WHALEN & WHALEN
[2012] FMCAfam 849
•17 August 2012
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| WHALEN & WHALEN | [2012] FMCAfam 849 |
| FAMILY LAW – Property – 12 year marriage – husband brought significantly greater assets into the marriage – decline to add back funds received by wife post separation – s.75(2) factors – just and equitable. |
| Family Law Act 1975, ss.75(2), 79 |
| Lee Steere & Lee Steere (1985) FLC 91-626 Hickey & Hickey (2003) FLC 93-143 AJO v GRO (2005) FLC 93-218 NHC v RCH (2004) FLC93-204 M & M [1998] FamCA 42 C & C [1998] FamCA 143 D J M & J L M (1998) FLC 92-816 Townsend & Townsend (1995) FLC 92-569 D & D (2003) FamCA 473 at 49 |
| Applicant: | MS WHALEN |
| Respondent: | MR WHALEN |
| File Number: | LNC 5 of 2010 |
| Judgment of: | Kelly FM |
| Hearing dates: | 19 and 20 July 2012 |
| Date of Last Submission: | 20 July 2012 |
| Delivered at: | Adelaide |
| Delivered on: | 17 August 2012 |
REPRESENTATION
| Counsel for the Applicant: | Mr F Dixon SC |
| Solicitors for the Applicant: | McGrath & Co |
| Counsel for the Respondent: | Mr B McQuade |
| Solicitors for the Respondent: | Andrew Rogers Lawyers |
ORDERS
In full and final settlement of any claim that either party may have against the other for settlement of property:
Within 60 days from the date of this order the husband pay to the wife the sum of FOUR HUNDRED AND SIXTY NINE THOUSAND NINE HUNDRED AND NINETY FIVE DOLLARS ($469,995).
The wife retain all other assets and financial resources that she has in her possession free from any further claim from the husband including the following:
(a)the house property at [C] in the State of Tasmania;
(b)the wife’s savings;
(c)the wife’s furnishings, personal effects and other articles of domestic use or ornament;
(d)any motor vehicle currently in the wife’s possession;
(e)the wife’s superannuation entitlements;
(f)any life insurance or life assurance entitlements in the wife’s sole name.
The husband retain all other assets and financial resources that he has in his possession free from any further claim from the wife including the following:
(a)his interest in [R] Pty Ltd;
(b)the property situate at and known as Sections [omitted] in [S] in the State of South Australia comprised and described in Certificate of Title Register Book Volume [omitted];
(c)the husband’s savings;
(d)the husband’s furnishings, personal effects and other articles of domestic use or ornament;
(e)any motor vehicle currently in the husband’s possession;
(f)the husband’s superannuation entitlements;
(g)any life insurance or life assurance entitlements in the husband’s sole name.
Each party indemnify the other and keep the other party indemnified with respect to any debt outstanding in that party’s sole name.
The husband indemnify the wife and keep her indemnified with respect to any debts outstanding in the name of [R] Pty Ltd.
Each party do all such things and sign all documents necessary to give effect to these orders and in the event either party fails to do so a Registrar of the Federal Magistrates Court, Adelaide Registry, is appointed and empowered pursuant to s.106A of the Family Law Act 1975 to execute all documents and perform all acts necessary to implement the terms of these orders.
IT IS NOTED that publication of this judgment under the pseudonym Whalen & Whalen is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT ADELAIDE |
LNC 5 of 2010
| MS WHALEN |
Applicant
And
| MR WHALEN |
Respondent
REASONS FOR JUDGMENT
Introduction
The Applicant, Ms Whalen and the Respondent, Mr Whalen, commenced living together in 1996. They married in 2000 and separated in September 2008. They have been unable to reach agreement regarding property settlement issues following their separation and it now falls to the Court to determine these matters.
Background
The wife and husband met in the mid-1990s. They had both been married previously. The wife has a daughter from her first marriage, [X], now aged 27. [X] was approximately eight years old when the parties commenced living together. The husband had two children from his previous relationship [Y], now aged 29 and [Z], now aged 27.
[X] lived with the parties during their marriage. She attended boarding school in Adelaide and the wife met her fees in that regard. The husband’s children spent time with the husband on alternate weekends but difficulties developed within the family unit. The husband chose not to invite the children to his wedding and the children stopped spending regular time in their father’s care thereafter.
At the time the parties began living together the wife was in receipt of a [omitted] pension following the death of her first husband. She owned a property at [M] which was subject to a mortgage. The husband lived on a farming property at [W]. The property has been in the husband’s family for generations and was owned through a company, [R] Pty Ltd (“[R]”). [R] had been transferred to the husband’s sole name prior to cohabitation. He has worked the farm throughout his adult life and continues to do so.
The wife sold her [M] property in 1998 and realised net proceeds of approximately $45,000. She and the husband then purchased a property at [S] in [omitted], adjacent to land already owned by [R] and farmed by the husband. The wife contributed her net proceeds of sale to the purchase of the [S] property and the parties held that property as to 7/20ths to the wife and 13/20ths to the husband.
Both parties worked hard during their marriage. The husband devoted his efforts to running the farm. The wife managed the family’s domestic life, in addition to helping out with farming duties. She also took over responsibility for the general book work for the business, completing tax returns and so on. However, it was clear that the farm was the husband’s business and he was responsible for all decisions in relation to farm management.
After a few years the wife decided to update her [omitted] qualifications. She then obtained part time employment at [omitted] before moving on to [omitted]. The wife continued in that employment until separation.
In March 2002 the wife received an inheritance from her aunt and purchased a property at [W] in her sole name. She renovated the property and sold it in 2007, receiving net proceeds of $56,681.
Following ongoing difficulties within their relationship, the parties decided to separate in 2008. The husband purchased the wife’s 7/20ths interest in the [S] property for the sum of $95,439 in July 2008. The wife had visited her sister in Tasmania and decided to move there to live. She purchased a property at [C] in Tasmania, for the sum of $165,000. The parties finally separated in September 2008 when the wife and [X] moved to the new property in Tasmania. The wife remains living in Tasmania and continues to work part time in [omitted].
The husband has remained living on the [W] property and continues to run the farm.
The proceedings
These proceedings commenced in the Launceston Registry with the wife’s Initiating Application filed on 28 February 2011 and subsequently amended on 1 July 2011. The husband filed his Response on 18 July 2011.
The parties participated in a Conciliation Conference on 29 November 2011 but were unable to reach agreement. On 21 December 2011 the proceedings were transferred to the Adelaide Registry. On 8 February 2012 the proceedings were listed for trial on 19 and 20 July 2012.
The wife relied upon the following documents:
a)Amended Application for Final Orders filed 1 July 2011;
b)Wife’s Financial Statement filed 23 November 2011;
c)Wife’s Affidavit filed 23 November 2011;
d)Wife’s Financial Statement filed 28 November 2011;
e)Affidavit of the wife’s sister Ms R filed 25 May 2012;
f)Affidavit of the wife’s sister Ms G filed 31 May 2012;
g)Wife’s further Financial Statement filed 1 June 2012;
h)Affidavit of Mr R, Chartered Accountant, filed 20 July 2012.
The husband relied upon the following documents:
a)Response filed 18 July 2011;
b)Husband’s Financial Statement filed 14 July 2011;
c)Husband’s Affidavit filed 17 July 2012;
d)Affidavit of Ms J filed 19 June 2012;
e)Husband’s Trial Affidavit filed 19 June 2012;
f)Husband’s further Financial Statement filed 19 June 2012;
g)Affidavit of Ms L filed 17 July 2012.
The wife objected to the husband relying upon the Affidavit of his accountant, Ms L, as it was filed well out of time. Following argument, the Court received Ms L's Affidavit but the wife was granted liberty to arrange further expert accounting evidence. The Court also indicated that any costs application by the wife would be positively received, given Ms L's Affidavit was filed so late in the proceedings.
The trial proceeded before me on 19 and 20 July 2012. Both parties gave evidence and were cross examined, as were the wife’s sisters and the accountant, Mr R. The wife did not seek to examine Ms J. Ultimately the husband’s accountant Ms L was unavailable for cross examination.
I am satisfied both parties gave their evidence honestly and to the best of their recollection, as did the wife’s sisters. Mr R gave his evidence in a forthright, professional manner. As Ms L was not available for cross examination that inevitably undermines the weight the Court may place upon her evidence.
Legal principles
Section 79 of the Family Law Act 1975 sets out the factors that the Court must consider when deciding an application for property settlement. Various Full Court authorities have confirmed that the Court must follow a number of discrete steps when determining any adjustment of matrimonial property[1].
[1] Lee Steere & Lee Steere (1985) FLC 91-626
First the Court must identify the assets and liabilities arising from the parties’ marriage. The law does not require that assets held by the parties at separation must be preserved pending a final property settlement. In NHC v RCH[2] the Full Court quoted favourably from a previous decision, M & M[3], where an earlier Full Court said:
“There seems to be no appropriate basis for notionally adding back moneys that existed at separation but which have been subsequently spent on meeting reasonably incurred necessary living expenses. Neither the Family Law Act nor the case law require that parties go into a state of suspended economic animation once their marriage breaks down pending the resolution of the financial arrangements. Parties are entitled to continue to provide for their own support.”
[2] NHC v RCH (2004) FLC93-204
[3] M & M [1998] FamCA 42
The Full Court then cited the decision of C & C[4] in which a differently constituted Court expressed a similar view, saying:
“Whilst not seeking to place a fetter upon the exercise of discretion of a trial Judge in individual cases, it seems to us that the concept of adding moneys reasonably disposed of back into the pool ought to be the exception rather than the rule. The parties are entitled to reasonably conduct their affairs post-separation in a manner that is consistent with properly getting on with their lives.”
[4] C & C [1998] FamCA 143
Equally, the case law has identified a number of areas where it is appropriate to add back into the asset pool as “notional property” assets that are no longer available to the parties. Those areas include where assets held at separation have been used to pay one party’s legal fees[5], where assets have been disposed of wantonly or recklessly, or where one party has had the benefit of “a premature distribution of a proportion of the matrimonial assets”[6]. The latter two categories may require the Court to consider whether the funds or assets expended were “reasonably disposed of” or directed to what could be described as “reasonably incurred necessary living expenses”, or not.
[5] D J M & J L M (1998) FLC 92-816; NHC v RCH (supra)
[6] Townsend & Townsend (1995) FLC 92-569
Once the asset pool has been identified, the Court must then assess each party’s contribution during the marriage. The relevant factors pursuant to s.79(4)(a)-(c) include the parties’ direct and indirect financial contributions, any other contribution the parties may have made to the “acquisition, conservation or improvement of the matrimonial assets” and their respective contribution to the overall welfare of the family as a whole – what is often described as the “homemaker or parent” contribution.
The third step requires the Court to consider a range of factors set out in s.79(4)(d)-(g) including the matters set out in s.75(2) and the parties’ future needs. Finally the Court must be satisfied that the orders to be made are just and equitable as between the parties in accordance with s.79(2). As was noted by the Full Court in D & D[7]:
“… the task of the court in proceedings under s.79 is not akin to an accounting exercise. The task is to examine the facts of each case carefully to decide what is appropriate and just and equitable in the circumstances. There cannot be expected to be a universal answer to that question on any given set of facts. It is of the essence of judicial discretion that different minds may comfortably arrive at different conclusions.”
[7] D & D (2003) FamCA 473 at 49
Asset pool
To the parties’ credit, they have reached agreement on the asset pool, save for certain funds the husband seeks to notionally add back into the asset pool. The parties have also agreed to include their superannuation interests within a “one pool” approach and the Court is content to proceed in that manner, given the relatively modest value of the parties’ superannuation interests, compared to the total asset pool.
Should moneys received by the wife after separation be added back into the asset pool?
The husband argues that various sums received or retained by the wife at separation should be added back into the asset pool as follows:
·the sum of $95,439 paid to the wife by the husband for her interest in the [S] land;
·the sum of $12,300 apparently retained by the wife at separation from the net proceeds of sale of her [W] property;
·the wife’s Super [S] entitlement in the sum of $15,267, which she withdrew shortly after separation.
The [S] payment
The husband paid to the wife the sum of $95,439 on account of her 7/20ths interest in the [S] land. The payment from the husband consisted of an initial sum of $10,000 in September 2008, which the wife used towards her new home at [C]. In January 2009 she received the husband’s further payment of $85,000, together with a last rental cheque from [R], in the sum of $439. The wife deposited those funds into her mortgage account.
The wife subsequently drew down on her mortgage to meet the cost of various renovations to her [C] property. She also purchased various household items.[8] The property is currently valued at $195,000 and the wife’s mortgage stands at approximately $151,460.
[8] The wife’s expenditure on, or related to her home in [C] are listed in Annexure “A” to her trial affidavit filed 23 November 2011.
The husband argues that it is unjust and inequitable to allow the wife to make a further claim against the [S] property when she has already received $95,000 for her interest in that property. The husband argues that the sum of $95,000 should be added back into the asset pool but concedes that the wife’s [C] property should therefore go into the asset pool at its original purchase price of $165,000.
This transaction could arguably be viewed as a “premature distribution of a proportion of the matrimonial assets” to the wife, in the sense this phrase is discussed by Nicholson CJ in Townsend & Townsend.[9] But, unlike the situation in Townsend, this transaction obviously occurred with the full knowledge of both parties. The wife quite properly deposited the funds into her mortgage account. She did not rely upon these funds to meet her day to day living expenses such as mortgage repayments, groceries and the like.
[9] Townsend & Townsend, supra @ 81,654
The husband accepts that the wife spent the bulk of these funds on improvements to her new home. He did not suggest that the wife had spent the money recklessly, wantonly or negligently. The reality is she received these funds and has invested them in her current residential property and in purchasing the usual household goods that one would expect when setting up a new home.
It is unfortunate that the funds invested by the wife in the [C] property are not reflected in the current value of the property, but that is not a basis to include the [S] payment as an “add back”.
For his part, the husband had no hesitation in continuing on with his own financial affairs post separation. He continued to farm and trade through [R]. Grain was sold and monies used to purchase farming equipment in the usual course of business. The husband acknowledged that some items of equipment purchased after separation may now be worth less than the purchase price paid at the time.
This observation is not a criticism of the husband, it simply reflects the reality that both parties have continued to conduct their financial affairs in a responsible and reasonable manner since separation, as they are entitled to do. At times their decisions may impact adversely on the asset pool, but that of itself is not sufficient to include the relevant funds within a notional asset pool at trial.
Rather than adding back the sum of $95,000, I consider a more appropriate approach is to acknowledge that the funds received by the wife represent a considerable post separation contribution to the wife’s welfare and future financial security. She now enjoys the benefit of living in a comfortable home and her equitable interest in the property will increase with time. This is to her long term financial advantage.
Funds retained by the wife from sale of the [W] property
The wife sold this property in October 2007 and received net proceeds of $56,681. The wife sets out the various expenses paid from these funds in her trial affidavit.[10] I note that the husband did not challenge any of the wife’s evidence regarding her use of these funds.
[10] Wife’s trial affidavit @ paras.82, 83, 92
The husband argues the wife retained or has failed to account for approximately $12,300 from the proceeds of sale received by her. The actual amount proposed by Counsel to be “added back” seems to be based on two withdrawals made by the wife in April and May 2008. Insofar as the wife did have access to these funds just prior to separation, there is no evidence that would justify the Court now determining those funds were somehow used or retained inappropriately by the wife.
The husband is critical of the wife’s failure to produce specific bank statements in relation to her use of these funds but I reject any suggestion that the wife has deliberately withheld relevant financial documentation. The wife gave evidence that she used these funds to assist in setting up her new home in Tasmania and there was no challenge to this evidence. I decline to notionally include these funds in the asset pool.
The wife’s withdrawal of her superannuation entitlements from Super [S]
The wife withdrew her superannuation entitlements in July 2011, receiving net the sum of $15,267. She purchased her bus/campervan for the sum of $10,000. This vehicle has been included in the asset pool, with a value of $8,000, leaving a balance of $5,267 unaccounted for.
As with my discussion regarding the other claimed “addbacks”, I accept the wife was entitled to use the balance of these funds to meet her reasonable living expenses. It must be remembered that the wife earns a very modest income. It is hardly surprising if she needs to augment her income by liquidating her financial resources from time to time. I repeat, the husband does not argue that any of the wife’s post separation expenditure has been reckless, negligent or wanton. I consider the wife is entitled to go about her day to day life and arrange her financial affairs as she considers appropriate, as is the husband, provided that their expenditure is reasonable.
I decline to add back any of the sums referred to by the husband. Accordingly the matrimonial asset pool is as follows:
| Assets | Wife | Husband | |
| [R] Pty Ltd farming land | $1,295,000 | ||
| [R] farming plant and equipment | $347,000 | ||
| [R] livestock | $138,200 | ||
| [R] Premium Saver business bank account | $51,076 | ||
| Nissan X-trail | $21,000 | ||
| Husband’s ANZ account V2 | $35,000 | ||
| Husband’s ANZ account | $12,000 | ||
| Husband’s household contents | $5,000 | ||
| Husband’s superannuation | $77,691 | ||
| Land at [S] | $245,000 | $2,226,967 | |
| House at [C] | $195,000 | ||
| Wife’s bank account | $535 | ||
| Wife’s Toyota landcruiser | $8,000 | ||
| Wife’s Toyota Echo | $3,500 | ||
| Wife’s bus | $8,000 | ||
| Wife’s household contents | $5,000 | ||
| Wife’s Horse float | $12,000 | ||
| Wife’s superannuation – Hesta | $21,414 | $253,449 | |
| Total Assets | $2,480,416 | ||
| Liabilities | |||
| Wife’s mortgage | ($151,460) | ($151,460) | |
| [R] account (overdrawn) | ($7,689) | ||
| Husband’s estimated tax debt related to farm | ($33,333) | ($41,022) | |
| Total Liabilities | ($192,482) | ||
| Total Net Assets | $101,989 | $2,185,945 | $2,287,934 |
Based on the above figures, the total net asset pool is $2,287,934. As the table indicates, the wife presently holds or retains net assets to the value of $101,989, or roughly 5% of the total asset pool. The husband presently holds or has control of net assets valued at approximately $2,185,945, or roughly 95% of the total asset pool.[11]
[11] Statement of Agreed Assets and Liabilities, MFI W2 tendered on 19 July 2012
Contributions
The parties are unable to agree upon the value of the husband’s interest in [R] at the time they began living together. The husband estimated that the value of his interest in the farming business at the time to be in the region of $850,000, taking into account the real estate holdings, which he estimated were valued at approximately $800,000, and allowing for various debts owed by the business.
Neither the husband’s own estimates, nor Memoranda of Transfer documents from 2003 provide any sound evidentiary basis for me to determine the value of [R]’s real estate holdings in 1996. Neither party chose to present any historical valuation evidence. In the circumstances I am unable to precisely quantify the value of the husband’s initial direct financial contribution through his interest in [R].
The wife brought into the marriage her modest equity in the [M] property, together with a motor vehicle and household furnishings and effects. Again, the value of these items in 1996 is uncertain, although the wife sold her [M] property in 1998 and realised net proceeds of approximately $45,000.
While I cannot allocate a precise value to the husband’s interest in [R], it represented an overwhelmingly greater direct financial contribution at the time of cohabitation, comparative to the wife’s direct financial contribution.
Both parties received inheritances during the marriage. These various inheritances reflect further direct financial contributions made by each party. Again, the inheritances received by the husband were of substantially greater value than that received by the wife.
While the husband’s initial and other lump sum financial contributions greatly outweigh those of the wife, I am satisfied that the parties’ contributions should otherwise be assessed as equal. The parties kept their finances separate during their marriage, but they both made an ongoing direct financial contribution from their available income. The wife met most of the general housekeeping expenses from her pension and subsequently from her wages. The family lived in the homestead located on the [R] land and the husband met the other associated expenses such as rates and utilities.
It must be remembered that the Court does not undertake an accounting exercise when assessing the parties’ contributions. Not all contributions can be allocated a defined “dollar value” and that is not the relevant approach. The husband agreed that he considered he and the wife were “a partnership” during their marriage, even though they kept their finances separate. The husband further acknowledged that the wife met the bulk of expenses associated with supporting her daughter [X], including private school fees for [X] while she was attending boarding school.
The husband clearly worked hard running the farm and the wife acknowledges his contribution in that regard. She agreed that he undertook 90% of the activity involved in running the farm. Equally, the husband agreed that the wife worked hard managing the parties’ domestic life and improving their immediate domestic environment in and about the home. Her “homemaker” contribution to the welfare of the family was significant and should not be overlooked.
The wife also assisted the husband about the farm as required and took over responsibility for preparing the financial accounts and “doing the books” for the business. While the wife was paid a salary for this work in later years, I am satisfied her wages would have been directed to the overall welfare of the family.
Both parties have contributed to the overall security of their family unit by virtue of the ongoing financial and emotional support they provided to each other during their married life together. Their mutual support enhanced each party’s capacity to work hard and improve their financial circumstances.
Both parties’ indirect contributions need to be taken into account, not just the wife’s contributions to the husband’s interest in [R]. The direct and indirect contributions made by both parties during the marriage, both financial and otherwise, are now reflected in the assets acquired during the marriage, whether or not those assets were held jointly, or in one party’s name.
As at the point of separation, taking into account the husband’s much greater initial financial contribution, I conclude the husband’s contribution should be assessed at 75% and the wife’s contribution at 25%, before considering the post separation contributions made by each party.
The wife has had the benefit of receiving payment from the husband for her 7/20ths legal interest in the [S] land, together with the net proceeds of her superannuation and the balance remaining from the net proceeds of sale from the [W] property. These funds represent a significant benefit retained by the wife, particularly the [S] payment.
The wife has been able to undertake a number of improvements to her property at [C]. These renovations have clearly increased the quality and amenity of her residential home, even if the funds spent are not yet fully reflected in the value of the property. The wife’s capacity to make these improvements and purchase other household items was greatly enhanced by the funds she received by the husband or otherwise accessed after separation. These funds are no longer available for distribution between the parties, but should be acknowledged as a post separation contribution to the wife’s welfare.
Taking into account all of the above, I find the husband’s overall contributions should be assessed at 80% and the wife’s overall contributions should be assessed at 20%.
Section 75(2) factors
Both parties are in receipt of a modest income. The wife’s present income exceeds that of the husband but it must be remembered the husband could choose to allocate himself a higher salary from [R] at any time.
On either party’s proposed outcome, there is no doubt that the husband will retain substantially greater net assets than will be retained by the wife. The bulk of those assets are tied up in his farm but, nonetheless, the husband is the sole director and shareholder of [R] and this company is virtually debt free. He is very much in control of his future financial destiny.
Both parties are in their mid-50s and in reasonable health. Both parties continue to lead a modest lifestyle. There is no suggestion that either party is unable to continue working as they presently do. The wife is presently working part time. It may be she is able to increase her working hours in the future but either way she is able to provide for her own support, whether through part time or full time employment.
The husband argues that there are no factors that warrant any adjustment on account of s.75(2) factors but I disagree.
The parties were married for 12 years. Both parties worked hard and devoted the whole of their efforts to the welfare of the family and improving the family’s overall financial circumstances.
The husband’s proposal would leave the wife with very limited financial resources, aside from her home. She would have little by way of a “nest egg”, to protect her against any unexpected or unforeseen exigencies that may arise in the future. I do not consider such an outcome would be just or equitable.
Taking into account the parties’ future needs and their right to maintain a reasonable standard of living into the future, I am satisfied that a modest adjustment on account of s.75(2) factors in the wife’s favour is warranted, in the region of 5%.
Conclusion
Taking into account the above findings, the net asset pool of $2,287,934 should be divided as to 25% to the wife and 75% to the husband. On that basis the wife will retain assets to the value of $571,984 and the husband should retain assets to the value of $1,715,950.
The parties would each retain the following assets and liabilities:
| Assets | Wife | Husband |
| House at [C] | $195,000 | |
| Wife’s bank account | $535 | |
| Wife’s Toyota landcruiser | $8,000 | |
| Wife’s Toyota Echo | $3,500 | |
| Wife’s bus | $8,000 | |
| Wife’s household contents | $5,000 | |
| Horse float | $12,000 | |
| Superannuation – Hesta | $21,414 | |
| $253,449 | ||
| Liabilities | ||
| Wife’s mortgage | ($151,460) | |
| Total Net Assets held by wife | $101,989 | |
| PLUS payment due from the husband | 469,995 | |
| Wife to retain 25% of net asset pool | $571,984 | |
| Assets | ||
| [R] Pty Ltd farming land | $1,295,000 | |
| Farming plant and equipment | $347,000 | |
| Livestock | $138,200 | |
| [R] Premium Saver business bank account | $51,076 | |
| Nissen X-trail | $21,000 | |
| Husband’s ANZ account V2 | $35,000 | |
| Husband’s ANZ account | $12,000 | |
| Husband’s household contents | $5,000 | |
| Husband’s superannuation | $77,691 | |
| Land at [S] | $245,000 | |
| 2,226,967 | ||
| Liabilities | ||
| [R] account (overdrawn) | ($7,688) | |
| Husband’s estimated tax debt related to farm | ($33,333) | |
| Total Net Assets held by husband | $2,185,945 | |
| LESS payment to the wife | ($469,995) | |
| Husband to retain 75% of net asset pool | $1,715,950 |
Is this outcome just and equitable?
The husband is retaining the bulk of the asset pool, which properly reflects his greater financial contribution. The wife will be in a position to discharge her mortgage, should she choose to do so, and still retain a modest amount to invest and generally to provide her with a level of ongoing financial security. This is appropriate, given her limited income.
Obviously the husband will need to dispose of assets or arrange finance to meet his obligations under these orders. The husband argues that he may suffer significant taxation implications if he is required to dispose of any land held through [R], as he can only receive funds through the proper payment of dividends.
It is fair to say that there was some uncertainty about the potential impact upon the husband in this regard. Counsel for the husband urged the Court to consider making contingent orders dealing with various possibilities and allowing for a potential taxation impost upon the husband.
The Court heard evidence from Mr R and considered the Affidavit of Ms L, regarding the options available to the husband in that regard. Unfortunately Ms L was not available for cross examination, but
Mr R’s evidence was very helpful on this point.
Mr R agreed there could be taxation implications but considered the husband had further re-financing options open to him, including arrangements for either a secured or unsecured loan from the company [R], pursuant to Division 7A of the Income Tax Assessment Act1936. According to Mr R, the 2011 financial statements for [R] indicate that the company owes the husband $88,000, which could be repaid to him without attracting any taxation liability.
I note the husband also has available to him land and savings valued at approximately $290,000, separate from his interest in [R]. Potentially therefore the husband may only need to borrow or raise an amount less than $200,000, even allowing for associated sale/legal costs. I further note that in 2008/09 the husband was apparently able to raise the sum of $95,000 to pay to the wife. He has not placed any evidence before the Court suggesting that raising this sum caused him any taxation difficulties in the relevant financial year.
On balance, I am satisfied that the husband should be able to raise the funds necessary without incurring a significant taxation liability. The husband will need to borrow funds to pay out the wife’s entitlement and to that extent there are financial implications for him in giving effect to any property settlement order. He will have ongoing repayments to manage but, on balance, I am confident in the husband’s capacity to manage his increased debt burden. I am further confident that he will be able to structure his finances in such a way that any taxation implications will be minimal.
The orders that I propose still leave a situation where the husband is retaining a significantly greater percentage of the matrimonial asset pool and where the wife’s future financial security is far less secure in terms of the assets and financial resources available to her. However, when I take into account my findings regarding the parties’ respective contributions and their future needs, I am satisfied that this outcome is just and equitable as between the parties.
I now make orders as published at the commencement of these reasons.
I certify that the preceding seventy-four (74) paragraphs are a true copy of the reasons for judgment of Kelly FM
Date: 17 August 2012
Hickey & Hickey (2003) FLC 93-143
AJO v GRO (2005) FLC 93-218
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