WESTON and WESTON
[2012] FCWA 24
•23 MARCH 2012
JURISDICTION : FAMILY COURT OF WESTERN AUSTRALIA
ACT : FAMILY LAW ACT 1975
LOCATION :
CITATION : WESTON and WESTON [2012] FCWA 24
CORAM : MONCRIEFF J
HEARD : 28 & 29 NOVEMBER 2011 & WRITTEN SUBMISSIONS
DELIVERED : 23 MARCH 2012
FILE NO/S : PTW 2126 of 2010
BETWEEN : WESTON Applicant Wife
AND WESTON
Respondent Husband
Catchwords:
FAMILY LAW - property - initial contributions - wilful misconduct by party and accountant - non disclosure
Legislation:
Family Law Act 1975 (Cth) s 79
Category: Not Reportable
Representation:
Counsel:
Applicant : Mr R Bannerman
Respondent : Dr A Dickey QC
Solicitors:
Applicant : Bannerman Solicitors
Respondent : Ruby & Associates
Case(s) referred to in judgment(s):
Hickey & Hickey and the Attorney-General for the Commonwealth (Intervener) (2003) FLC 93-143
Kannis and Kannis (2003) FLC 93-135
Khademollah and Khademollah (2000) FLC 93-050
Pierce and Pierce (1999) FLC 92-844
Rosati & Rosati (1998) FLC 92-804
Weir and Weir (1983) FLC 92-338
(Page 3)
WORDS IN SQUARE BRACKETS REPLACE WORDS USED IN THE ORIGINAL JUDGMENT - PARTIES’ NAMES AND IDENTIFYING DETAILS HAVE BEEN CHANGED
1 [Ms Weston] (“the wife”) and [Mr Weston] (“the husband”), the parties to the
proceedings, have been unable to reach agreement about how to resolve financial issues between them as a consequence of the breakdown of their relationship following their separation in March 2010.
2The husband and wife were married in [a country town M] on 5 March 2006 having commenced living together in either late September or early October 2003.
3They separated in March 2010 although the wife continued to reside in a separate dwelling on the former matrimonial property until May 2010 after which she left the property to reside elsewhere.
4There were no children of the parties’ relationship although the wife has two children of a prior relationship, namely [Evelyn] born [in] May 1992, now 19 years old but 11 years old at the commencement of the parties’ cohabitation and [Stephen] born [in] July 1996, now 15 years old and 7 years old at the commencement of the parties’ relationship.
5Evelyn and Stephen spent time equally with their mother, the wife, and their father [Mr K], the wife’s former husband, following their separation and continuing during the relationship of the husband and the wife in these proceedings.
6At trial the dispute between the parties had narrowed significantly. The pool of assets available for distribution between them was largely agreed. The most significant area of disagreement between them was the treatment of a capital gains tax (“CGT”) liability arising from the sale of property and the assessment of the parties’ respective contributions to the pool of assets.
7There were several minor issues relating to the asset pool to which I will refer further in these reasons.
8Another outstanding issue for consideration was the treatment of carried forward tax losses in the parties’ family trust, which, it is common ground, the husband will retain and derive the full extent of any available benefit therefrom.
9A further issue that needs to be considered is whether or not there should be any adjustment made for the factors prescribed in s 75(2) of the Family Law Act 1975 (Cth) (“the Act”), having regard to the circumstances surrounding the conduct of the litigation.
The applications
10 In her application initiating proceedings the wife had sought orders that:
1.The assets of the parties be divided in such proportions to be specified by the wife within 28 days of the husband providing full disclosure.
2.The husband pay the wife’s costs of and incidental to the application.
11 Although the wife did not formally amend her application, her position at the commencement of the trial was as specified in her papers for the judge, seeking orders the effect of which was to divide the asset pool equally between the parties.
12 In his response to the application initiating proceedings the husband sought orders:
1.Within 35 days of the publication of orders the husband shall pay to the wife a sum to be quantified upon full disclosure being provided by each of the parties which sum shall be quantified as representing
50% of the matrimonial assets less the value of the assets she has retained.
13 At trial, again without amendment to the response, the husband’s position had shifted significantly in that he was seeking a percentage division of the assets of the parties between them “in the proportions 65 per cent to the husband and 35 per cent to the wife”. In other words the husband had changed his position from seeking equality to seeking a 30 per cent differential between the outcomes for the parties.
14 In written submissions filed on his behalf by one of her Majesty’s counsel Dr Dickey, the husband’s position had changed in that he was seeking an outcome that would settle 60 per cent of the assets on him and 40 per cent on the wife, namely a
20 per cent differential between them.
15 In the conclusion of the matter neither party ultimately sought any variation to a contribution based percentage outcome reliant on the factors prescribed in s 75(2) of the Act or what are frequently described as the “future needs” factors. Rather the wife sought an adjustment in her favour based on the husband’s want of disclosure and conduct in the proceedings. It was her submission that his conduct left a degree of uncertainty over the financial position of the husband and that his conduct should be considered a factor under s 75(2)(o), namely, “any fact or circumstance which, in the opinion of the court, the justice of the case requires to be taken into account”.
16 It was common ground that the husband would retain the former matrimonial home property situated [just outside country town M] in the State of Western Australia.
The Law
17 The approach to be taken by a court in dealing with a dispute such as this is well settled and is that set out in Hickey & Hickey and the Attorney-General for the Commonwealth (Intervener) (2003) FLC 93-143.
18 Firstly, the Court must identify the pool of assets available for distribution between the parties.
19 Secondly, the Court must make an assessment of the parties’ respective contributions to the property available for distribution. Contributions can be financial, either direct or indirect, non financial and as a homemaker and parent.
20 Thirdly, the Court must identify any of the factors prescribed under s 75(2) of the Act that are relevant to the circumstances of the parties and if the circumstances of the parties warrant an adjustment to the outcome achieved through the Court’s determination based on contributions.
21 Finally, the Court must then assess the outcome arrived at as a result of the first three steps and determine whether that outcome produces a result that is just and equitable in all the circumstances of the matter.
The evidence
22 In her case the wife relied upon her affidavit of evidence filed on 23 June 2011 together with her statement of financial circumstances filed on the same day. She relied on witness affidavits of [Mr R] filed on 23 June 2011, [Ms C] filed on 23 June
2011 and [Mr N], accountant, filed on 11 July 2011.
23 Mr R was ultimately not required for cross-examination however the wife, Ms C
and Mr N were cross-examined.
24 The husband relied on his affidavit and statement of financial circumstances both filed on 6 July 2011 and an affidavit of [Mr B], also an accountant, filed on
17 October 2011.
25 Both the husband and Mr B were cross-examined.
26 The trial proceeded over two days before me in a country town M and at my request at the close of the first day, Mr N and Mr B conferred in an endeavour to resolve some outstanding issues relevant to the CGT liability, each of them having been called to adduce expert evidence. Mr N had commenced his evidence prior to conferring with Mr B and concluded the same on the following day.
27 At the conclusion of the evidence the matter was adjourned to enable the parties to file written submissions.
28 The wife and her witnesses presented in a highly credible manner. The wife made appropriate concessions against her interests and in my finding endeavoured to be fair, she gave her evidence truthfully and to the best of her recollection.
29 The evidence of Ms C was not seriously challenged and was directed primarily to the date of which the parties commenced their cohabitation. I accept her evidence.
30 Mr N is a chartered accountant at [ABC Accounting] and was a most impressive witness. He gave detailed and thoroughly considered evidence about the assessment
of CGT and of the options available to lawfully defer and reduce the liability for CGT and to ultimately reduce the same to nil. He impressed me as a witness who was highly expert in his field however was cautious to express an opinion without having fully considered the same and satisfied himself that the advice that he was giving was correct. He was also prepared to revise his opinion when presented with other factors that had not been previously considered. His presentation was commensurate with his expertise and he gave his evidence in a thorough, considered, credible and professional manner.
31 The difference between the presentation of the wife’s case and the husband’s case could be likened to the difference between “chalk and cheese”. The husband was a most unimpressive witness who adopted a posture that was not helpful to his case with answers to counsel in cross-examination such as “if you say so”. He was determined in my finding to minimalise any contribution made by the wife and if confronted with a proposition where he could not avoid acknowledging a contribution made by the wife he would seek to minimise it or explain it away, or simply tell an untruth.
32 Claims made by the husband, for example that he had paid cash direct to suppliers, were not put to the wife. Nor were claims that he had sold a coolroom for which he got the receipts “last night”, that is, after the first day of the trial and asserted that “the documents are at home”, on the second day of the trial. Further, claims that he discussed certain matters with the wife also were not put to her, with the husband ultimately acknowledging that he had not instructed his lawyers to that effect.
33 Post-separation the wife’s Mercedes motor vehicle was put on blocks and had its wheels removed. The explanation from the husband was “somebody else did it”, yet despite the intrusion to the property and the potential damage to the vehicle the husband did not report the matter to the police. Similarly other vehicles were rendered unusable at times when the wife wished to use them. The husband’s answer being that he was affecting maintenance to ensure their safety, a proposition I consider to be nothing more than a shallow lie. Similarly, allegations that the wife had removed funds from ATMs and by way of EFTPOS transactions remained unproven with appropriate statements or evidence that the husband would have easily been capable of adducing, had the proposition had foundation.
34 I have significant reservations about the frankness of his disclosure, to which I refer later in these reasons, and his frankness overall to the Court about his post- separation dealings, the way in which he has treated the wife’s chattels post-separation and his representations about his financial position, in particular his liability for CGT, which, for the reasons I set out below, I consider were contrived with a view to misleading the wife, her advisers and ultimately the Court.
35 The husband was aided and abetted in the appalling presentation of his case by his accountant, Mr B. At times Mr B’s presentation, which was generally aggressive, defensive and inappropriate, led me to wonder whether he had any professional competence whatsoever. Overall I was left with the impression from Mr B’s evidence that he was either utterly incompetent as an accountant or had contrived, to the benefit of the husband, to misrepresent taxation liabilities supported by calculations that were incompetent and simply wrong. Mr B practises as an accountant and has advised the
husband throughout and it was the husband’s evidence “that I always take my accountant’s advice”, although I am left with little doubt that the husband was more than happy to have his accountant attempt to pull “the wool over the eyes of the wife”.
36 The husband’s evidence was in conflict with that of Mr B in several material areas relating to disclosure, namely, as to the preparation of Business Activity Statements (“BAS statements”), where the husband asserted that their preparation was Mr B’s responsibility and Mr B the opposite, the timing of the preparation of “draft” taxation returns and the commencement of the husband’s new business. In any event I do not believe either of them.
37 If it were the case that Mr B was simply extraordinarily incompetent in his calculation of the CGT liability, then a further potential argument arises on behalf of the wife by way of contribution that she has made to the enhancement of the asset pool by challenging Mr B’s calculations of CGT and effectively returning to the asset pool some $917,537.50.
38 However, for the reasons appearing hereunder, I consider it more likely that the husband and Mr B acted in consort to attempt to create an impression of an inflated liability, which I have no doubt would have been intended to be ultimately returned to the hands of the husband.
39 At any point and over any issue, unless I specify otherwise in the course of these reasons, I prefer the evidence of the wife and her witnesses at any point of conflict with that of the husband and Mr B.
Background
40 Each of the parties resided in a country town M.
41 They met in the middle of 2003 and in my finding commenced to live together shortly thereafter.
42 Although the husband suggests that the parties did not commence living together until 2004, the wife asserts that the parties in fact became engaged in 2004 and supports her assertion with a copy of a valuation certificate prepared by the jeweller who made the wife’s engagement ring. The valuation is coincidental in time with the wife’s assertion whilst the husband was not even prepared to concede that the parties became engaged.
43 The parties married in country town M on 5 March 2006.
44 At the time that the parties commenced living together the husband owned a
25 acre property [on M town] Road, also referred to as [W] Road, in [a country town S], some 4 kilometres from the centre of country town M. At the time of his purchase it was vacant land.
45 A retrospective valuation was prepared for the property as at 1 July 2004 which placed its value at $450,000, however the valuation post dates the parties’ cohabitation by almost a year and is of little evidentiary value, other than to demonstrate that the
property, which had been acquired prior to the parties’ cohabitation in the sum of
$200,000 had increased by some in undetermined amount, in all probability, by the time the parties commenced cohabitation.
46 At the time of cohabitation the husband was working on a two on one off swing for [a transport company] at a mine in the [a country town D] area.
47 In 2004 the husband commenced work locally in a country town M.
48 The parties cohabited in a property owned by the wife in a country town S, the house on which the wife had built in late 2001 early 2002.
49 In September 2003 the wife purchased a further plot of land being a two and a half acre block that backed onto the property she already owned.
50 The wife and her children had a significant interest in horses and it was her intention to provide the additional area for horses.
51 The other assets that the wife brought to the relationship were a 2000 model Ford car, an extended double horse float and some horses. Although the wife nominates values for these items, they are at best her estimation.
52 At the time of cohabitation the wife was employed as a clinical nurse at the country town M Hospital working eight shifts per fortnight and generating an income of approximately $42,000.
53 The husband had his property at W Road, subject to security for the borrowings he had made to facilitate the purchase, the balance of which was approximately
$176,000 at the time the parties commenced cohabitation. There was no residence or other improvements completed on the property at the time of cohabitation and prior to cohabitation the husband had been living with friends.
54 In August 2002, that is prior to the parties’ cohabitation, the local shire issued a building permit for the husband to develop commercial premises on the country town S property. He asserts and it is not controversial that the permit was subject to a number of conditions being met, which were satisfied over the following 3 years. He had also applied to subdivide the property and the subdivision was completed in 2004 creating 2 lots, namely [Lot X], a country town S consisting of approximately 23 acres and [Lot Y], a country town S consisting of approximately 2.5 acres.
55 In early 2004 and coincidental with the husband seeking employment locally in a country town M development commenced on Lot X. The husband’s view was to build a commercial premises that could be used as a café and delicatessen business and would incorporate 3 bedroom accommodation.
56 The building work commenced in April 2004 and the husband acknowledged that at that time he ceased his employment in the mines thereafter working as a truck driver for [a company] in a country town M which enabled him to oversee the building development on Lot X.
57 In May 2005 the wife sold her country town S property and in August of that same year sold the additional lot. The proceeds of sale of the original property were utilised to discharge the mortgage, which had been increased to acquire the vacant land.
58 The proceeds of sale from the vacant land of approximately $118,000 were utilised for the benefit of the parties, subject however to the wife incurring a CGT liability on the sale of the vacant land.
59 The available net proceeds of the sale of the vacant land were applied towards the improvement of Lot X.
60 In July 2005 the parties commenced operating a café and delicatessen known as “[The W Café]” from the improvements undertaken to Lot X. The café was operated through a trust known as [the Trust], which traded as [W P Convenience Store].
61 Subsequent to the sale of the wife’s property the parties and the wife’s children thereafter commenced to reside in the café accommodation.
62 In October 2005 the husband was required to complete the conditions of approval for the construction and commencement of the business in particular bitumen sealing the car park to the café. The café had been operating since July, notwithstanding the failure to comply with this condition.
63 It would appear there was some urgency in the completion of this condition however the husband was unable to secure additional funds to enable the work to be undertaken.
64 The parties then entered into an arrangement where the land in Lot Y was sold to the wife for $90,000. Based on her income she was able to secure borrowings of
$90,000 which sum was paid to the husband and utilised for the completion of the required conditions and any balance remaining I accept was utilised for joint purposes.
65 The borrowings taken by the wife to secure the purchase of Lot Y were ultimately met by income generated through the business.
66 The wife sold Lot Y in September 2006 at a substantially increased price over purchase of $255,000, yet again incurring a CGT liability. The assessment of capital gains of approximately $90,000 was met by borrowings from Great Southern Finance. The parties had been advised by their accountant, Mr B, to invest in [a business venture]. The liability was ultimately discharged upon the sale of Lot X to which I refer later in these reasons.
67 During the time that the café was being built and the property being developed each of the parties continued working in their respective employment to meet the mortgage commitments that had been undertaken to finance the project.
68 The husband ceased working shortly prior to the café being completed and opened in July 2005. The café opened 7 days a week from 3.00 am to 6.00 pm. The husband worked full-time in the café business and the wife continued to work 48 hours
per fortnight at the hospital and I accept her evidence that she was otherwise employed in the business or engaged in the running of the household in support of the business.
69 In May 2006 the parties purchased jointly a 110 acre property [the former matrimonial home outside country town M] for the sum of $450,000. They borrowed the entire purchase price and then borrowed a further $600,000 to complete the building of a house on the property.
70 Infrastructure improvements were undertaken on the property also to accommodate horses and farming plant and equipment was acquired.
71 The parties commenced to reside [at the former matrimonial home just outside country town M] in 2006 in an existing old cottage on the property whilst the home was built, being completed in 2009.
72 The parties operated a horse agistment business on the property through a partnership styled [M & N] trading as [EQ].
73 In addition to running the horse agistment business the parties grew and cut hay on the property for use for the horses and also for sale.
74 In September 2006 the café was placed on the market for sale.
75 The wife deposes to the fact that the parties were planning to subdivide the property into 3 semi-rural blocks with the idea of retaining two of the blocks for their own purposes.
76 There was no interest in purchase of the property from any parties, however in June 2007 an approach was made by a company [RMT Pty Ltd (“RMT”)] to purchase the entirety of Lot X for the sum of $3,500,000. RMT wished to turn the property into a commercial business park and demolish the café.
77 The purchase was conditional upon certain approvals being granted and there were significant delays in the completion for the contract utilised in obtaining the approvals.
78 The contract was renegotiated and some “good faith payments” made along the way with the final sale price being the sum of $4,105,000 with the sale settling on
6 August 2010, some 5 months after the parties’ separation.
79 There had been disharmony between the parties following their separation, which led the wife to commence proceedings in the Family Court of Western Australia to secure her position and any proceeds of sale arising upon the completion of the contract of the sale with RMT.
80 On 21 April 2010 orders were made by Magistrate Fleming firstly requiring the husband to do all necessary things and sign documents required to complete the sale, the allegation being made by the wife that he was threatening to pull out of the sale and further orders were made with an injunction restraining the husband from “dealing with, disposing, alienating or otherwise interfering with the sale proceeds of the property other than to pay any settlement costs, to pay any adjustment of rates and
taxes and to place the balance in an interest bearing trust account in the joint names of the parties pending the written agreement of the parties or order of the Court”.
81 Similarly the husband was restrained and an injunction was granted restraining him from selling, disposing, alienating, gifting or otherwise dealing with any assets of the parties other than in the normal course of business unless with the wife’s prior written consent or an order of the Court.
82 Upon the sale of the property the husband particularises certain payments as having been made as follows:
(a) Bendigo Bank NW (former Great Southern Finance loan) $87,128.84 (b) Mercedes Financial Services (loan for Mercedes motor vehicle) $85,321.15 (c) Toyota Finance (loan for Yaris motor vehicle) $11,654.00 (d) Capital Finance (loan for F250 utility) approx $33,169.00 (e) John Deere Financial Services – Grassfarmer seeder $7,139.82 (f) John Deere Financial Services – JD Mower $6,863.25 (g) My Bankwest MasterCard $7,631.00 (h) Bankwest MasterCard $8,849.47 (i) ANZ loan $9,966.74 (j) Go MasterCard $7,425.55 (k) Elders – shop insurance $271.68
(l) Elders – new business tax $970.52 (m) Brownes or Kiwi Dairy Supplies $1,989.38 (n) Paper Point (Newspaper Delivery Co) $894.88 (o) Miles Glass $1,852.00 (p) Heytesbury Stud $3,960.00 (q) Coca Cola Amatil $2,020.26 (r) [K Bakery] $1,480.40 (s) The West Australian Newspaper $1,028.90 (t) Baycorp $2,441.00 (u) S&K Electrical $235.40
(v) Western Independent Foods $32,265.73 (w)
[Country town M] rates
$1,361.78
(x)
Synergy
$3,984.80
83 There is some dispute about the extent of the liabilities having been properly incurred given the want of disclosure by the husband, to which I refer later in these reasons and his assertion that he was paying suppliers in cash.
84 Subsequent to the separation the husband has commenced a trucking business operating as a sole trader under the business name [True Haulage] and has acquired a Kenworth truck. The parties have had various interim divisions from the remaining net proceed of sale of Lot X to the extent of $200,000 each, to trial, and at the conclusion of the trial in a country town M I made an order by consent that the parties be at liberty to distribute a further $70,000 to each of them from the proceeds of sale.
85 Following the parties’ initial separation the wife resided in the old cottage on the property at a country town M until May.
86 The husband’s conduct during the time that the parties were separated but still residing on the same property does him some little, if any, credit. Whilst the wife may be criticised for failing to remove some equipment and chattels from the property, the husband’s conduct, for example exposing a tractor to the weather when undercover storage was available and the way in which the husband left the wife’s personal belongings exposed to the weather, was unnecessary, vindictive and calculated in my finding to diminish the value of the assets and cause distress to the wife.
87 It was utterly unnecessary for the husband to act as he did and his actions in dealing with a Kubota tractor underscore the attitude of the husband to the wife and the preservation of any property she may have. He moved a tractor out into the elements and upon this being noticed by the wife she took the opportunity to place it undercover only to have the husband then again move it out and expose it to the elements. In my finding the husband’s behaviour was immature and underscores his attitude not only to the wife but also towards the proper discharge of his responsibilities in terms of the conduct of these proceedings.
The asset pool
88 The joint assets and liabilities schedule prepared by counsel at the conclusion of the trial is as follows. I have recorded the wife’s nominated value in each case and identify the areas of dispute below.
Property
Description of Property / Asset Wife's Value
1 [FMH outside a country town M](Jt) $1,180,000.00
2 Demountable House (currently [at FMH outside a country town M]) $20,000.00
| 3 | Vehicles/Machinery 2007 Mercedes CLK200 (Wife) | $26,000.00 |
| 4 | 2007 Toyota Yaris (Wife) | $12,000.00 |
| 5 | 2006 Ford F250 XLT Utility (Husband) | $50,000.00 |
| 6 | 2009 Macro Drover -Gooseneck Trailer (now sold) (Wife) | $55,000.00 |
| 7 | 2008 Isuzu Dual Cab Truck (Husband) | $55,000.00 |
| 8 | John Deer 1445 Mower (Husband) | $7,000.00 |
| 9 | John Deer 1850 Tractor (Husband) | $15,000.00 |
| 10 | Hardie 850 Sprayer (Husband) | $3,800.00 |
| 11 | 2008 Aitchison Grass Farmer (Husband) | $3,000.00 |
| 12 | Kubota 1500 Tractor (Wife) | $1,000.00 |
| 13 | McCormick Combine (Husband) | $300.00 |
| 14 | Harrows Linkage (Husband) | $50.00 |
| 15 | Slasher 6ft (Husband) | $100.00 |
| 16 | Motor Bike Sprayer (Wife) | $300.00 |
| 17 | Tow Behind Spreader and Tow Behind Trailer (Wife) | $200.00 |
| 18 | Page Pasture Topper (Husband) | $500.00 |
| 19 | Honda Genset Generator (Husband) | $5,000.00 |
| 20 | Go Kart Trailer (Husband) | $500.00 |
| 21 | Horses and Equipment Jump Pole Gear (Wife) | $3,000.00 |
| 22 | Half Breed Saddle (Husband) | $2,000.00 |
| 23 | Saddles/Tack (Wife) | $4,000.00 |
| 24 | Horse Float (Wife) | $3,000.00 |
| 25 | Horse Buggy (Husband) | $350.00 |
| 26 | Addback from sale of cattleyards (Husband) | $1,250.00 |
| 27 | Round Yard (Wife) | $1,500.00 |
| 28 | Miscellaneous Addback from sale of coolroom (Husband) | $7,000.00 |
| 29 | Addback from sale of Shop Fridge (Husband) | $7,000.00 |
| 30 | Coolroom (located at block) (Husband) | $5,000.00 |
| 31 | Limestone Blocks (Husband) | $6,098.00 |
| 32 | Café Equipment (Husband) | $2,600.00 |
| 33 | Back Hoe (Husband) | $4,000.00 |
| 34 | Jewellery (Wife) | Nominal |
| 35 | Bank Accounts Westpac Account (Proceeds) (Jt) | $1,045,059.32 |
| 36 | Westpac Account Choice Account (Jt) | $2,439.44 |
| 37 | Wife's Received Funds | $200,000.00 |
| 38 | Husband's Received Funds | $200,000.00 |
| Subtotal Assets | $2,929,046.76 |
| Superannuation | ||
| 39 | GESB (Wife) | $69,668.92 |
| 40 | AMP Superannuation (Husband) | $34,670.78 |
| Subtotal Superannuation | $104,339.70 | |
| TOTAL ASSETS | $3,033,386.46 |
Liabilities Wife’s Value
Capital Gains Tax payable in future (Husband)
Total Liabilities $0.00
TOTAL NET ASSETS $3,033,386.46
89 Other than the issue pertaining to the liability for CGT and the treatment of carried forward tax losses, the only areas remaining in dispute between the parties as to the pool are few and relatively minor.
90 Areas of disagreement between the parties are as follows: The disposition of the demountable house
91 The disposition of the demountable house currently situated at the FMH outside a country town M property, the value of which is agreed at $20,000, has become, again, an issue between the parties.
92 During the course of his evidence the husband indicated his willingness to accept the value of the demountable and retain the same although in the written submissions filed on his behalf he sought a sale.
93 Given the position taken by the husband in evidence, I consider it appropriate to add the value of the demountable to his retained assets. If he wishes to dispose of the same then he is at liberty to do so. Given the my concerns about dealings by the husband, with assets in which the wife may retain an interest, I am not satisfied that a sale would be undertaken in good faith, and given the agreement as to value, there is little, if any, prejudice to the husband.
The value of the coolroom at the FMH outside a country town M (line item 30)
94 As to the coolroom, the wife nominates a value of $5,000, the husband $4,000.
The same is in the husband’s possession and the husband has been in a unique position of obtaining a valuation of the item in the event that there was an issue about the same. He has not done so. However, his unchallenged evidence was that the unit cost $5,000 some three years ago and that it is unlikely to have appreciated in value. There is an irresistible logic in the husband’s unchallenged position, notwithstanding the principles enunciated by the full court of the Family Court in Khademollah and Khademollah (2000) FLC 93-050.
95 An application of those principles would in my finding usually place the obligation upon the husband, who is asserting a lesser value, to have demonstrated the basis for such value given that he was in possession of the item and more easily therefore able to obtain a valuation of the relevant item. However, I accept his evidence as being the more probable and fix a value at $4,000 for the item. The husband also sought a sale of this item in his written submissions, but for the reasons I cited in paragraph 93 of these reasons in relation to the demountable, I consider it appropriate to add the value of the coolroom to the husband’s retained assets.
The wife’s jewellery (line item 34)
96 The husband has nominated a value of $16,000. There is no evidentiary basis for his claim and the same is not mentioned as an issue in his evidence-in-chief. The extent of the jewellery is very limited, namely an engagement ring valued at time of purchase for a replacement cost of $3,750, a wedding ring and a pearl pendant said to have cost $150. There is nothing that would draw me to the conclusion advanced by the husband, which was an issue raised late in the proceedings and, in my finding, in all probability opportunistically. That being said, however, it must have some value, but it is unlikely to have appreciated since purchase, and the original acquisition value was not significant. Whilst there is a lacuna in the evidence to which I have referred, I must make a determination as to the value to be ascribed to the jewellery for the purposes of assessing the pool of assets and liabilities.
97 The only evidence before me is the valuation to which I have referred and the undisputed assertion that the pearl pendant cost $150.
98 I consider that it is appropriate for me to take judicial notice of the fact that the valuation was prepared for insurance purposes and reflects a replacement cost, at retail, for the item at the time of purchase. Similarly, the pearl pendant cost $150, retail, at the time of its acquisition.
99 I consider that I may further take judicial notice and drawing on the numerous cases that have come before me in my experience at the Bar that market value is more likely to be significantly less than retail replacement or acquisition cost for a depreciating asset. Further, there is no evidence before me that would support a conclusion that the particular items of jewellery were of a nature that they would appreciate in value.
100 Overall I consider it likely that the jewellery has a value of less than $2,000, however given my inability to determine, based on any contemporaneous evidence as to what the value would be, but having regard to what I consider it is likely to be, I propose to set off the value against the proceeds of sale of the coolroom as appear hereunder and about which there is a similar evidentiary lacuna.
The proceeds of sale of the coolroom (line item 28)
101 Another item in dispute is the receipt, by the husband, of the proceeds of sale from a coolroom previously forming part of the plant of the café and sold to the [Downtown] Tavern, said by the wife to have sold for $7,000. Neither party produced any reliable evidence about the sale or the receipt of any proceeds. The husband asserted that all the proceeds were received prior to separation, and then produced receipts on the second day of the trial that had been obtained “overnight” the
provenance of which are somewhat suspect and which do not bear the stamp that the wife asserted would be affixed thereto if they were genuine and received by the business. In any event it is clear that some of the proceeds of sale were received after separation and not accounted for, however, it appears that the post-separation receipts were relatively minor. Whilst the husband has failed in his obligation of proper and timely disclosure, as I propose to deal with the aspect of the matter elsewhere, I propose to offset any post-separation receipt against the value of the wife’s jewellery, and remove each of the items from the schedule for the purpose of the asset pool.
The slasher (line item 15)
102 The husband asserts the slasher has no value, now being only scrap which is now located at the tip and has been discarded. His proposition was not disputed by the wife. I accept that the slasher has no value.
The wife’s saddles and tack and horse float (line items 23 and 24)
103 The wife ascribes a value of $4,000 for saddles and tack and the husband $8,000.
The wife asserts the value of $3,000 for the horse float whilst the husband asserts the value of $4,000.
104 There was no evidence provided from any independent source by either of the parties. However the husband conceded that his assessment of value was historical and dated and reflected his understanding of either insurance or acquisition costs. In those circumstances, and adopting the approach I have taken with respect to other items, as unsatisfactory as the evidence may be, I consider it more likely that the wife’s values are more probably the more accurate and accordingly find the value of the saddles and tack to be $4,000 and the float $3,000.
The loose limestone blocks at the FMH outside country town M
105 Another area of contention is the existence of limestone blocks at the FMH outside country town M property. The husband said the blocks, which had previously been affixed, had been moved to enable him to make alterations to the horse facilities on the property and that they did not have a separate value, forming part of the improvements to the property.
106 Whilst it is arguable that the blocks have been relocated from their original fixed position and therefore may have a separate value, there is no evidence before me as to the calculation of the value asserted by the wife. Nor is the wife in a position to seriously challenge the assertion by the husband, albeit that assertion may be somewhat at odds with the husband’s stated position of reducing horse numbers, although consistent with his stated desire to make some modifications to the external improvements to the property and modifying the horse facilities to accommodate the needs of his caretaker, who has horses of her own.
107 On balance I am not satisfied that the blocks have a separate value. The Hardie 850 sprayer (line item 10)
108 The wife nominated a value of $3,000 for this item and the husband a value of
$1,500. The husband’s value was nominated having regard to the purchase price and age of the particular piece of equipment. Again the item had not been valued,
however, and once again, the husband’s evidence was not challenged and is more likely, having regard to the factors of age and initial cost. I accept the value as $1,500.
109 I find that the assets of the parties, and allowing for the further distribution between them following trial of $70,000 each, are as set out below. I shall deal with the claimed liability of CGT separately.
Property
Description of Property / Asset Value
1 [FMH outside country town M] (Jt) $1,180,000.00
2 Demountable House (currently [at FMH outside country town M)] $20,000.00
| 3 | Vehicles/Machinery 2007 Mercedes CLK200 - (Wife) | $26,000.00 |
| 4 | 2007 Toyota Yaris (Wife) | $12,000.00 |
| 5 | 2006 Ford F250 XLT Utility (Husband) | $50,000.00 |
| 6 | 2009 Macro Drover -Gooseneck Trailer (now sold) (Wife) | $55,000.00 |
| 7 | 2008 Isuzu Dual Cab Truck (Husband) | $55,000.00 |
| 8 | John Deer 1445 Mower (Husband) | $7,000.00 |
| 9 | John Deer 1850 Tractor (Husband) | $15,000.00 |
| 10 | Hardie 850 Sprayer (Husband) | $1,500.00 |
| 11 | 2008 Aitchison Grass Farmer (Husband) | $3,000.00 |
| 12 | Kubota 1500 Tractor (Wife) | $1,000.00 |
| 13 | McCormick Combine (Husband) | $300.00 |
| 14 | Harrows Linkage (Husband) | $50.00 |
| 15 | Slasher 6ft (Husband) | Nil |
| 16 | Motor Bike Sprayer (Wife) | $300.00 |
| 17 | Tow Behind Spreader and Tow Behind Trailer (Wife) | $200.00 |
| 18 | Page Pasture Topper (Husband) | $500.00 |
| 19 | Honda Genset Generator (Husband) | $5,000.00 |
| 20 | Go Kart Trailer (Husband) | $500.00 |
| 21 | Horses and Equipment Jump Pole Gear (Wife) | $3,000.00 |
| 22 | Half Breed Saddle (Husband) | $2,000.00 |
| 23 | Saddles/Tack (Wife) | $4,000.00 |
| 24 | Horse Float (Wife) | $3,000.00 |
| 25 | Horse Buggy (Husband) | $350.00 |
| 26 | Addback from sale of cattleyards (Husband) | $1,250.00 |
| 27 | Round Yard (Wife) | $1,500.00 |
| 28 | Miscellaneous Addback from sale of coolroom (Husband) | Offset 34 |
| 29 | Addback from sale of Shop Fridge (Husband) | $7,000.00 |
| 30 | Coolroom (located at block) (Husband) | $4,000.00 |
| 31 | Limestone Blocks (Husband) | Disregard |
| 32 | ||
| Café Equipment (Husband) | $2,600.00 | |
| 33 | Back Hoe (Husband) | $4,000.00 |
| 34 | Jewellery (Wife) | Offset 28 |
| 35 | Bank Accounts Westpac Account (Proceeds) (Jt) (at 31 January 2012) | $915,795.60 |
| 36 | Westpac Account Choice Account (Jt) | $2,439.44 |
| 37 | Wife's Received Funds | $270,000.00 |
| 38 | Husband's Received Funds | $270,000.00 |
| Subtotal Assets | $2,923,285.04 | |
| 39 | Superannuation GESB (Wife) | $69,668.92 |
| 40 | AMP Superannuation (Husband) | $34,670.78 |
| Subtotal Superannuation | $104,339.70 | |
| TOTAL ASSETS | $3,027,624.74 | |
| Liabilities | ||
| Capital Gains Tax payable (Husband) | ||
| Total Liabilities | ||
| TOTAL NET ASSETS |
Capital Gains Tax
110 Upon the ultimate sale of the W Road property to RMT Limited at $4,105,000 an issue arose as to the consequential liability for CGT.
111 The issue became one of concern by the wife when she received the initial estimate of CGT from Mr B where he assessed the liability to be $917,537.50.
112 His calculation was simplistic to say the least and was as follows: Capital Gains Calculation
Selling Price 4105000
Less GST 373181.8
Net 4105000
Purchase of Land 208000 Capital Gain
3897000
Discounted Gain
1948500
[Mr Weston’s] Income Before (approx)(sic) $60,000
Tax 60001 to 80000 30% x 20000 $6,000.00
Tax 80001 to 180000 40% x 100000 $40,000.00
Tax 180,000 + (1948500 – 120000) x 45 $822,825.00
Medicare Normal Rates $29,227.50
Medicare Surcharge $19,485.00
Capital Gains Payable $917,537.50
113 As can be seen no allowance has been made for any relevant expenditure that may have altered the calculation. Furthermore Mr B had assessed capital gain on the GST that was payable on the sale.
114 The advice received from Mr B was also in stark contrast to that he accepted as having given to both the parties at about the time of sale, that he thought he could “get the capital gains tax down to nil”. Interestingly Mr B did not believe that he may have had any conflict of interest in continuing to advise the husband.
115 The wife requested ABC Accounting to undertake a CGT calculation on her behalf.
116 In what appears to be a well considered and researched initial advice of 15 pages from ABC Accounting they set out with some precision the exemptions and concessions that may apply to CGT and lawful mechanisms for reducing the amount of CGT that would be assessed as payable.
117 I observe that the care and precision that was clearly given to the preparation of the opinion for the wife was also evident in Mr N’s evidence.
118 It beggars belief that a person who holds themselves out as a professional accountant would assess CGT on GST and I am left with the view that the initial calculation prepared by Mr B was contrived to mislead.
119 Following Mr B’s “calculation” of CGT the husband directed the settlement agents appointed for the sale to make a payment to [BW & Associates] (Mr B’s firm)
with two cheques, the first in the sum of $373,181.80 and the second for $917,537.50. The cheques accorded with Mr B’s calculation of GST and CGT respectively.
120 The directions were given to the settlement agent notwithstanding the orders made on 21 April 2010 with an injunction restraining the husband from dealing with, disposing, alienating or otherwise interfering with the sale proceeds of the property other than to pay settlement costs, adjustments of rates and taxes and to place the balance in an interest bearing trust account.
121 No reasonable or credible explanation was given for the payments to Mr B.
Mr B in his evidence accepted that he had never received a payment of that dimension into his trust account before and offered no explanation as to why it should be done in this case, although his evidence at trial was that the transaction was done at the insistence of the husband.
122 Mr B however took it upon himself to write to the solicitors for the husband in the following terms:
Dear Susan
Re [Mr Weston] - Proceeds from Sale
[Mr Weston] presented me with 2 cheques to pay for the tax owing on the sale of the property situated [outside a country town M].
The cheques amounted to $1,290719.30 being for GST $373,181.80 and
CGT $917,537.50.
These are costs of the sale to be paid to the ATO and therefore are not part of the net proceeds of the sale.
They are held on a trust account for Mr B and Associates at the Commonwealth Bank [a country town M] and will be paid to the ATO when the returns are lodged with ATO.
Yours truly, [Mr B]
123 Several significant issues arise from the actions of the husband and Mr B in this transaction. Firstly, they are in breach of the orders made on 21 April 2010, unless one accepts Mr B’s interpretation that they are “costs of sale” when, in my finding they are clearly not. Whilst they may be a liability arising as a consequence of the sale they are not a cost of the sale itself. Secondly, the payment was made before any assessment had been made of the liability. Thirdly, the action diminished the pool of assets and resources available to the parties through the loss of interest, which, according to Mr B, would have been paid to his firm.
124 Further advice was received from ABC Accounting and was subsequently forwarded to Mr B.
125 Mr B then wrote to the wife direct in the following terms: Dear [Ms Weston]
Re Capital Gains on the business property.
[Mr N] of [ABC Accounting] has forwarded to me his letter of advice dated 20 October 2010. I fully agree with his findings in that letter. There is no dispute of the facts.
I agree with Table 1 on page 2 of his letter and that the Gross Capital Gain is $3,059704.
I also confirm that the 50% General Discount and the Active Asset
Discount can be applied as per Table 2 on page 3 of the advice. The Assessable Capital Gain is $764,926.
The Tax Payable on that figure is $369073 as per Table 3 Income Tax Payable Page 4 of the [ABC Accounting] Letter Dated 20 October 2010 is correct.
This is the amount of tax that is effectively payable on the gain.
[Mr Weston] has indicated that to pay $500,000 into a superannuation fund as per Table 4 of the letter is not an option, as he will have no money to pay this after the settlement. He does not wish to borrow any funds to pay into superannuation. Therefore he does not wish to exercise that option [sic]
[Mr Weston] has also indicated that he does not intend to purchase any further active business assets to roll the gain over too [sic]. Therefore he does not wish to use that option. Please note that the excerpt from the ATO website clearly shows that only defers the tax to a later date and he wishes to have everything paid out so he can go on with his life. [my emphasis]
Excerpt from ATO online “Small business rollover [sic]
The rules covering the small business rollover are contained in Subdivision
152-E of the Income Tax Assessment Act 1997. The small business rollover allows you to defer all or part of a capital gain made from a CGT event happening to an active asset. “[sic]
As the Application of Small Business Retirement Exemption and the Application of the Small Business CGT Rollover do not apply the Assessable Capital Gains is as $764,926.
The Capital Gains Tax on the sale of the property is $369,073.
I agree in full therefore with the calculation made by [Mr N] of [ABC Accounting] in the letter of 20 October 2010 and that the correct amount of tax is $369,073 as shown in Table 3 Income Tax Payable.
I will organise to be made available a payment slip to enable the amount of tax paid directly to the ATO.
Please also note that the GST is also now payable being due on
28 October. I will also provide a payment slip so that this can be paid. Yours truly,
[Mr B]
126 Although the correspondence to the wife is undated, as it refers to a letter of advice from ABC Accounting dated 20 October 2010, quite clearly the correspondence post-dated that advice.
127 Of some significance however was that notwithstanding Mr B’s representations as to the husband’s state of mind, the husband registered a business [True Haulage] in July/August 2010. He had acquired an ABN number for the business and the business was described as a “sole trader”.
128 Although the funds paid to Mr B’s firm were returned, Mr B wrote on
1 September 2010 to the husband’s solicitors that having considered the advice given from ABC Accounting he now calculated the tax payable of $712,773 and requested that that amount be paid into his trust account.
129 Some weeks later Mr B accepted a tax payable figure of $369,079 in the undated correspondence to which I have referred.
130 In early 2011 the husband purchased a truck for the sum of $374,000. The tax invoice for the Kenworth Prime Mover, tipper trailers and dolly issued to True Haulage is dated 8 February 2011. The expenditure was made utilising the CGT rollover concessions available to him.
131 Another troubling aspect of the husband and his accountant’s conduct relates to the preparation of taxation returns for the husband for the financial year ending
30 June 2010.
132 Mr B produced three returns for the husband for the relevant year. He claimed in his evidence that the returns were “drafts”, however nowhere on the face of the document or at any place are they expressed to be draft documents. Curiously the first return, said to have been prepared in September 2010, includes a reference to True Haulage with the description of the business activity as being “road freight transport”. This is despite the return being one in which Mr B, it would seem, elects not to utilise any of the concessions available to the husband as well as Mr B representing that his client does not intend to utilise the concessions or purchase any further active asset.
133 Mr B’s evidence was that he put this in “hypothetically” in the event that the husband chose to commence a business, yet remarkably he was able to identify that
nature of the business being undertaken by the husband and also the name of the business.
134 The second return disclosed a net capital gain of $108,984 (in contrast to the first of $1,529,852) and the third in similar terms to the second, but in each case there is no evidence of lodgement, despite representations to the contrary. Notably, and as observed by Mr N, in the second and third returns it appears that all the Small Business CGT concessions had been utilised.
135 The only conclusion available to be drawn from Mr B’s conduct is that he is firstly unethical, secondly was attempting to actively mislead the wife and thirdly intent on securing a significant amount of money in his trust account, presumably to be held, having been procured on the basis of bogus representations, until such time as the husband’s tax return, in whatever form it may have been, was lodged with the assessed tax if any being paid and any balance returned to the husband.
136 There could be no other logical or reasonable explanation otherwise for Mr B’s conduct and his evidence before me served only to support the conclusion that he could offer no other reasonable, logical, sensible or ethical explanation for his conduct. His demeanour, which I have described earlier in these reasons, served only to underscore the inevitability of the conclusion that I have reached above.
137 Significantly however in his evidence Mr B now concedes that given that the husband has elected to pursue the active asset rollover exemptions available to him he presently has no CGT liability that is likely to be assessed against him. Further Mr B now accepts the position advanced by Mr N, that the husband, whilst he continues in active business, can continue to rollover the CGT liability until he retires at which time he can roll it into superannuation thereby incurring no CGT liability at all.
138 It is accepted however that by utilising the rollover relief for CGT the husband will not be able to depreciate the assets acquired for which rollover relief is taken. However that issue should not be considered in isolation, but rather in the context of the benefit effect to be given of any carried forward tax losses.
139 In Rosati & Rosati (1998) FLC 92-804 at page 85,043, the full court of the Family Court (Ellis, Lindenmayer and Kay JJ) considered the approach to be adopted to a CGT cost upon the disposition of an asset relevant to proceedings under s 79.
140 At paragraph 6.36 their Honours concluded the proper approach to be as follows: It appears to us that although there is a degree of confusion, and possibly conflict, in
the reported cases as to the proper approach to be adopted by a court in proceedings under s 79 of the Act in relation to the effect of potential capital gains tax, which would be payable upon the sale of an asset, the following general principles may be said to emerge from those cases:-
(1) Whether the incidence of capital gains tax should be taken into account in valuing a particular asset varies according to the circumstances of the case, including the method of valuation applied to the particular asset, the likelihood or otherwise of that asset being realised in the foreseeable future, the circumstances of its acquisition and the evidence of the parties as to their intentions in relation to that asset.
(2) If the Court orders the sale of an asset, or is satisfied that a sale of it is inevitable, or would probably occur in the near future, or if the asset is one which was acquired solely as an investment and with a view to its ultimate sale for profit, then, generally, allowance should be made for any capital gains tax payable upon such a sale in determining the value of that asset for the purpose of proceedings.
(3) If none of the circumstances referred to in (2) applies to a particular asset, but the Court is satisfied that there is a significant risk that the asset will have to be sold in the short to mid term, then the Court, whilst not making allowance for the capital gains tax payable on such a sale in determining the value of the asset, may take that risk into account as a relevant s 75(2) factor, the weight to be attributed to that factor varying according to the degree of the risk and the length of the period within which the sale may occur.
(4) There may be special circumstances in a particular case which, despite the absence of any certainty or even likelihood of a sale of an asset in the foreseeable future, make it appropriate to take the incidence of capital gains tax into account in valuing that asset. In such a case, it may be appropriate to take the capital gains tax into account at its full rate, or at some discounted rate, having regard to the degree of risk of a sale occurring and/or the length of time which is likely to elapse before that occurs.
141 Having regard to the factual situation now before me, it is open to me to conclude that the husband through the lawful use of available concessions may ultimately have no CGT liability.
142 It is now his case that although he has not utilised all of the capital gain that would be assessable for CGT, he has utilised some of it and proposes to utilise the balance in the expansion of his contracting business.
143 By doing so the husband is able to lawfully avoid the payment of CGT for as long as he continues in the business and upon his retirement or cessation of such business then finally rollover the capital into superannuation and thereby attract no taxation liability.
144 Although the husband may have some years to go (being aged 40 at the time of judgment) until he is eligible to receive his superannuation, should he cease to conduct business on his own account, I consider the probability to be that the husband will continue to utilise the available concessions to him and ultimately avoid the payment of CGT entirely. I also find that the husband is strongly motivated to make a success of his business and that he is likely to do so, notwithstanding his failure to disclose all relevant material about the conduct of the business, to which I will refer later.
145 In all the circumstances I determine that no allowance should be made for any current or future liability for CGT.
Accumulated tax losses
146 Through the parties’ trust they have an undistributed accumulated tax loss of
$162,000. The husband seeks to retain the benefit of that tax loss, a position that is not opposed by the wife.
147 There is no doubt that the accumulated tax losses have a value, the assessment of which is of course dependant upon the husband’s income level and the applicable marginal rate of taxation.
148 However, the accumulated tax losses in this case have a secondary relevance as a consequence of the husband utilising the rollover relief to avoid the payment of CGT.
149 As I observed earlier, the husband will be denied certain taxation deductions, notably depreciation, that would otherwise be available to him to lawfully reduce his taxable income.
150 The offset of $162,000 is in my finding a significant benefit and significant amount available to the husband and in my finding mitigates any “penalty” that the husband would otherwise attract through the loss of an allowable deduction of depreciation.
151 Accordingly, having not allowed any liability for the husband’s future CGT assessment for the reasons I have given above, I am satisfied, particularly given the nature of the business that the husband has commenced to operate, namely, where depreciation is likely to usually be a significant deductable item, that it would be appropriate to disregard the value to the husband of the accumulated taxation losses for the purposes of calculating the parties’ asset and liability position and further, I do not propose to otherwise take them into account in any determination as to the husband’s future income.
Conclusion as to the asset pool
152 For the reasons I have given above I conclude that there are no liabilities that should be taken into account for the purpose of determining the assets available for distribution between the parties. Accordingly I find the pool of assets to have a value, determined by reference to the schedule above at paragraph 109, of $3,027,624.74.
Contributions
153 At the commencement of the parties’ relationship each of them had encumbered assets.
154 Each of the parties contributed the initial capital they had at the commencement of the relationship to the relationship.
155 I have little doubt that at the early stages of the parties’ relationship they worked in a full mutually supportive partnership and each contributed their income and talents to the enterprise of the development of the W Café.
156 It is clear that each of the parties worked in the business. There is no doubt that once the husband gave up his employment and worked full-time in the business he worked long hours commencing very early in the morning with the café opening initially at 3.00 am.
157 The wife’s income was used to meet the mortgages on her properties until their sale and she provided accommodation for the parties. Her income was contributed towards the expenses of the relationship.
158 The wife suggests in her evidence that she was also involved significantly in the arranging of financing and as she put it “the establishing of the business was quite complicated financially. There was a lot of juggling of our joint finances, properties purchased and sold, refinancing etc”.
159 The wife was able to directly contribute to the further borrowing of $90,000 to satisfy the shire’s conditions as a consequence of her income and whilst it may be that the payments on the borrowings were ultimately met from the business, in my finding the income for the business came from the joint efforts of the parties.
160 I accept the wife’s evidence that in addition to her working 48 hours per fortnight at the hospital she worked the balance of each fortnight at the café, attended to the banking, undertook the business book work and business errands. Her unchallenged evidence was that she also established gardens and tended to them after the business opened.
161 Her further unchallenged evidence was that in addition to her paid employment at the hospital and her contribution to the café business she “completed about
90 per cent of the household work, cooking, cleaning, washing clothes etc”.
162 The parties did not draw a wage from the business but I accept there may have been benefits available to them through the business.
163 I also accept that the wife was in part utilising her efforts as a homemaker and the support of her children and also that she contributed to their support financially.
164 Following the purchase of the FMH outside country town M property I accept the wife’s evidence that the house was built by the parties together, although she was registered as the owner/builder, and that both she and the husband were very much involved in all aspects of the decision making, purchases and the establishment of the home.
165 I also accept that she contributed to the setting up of the café business as she suggests.
166 Similarly both of the parties were involved in the agistment business and the cutting of hay.
167 Unlike the husband, the wife was openly prepared to accept and acknowledge the husband’s contributions. I have referred earlier to the limited and grudging acknowledgment by the husband of any contribution by the wife.
168 As Dr Dickey QC sagely observed in his closing submissions in referring to preliminary observations I made at the close of evidence, he submits:
His Honour’s critical observation that the husband gave little acknowledgement to the wife of her contributions. That is, of course, an observation which a judge may properly make on the evidence. The husband’s concern here is that this observation may affect the exercise of discretion in property division. All other things being equal, the same property division should result whether a husband acknowledges or fails to acknowledge his wife’s contributions to property and to the welfare of the family.
169 I entirely agree with the submission made by Dr Dickey QC, however the observation of course relates to credit and does not detract from the contributions I find that the parties had made. The fundamental difference between the acknowledgment of the wife of the husband’s contributions and the husband’s failure to acknowledge them is one of credit that is not to diminish a finding as to contribution.
170 There is no doubt that the husband brought into the relationship a more valuable property that ultimately as a result of the circumstances in which the parties found themselves in during the course of the marriage turned out to realise a significant value.
171 That is a contribution that cannot go without recognition.
172 In the concluding paragraphs of his trial affidavit the husband submitted, “Based on initial contribution I am of the view that I am entitled to a 65 per cent division of the matrimonial assets”. The position is in sharp contrast to that which appeared in his original response.
173 In submissions on the husband’s behalf Dr Dickey QC suggests that the wife’s contributions do not “come even close to balancing the husband’s contribution through Lot X” and ultimately concludes that on the basis of the parties’ contributions overall, both as to property and the welfare of the family and having regard to the relatively short period of cohabitation, that a division of property in the proportions 60-40 in favour of the husband is just and equitable.
174 The wife submits their contributions should be equal and whilst I have no doubt that the contributions between the parties other than initial contribution were at least equal, if not slightly balanced in favour of the wife, I agree that there should be a differential in favour of the husband on a contribution based finding.
175 In his closing submissions for the husband, Dr Dickey QC advanced the proposition that in recognition of the husband’s initial contribution and the ultimate realisation thereof, the wife’s subsequent contribution over a relatively short relationship was not such as to erode or otherwise diminish that initial contribution entirely.
176 As the Full Court observed in Pierce and Pierce (1999) FLC 92-844 at page
85,881:
28.In our opinion it is not so much a matter of erosion of contribution but a question of what weight is to be attached, in all the circumstances, to the initial contribution. It is necessary to weigh the initial contributions by a party with all other relevant contributions of both the husband and the wife. In considering the weight to be attached to the initial contribution, in this case of the husband, regard must be had to the use made by the parties of that contribution.
177 In this case that initial contribution has clearly been put to the use and the benefit of the parties and requires appropriate recognition and weight to be attached to it. I respectfully agree with and adopt the proportions proposed by Dr Dickey QC.
178 I find on contribution that the same favours the husband in the ratios 60 per cent to the husband and 40 per cent to the wife.
Section 75(2) factors
179 Each of the parties concede that there should be no adjustment to the contribution based outcome based on what might be described as the “need factors” prescribed in s 75(2).
180 Indeed, the only factor prescribed in s 75(2) of the Act that is in my finding is relevant is s 75(2)(o), to which I have referred earlier in these reasons.
181 At the conclusion of the evidence I observed that the husband should have regard to the approach taken by the full court of the Family Court of Australia in Weir and Weir (1983) FLC 92-338 namely that “once it has been established that there has been a deliberate non-disclosure the Court should not be unduly cautious about making findings in favour of the innocent party”.
182 Again Dr Dickey QC in his submissions sagely observes, “That case first and foremost concerned a failure by a husband to disclose, not documents, but assets. Thus, the Full Court said in this case, “We should have thought that the Court’s jurisdiction to make an order going beyond the identified property arises once there is sufficient evidence to support a finding that the party had not made a full disclosure of his or her assets” and submits that it does not form a part of the wife’s case that the husband has attempted to act in this way.
183 With great respect to that submission, the clear thrust of the wife’s cross- examination about the husband’s conduct involving accounts following separation and the challenge to his assertions as to his financial position can only be directed to a suggestion that the husband has been less than frank about his financial position overall, rather than simply reflecting upon his credit.
184 The husband’s post-separation conduct in this litigation has been appalling. I
have found that he has in consort with his accountant set out to wilfully mislead the
wife as to a CGT liability and I have little doubt that had he “got away with it” he would have happily misled the Court on the same basis, as would have his accountant Mr B.
185 If, as I have observed, Mr B and the husband’s conduct was innocent, then the wife through returning to the pool of assets some $917,000 has made a very significant post-separation contribution.
186 However, s 75(2)(o) is not in my finding directed towards the punishment of the husband for misconduct in terms of the preparation of the case.
187 That the husband has set out to mislead the wife is but a part of it. As a consequence of this and of other aspects of his attitude towards the litigation I have grave reservations about the frankness of the husband’s stated position as to his finances and overall wealth.
188 The husband was not forthcoming with documents despite the fact that it seemed on his evidence that he was able to obtain receipts for transactions “overnight”, although some reservations remain about the providence of those documents.
189 Other documents that may have been tendered to support the husband’s assertion as to the amounts due to suppliers, cash dispositions or dealings were conveniently “left at home” notwithstanding the fact that the parties were in the second day of the trial and it should have by that time been obvious to the husband that it was in his interest to produce evidence that supported his position. I further have no doubt that the husband’s obligation of disclosure was reinforced by her Majesty’s counsel acting on his behalf and by his solicitors.
190 Other aspects of the husband’s behaviour are also of concern in terms of a frank disclosure of the husband’s financial position.
191 The wife observed sand had been carted from the former matrimonial property.
She was able to follow one of the trucks to determine where it was the sand was being delivered and thereafter issued a subpoena to the recipient.
192 The recipient, according to the wife’s unchallenged position, was less than pleased about receiving a subpoena suggesting there were no documents supporting any transaction as between the husband and the recipient.
193 The husband’s position was that he was trading sand for gravel and again no documents were disclosed that would support that position.
194 The husband’s position in closing appeared to be that it simply did not matter as it had always been a common position that the husband would retain the property and therefore he could do with it as he wished.
195 Such a submission ignores the financial consequence of such a dealing, for whilst it may be that the husband was to retain the property, if he was generating and not disclosing income from that property, yet to be the subject matter of final orders, then it was his obligation to disclose those transactions, dealings and any benefit derived therefrom.
196 The husband’s failure to produce BAS statements also points to a concern about his frankness about his financial dealings and financial position overall. Although I note the contrast in the respective evidence of Mr B and the husband about the production of BAS statements, I am left with little doubt that it was a conscious choice on behalf of the husband either not to prepare them or not to disclose them, the more so when measured against the husband’s claim that he is not earning any income (in contrast to Mr B’s predictions) yet he is about to purchase another truck to expand his cartage contracting business.
197 During the course of these reasons in my findings as to credit I have also made observations about the manner in which the husband dealt with the wife’s property post-separation. There is little doubt that he embarked on a course of conduct to intimidate, stress and upset the wife and had little regard for the assets that she was to retain or the propriety of his own actions in terms of the consequences for diminishing value in such assets.
198 Whilst the wife left the assets at the former matrimonial home for some time and was criticised for doing so by her Majesty’s counsel for the husband, I do not accept the criticism as valid. I accept that she did not have the opportunity to otherwise house the chattels in the short term and that the husband’s conduct was at its lowest reckless and at its highest, and more likely, intentionally directed to spoiling of the wife’s assets.
199 The husband’s assertion about the loss of stock again simply does not ring true.
The claim that fences had collapsed with consequential stock escapes earlier in the relationship were never put to the wife and I have no doubt that was through no failure on behalf of the husband’s counsel but because such an assertion was a recent invention by the husband.
200 I make mention of the husband’s behaviours as they are consistent in my finding with an individual who is determined to minimise or otherwise diminish the other party’s claims at every opportunity and as a consequence I am left with significant doubts about the frankness of the husband in his financial circumstances.
201 I have regard also to the decision of the full court of the Family Court in Kannis and Kannis (2003) FLC 93-135 where the Full Court found it was appropriate for Holden CJ to have made an adjustment of 10 per cent in favour of the wife based on the husband’s lack of frankness in disclosure.
202 Whilst in that case the dimension of the husband’s non-disclosure may have been greater, it was no more significant than it is here in the sense that it prevents the Court from making definitive findings as to the circumstances of the parties. Such findings are a necessary requirement for a court to make an order that is just and equitable in all the circumstances of the case.
203 At the conclusion of this matter I am left with significant doubts about the husband’s claimed overall income and assets at his disposal. I am satisfied that it is appropriate to make an adjustment in favour of the wife of 5 per cent having regard to the non-disclosure and consequential uncertainty.
Just and equitable
204 For the reasons I have given above particularly with respect to my findings under s 75(2)(o), I have been left with significant residual concerns as to the overall circumstances of the parties that would enable me to be fully satisfied the outcome of this case based on my findings of contribution and the adjustment under s 75(2), produces a just and equitable result.
205 However, any greater adjustment in favour of the wife would in my finding not produce a just and equitable result as it would effectively negate in its entirety the greater initial contribution of the husband and whilst I consider his non-disclosure to be significant and any assessment of the consequential quantum benefit to the husband is speculative, I consider it to be unlikely to be of such a dimension as to totally negate the differential on contribution.
206 On the other hand any lesser adjustment would in my finding have the potential to significantly prejudice the wife and accordingly, I am satisfied that the overall outcome in these proceedings is just and equitable and I determine that the pool of assets between the parties should be divided as to 55 per cent thereof to the husband and 45 per cent thereof to the wife, the effect of which will be as follows.
207 The wife’s entitlement of 45 per cent of the found assets pool equates to a value of $1,362,431 (rounded down by 13 cents) of which she has or had had the benefit of the following:
1. Mercedes CLK200 motor vehicle $26,000
2. Toyota Yaris motor vehicle $12,000
3. Macro Drover – Gooseneck Trailer $55,000
4. Kubota 1500 Tractor $1,000
5. Motorbike Sprayer $300
6. Tow Behind Spreader & Tow Behind Trailer $200
7. Jump Pole Gear $3,000
8. Saddles/Tack $4,000
9. Horse Float $3,000
10. Round Yard $1,500
11. Received funds $270,000
12. Superannuation $69,668.92
208 The wife is accordingly entitled to a further cash adjustment in the sum of
$916,762 from the proceeds of sale together with 45 per cent of the interest
accumulated thereon beyond the figure as at 31 January 2012 together with any interest accumulated on the Westpac Account Choice Account.
Proposed orders
209 To give effect to my judgment I propose to make orders in the following terms:
1.Forthwith upon the making of these orders, the sum of $916,762 be paid to the wife from Westpac account together with a sum equal to
45 per cent of the amount by which the balance, at the date of payment exceeds the sum of $915,795.60 and the balance in Westpac Account Choice Account, shall exceed the sum of
$2,439.44 to the intent that the wife receives 45 per cent of any interest accrued.
2.Contemporaneously with the payment herein ordered, the wife shall execute a Memorandum of Transfer in registrable form in favour of the husband to effect a transfer of her interest in the [FMH situated outside country town M] being the land comprised and described in Certificate of Title to the intent that thereafter the husband shall be entitled to be the sole registered proprietor thereof and enjoy the sole beneficial interest thereof.
3.The husband be otherwise entitled to the balance remaining in the accounts described in paragraph 1 hereof after the payment ordered in paragraph 1 hereof.
4.The husband’s interest in the Mercedes Benz motor vehicle, Toyota Yaris motor vehicle registered number and Gooseneck Trailer vest in the wife and the husband shall execute such documents as shall be required of him to transfer to the wife his interest therein.
5.The interest of the other party in the property listed in the List of Assets table set out below vest in the party specified in the column headed “To be Retained by” therein and the parties shall execute such documents as shall be properly required to effect a transfer of such interest to the retaining party.
6.Other than as provided for in these orders, each of the parties shall retain the property presently in their possession or control including but without limiting the generality thereof the parties’ respective superannuation benefits free of any claim by the other.
7.Henceforth each of the parties shall discharge any liabilities attaching to any asset that they retain following these orders and shall discharge, without calling upon the other to contribute thereto their several debts.
8.The business partnership [M & N] previously trading as [EQ] Agistment is hereby dissolved.
(I will hear Counsel as to the effective date of dissolution and any consequential orders.)
9. The wife shall forthwith by deed:
(a) resign her position as co-trustee of the [EQ Family Trust] (“the trust”);
(b) renounce her powers and resign her position as appointor of the trust and appoint the husband to exercise these powers and otherwise assume the position of appointor of the trust;
(c) renounce and resign her position as a beneficiary
(including as a corpus beneficiary) of the trust; and
(d) transfer to the husband any other interest she has in the trust (including any stand in her credit and any loan account of the trust) provided however that the husband shall discharge the exoneration of the wife and indemnify her and hold her forever indemnified with respect of any claim against the wife arising or accruing as a consequence of any debit loan account or other indebtedness of the wife to the trust.
10. Liberty to each of the parties to apply for consequential orders.
11. The application and response otherwise stand dismissed.
| Asset | Owned By: | In Possession Of: | To be Retained by: |
| Toyota Yaris | Wife | Wife | Wife |
| Mercedes | Wife | Wife | Wife |
| Macro Drover – Gooseneck trailer | Husband | Wife | Wife |
| Double Horse Float | Wife | Wife | Wife |
| Super Spreader | Jointly | Husband | Wife |
| Kubota Tractor | Jointly | Husband | Wife |
| Horse Round Yard Panels | Jointly | Wife | Wife |
| Cow Round Yard Panels | Jointly | Husband | Husband |
| Equestrian Jumping Poles and Wings | Jointly | Husband | Wife |
| Horse Buggy | Jointly | Husband | Wife |
| Saddle tack | Jointly | Wife | Wife |
| Jewellery | Wife | Wife | Wife |
| GESB Superannuation | Wife | Wife | Wife |
| 2006 Ford F250 Utility | Husband | Husband | Husband |
| Isuzu Truck | Husband | Husband | Husband |
| John Deere Ride On Lawnmower | Jointly | Husband | Husband |
| John Deere 1850 Tractor | Jointly | Husband | Husband |
| John Deere Backhoe | Jointly | Husband | Husband |
| Hardi Spray Unit | Jointly | Husband | Husband |
| 2008 Aitchison Grass Farmer | Jointly | Husband | Husband |
| McCormick Combine | Jointly | Husband | Husband |
| Harrows Linkage | Jointly | Husband | Husband |
| Page Pasture Chopper | Jointly | Husband | Husband |
| Honda Generator | Jointly | Husband | Husband |
| Cool Room | Jointly | Husband | Husband |
| Limestone Blocks | Jointly | Husband | Husband |
| Open Front Fridge | Jointly | Husband | Husband |
| Café Equipment | Jointly | Husband | Husband |
| Saddle and Tack | Jointly | Husband | Husband |
| Plough | Jointly | Husband | Husband |
| Cart Trailer | Husband | Husband | Husband |
| Car trailer purchased by the husband since separation | Husband | Husband | Husband |
| Kenworth Truck (purchased by Husband since separation) | Husband | Husband | Husband |
| AMP Super | Husband | Husband | Husband |
I certify that the preceding [209] paragraphs are a true copy of the reasons for judgment delivered by this Honourable Court
Associate
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