the spending party as part of the value of their assessed entitlements.  Doing so does not offend what was emphasised by the High Court.  Adding back does not seek to create property interests that do not exist.  Rather, doing so emphasises that satisfying the respective requirements of ss 79(2) and (4) of the Act to do justice and equity can require an “accounting” or “balance sheet” exercise for the purposes of s 79(2) and (4), so as to include the value of the dissipated property or expended sums within the total value of the parties’ existing interests in property, and to credit the value of same against the assessed entitlement of the dissipating or spending party.

4. The Court accepts the Applicant’s evidence that the wine collection of the Applicant has now been consumed by him. Some years have passed. The $80,000 valuation figure the Court also accepts was an inflated figure provided by the Applicant when he thought the parties would enter into a Binding Financial Agreement. That suited him then, but does not now. He freely admits the gross inaccuracy of a figure earlier asserted by him. Again it goes to his unreliability when discussing his financial circumstances and the inability of the Court to accept certain matters as asserted by him. There is no evidence however on which the Court could conclude to the necessary standard of proof that either the asserted wine collection still exists or that it has a value as estimated by the Respondent. Her estimate is based on the inflated value earlier provided to her by the Applicant.

5. The Applicant has one motor vehicle - a Motor vehicle 2 which forms part of his personal assets. It is included in the asset pool at the estimated value of $15,000, its value after depreciation being currently $26,158.

Section 90SF(3) of the Act Matters

1. On 17 December 2017, the Respondent and Z commenced to cohabitate with Mr H in rental accommodation in Suburb KK. Following Mr H’s purchase of real property in Suburb LL in January 2019, the Respondent, Mr H and Z moved into the property. They continue to reside in that accommodation. The Respondent is now in receipt of income as described earlier in these reasons and receives the support of her de facto husband Mr H. Mr H is a professional employed by MM Company as Regional Manager. He earns an average weekly income of $9,450. The home in which the Respondent and Z reside was purchased solely by Mr H and all payments in respect thereto are made by him. These include the mortgage encumbrance and rates for the property together with the payment of all utilities. Mr H is also the father of two sons. He makes a significant contribution to their support, both financial and emotional.

1. The Applicant is in receipt of income which, on the evidence, is in a sum not able to be quantified with any degree of certainty. His Financial Statement refers to an income amount of $195 each week and an expenditure amount of $1,390 each week. There is a large weekly shortfall in his income viewed through the prism of his expenditure which is not adequately explained by him.

2. The Applicant and Respondent shared their daughter’s costs in the first 12 months following separation. That resulted in the Applicant paying to the Respondent the sum of $1,400 a month towards Z’s care. That arrangement then ceased in July 2016 at the Applicant’s instigation. Since that time, being a period of over three and a half years, save for a very recent contribution by the Applicant of $200 toward Z’s school expenses, the Applicant has made no payment of child support to the Respondent in respect of her care of Z. His evidence is that no child support assessment has been sought by the Respondent and further that he could not afford any payment were payments sought. I accept the evidence of the Respondent that she has not sought assessment and collection of any child support amount because she considered and considers that a futile course. The Applicant’s income would produce no assessed amount in particular where he has already engaged in covert behaviour designed to avoid the payment of income tax as described in these reasons. The Respondent has not been prepared to date to seek any departure from any anticipated assessed amount of zero dollars. Any such action would result in further legal costs and likely further non-disclosure by the Applicant as to his true financial position. Otherwise, the Applicant pays for Z’s expenses when she is in his care.

3. The Respondent estimates that her payment of expenses for Z from her receipt of income is approximately $700 each week. If there occurs a shortfall, then Mr H meets that cost. These costs do not include the accommodation expenses of Z which are paid for by Mr H.

4. The Respondent has borrowed a very substantial sum to fund this litigation. She has had a loan advanced to her by her father, Mr NN Pacini. It is in a sum of approximately $419,000.

5. The Respondent has a small amount of savings, an approximate $896 shareholding, and a modest motor vehicle with a value of approximately $5,000. She has a credit card liability of approximately $6,150 and an interest free loan advanced to her by Mr H which she has commenced to repay at the rate of $69 per week. The loan amount was $15,000 advanced in January 2018. The loan was necessary to pay down the Respondent’s then credit card debt.  The amount now outstanding is approximately $14,400.

6. The Applicant has expended considerable sums since separation, not all accounted for. He continues to invest in his farming business and is able to fund his comfortable lifestyle through his various businesses.

7. In respect of the above matters and in particular the care of Z and necessary payment of her expenses in far greater part by the Respondent there should be a further adjustment, additional to the contribution adjustment, set out below (paragraph 66), to the Respondent of seven per cent.

Conclusion

1. The total net assets of the parties, excluding the DD Town property and including the notional add back of the mortgage monies as described in paragraph 54 above is in the sum of $1,832,573 - $42,500 = $1,790,073 + $354,385 = $2,144,458.

2. The contribution adjustment significantly favours the Applicant. It should be an apportionment of 90 per cent/10 per cent in the Applicant’s favour. To that should be added the adjustment in favour of the Respondent as set out in paragraph 64 above.

3. This results in a payment from the Applicant to the Respondent of $364,557.86 which represents 17 per cent of the total net and notional assets.

4. The Court determines that in the circumstances described above it is just and equitable to make orders which provide for an alteration of the parties interest in property in the percentage described above.

5. It is a matter for the Applicant as to how he funds the payment due to the Respondent. It would not be just and equitable as between the parties to exclude a sale of the C Town property to effect the necessary settlement.

I certify that the preceding sixty-nine (69) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Hartnett delivered on 6 April 2020.

Associate: 

Date:  6 April 2020