Willans and Enmore (No 2)
[2021] FamCA 340
FAMILY COURT OF AUSTRALIA
| WILLANS & ENMORE (NO. 2) | [2021] FamCA 340 |
| FAMILY LAW – ADJUSTMENT OF PROPERTY INTERESTS – 11-12 year de facto relationship – substantial interests involved. FAMILY LAW – EVIDENCE – expert evidence – concurrent expert evidence – hot tub – relevant principles. |
| Corporations Act 2001 (Cth), s 180 Federal Court of Australia, Expert Evidence Practice Note (GPN-Expt), 25 October 2016 Federal Court Rules 2011 (Cth), r 23.15 |
| Abalos v Australian Postal Commission (1990) 171 CLR 167 Baker v Towle (2008) 39 Fam LR 323 Brunskill v Sovereign Marine & General Insurance Co Ltd (1985) 59 ALJR 842 In the Marriage of Aleksovski (1996) 20 Fam LR 894 In the Marriage of Gill (1984) 9 Fam LR 969 Jabour v Jabour (2019) 59 Fam LR 475 Jones v Hyde (1989) 63 ALJR 349 Williams & Williams [2007] FamCA 313 Zaruba & Zaruba [2017] FamCAFC 91 Geraldine Andrews QC & Richard Millett QC, Law of Guarantees (Sweet & Maxwell, 6th ed, 2011) |
| APPLICANT: | Ms Willans |
| RESPONDENT: | Mr Enmore |
| FILE NUMBER: | SYC | 4725 | of | 2017 |
| DATE DELIVERED: | 28 May 2021 |
| PLACE DELIVERED: | Melbourne |
| PLACE HEARD: | Sydney |
| JUDGMENT OF: | Wilson J |
| HEARING DATE: | 15, 16, 17, 18, 19, 24 February 2021 & 4 March 2021 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Ms S. Christie SC |
| SOLICITOR FOR THE APPLICANT: | Greg Alfonzetti Solicitor |
| COUNSEL FOR THE RESPONDENT: | Mr I. Coleman SC |
| SOLICITOR FOR THE RESPONDENT: | Andrew Cohen Solicitor |
Orders
On or before 4pm on 11 June 2021 the parties must bring in a minute that gives effect to these reasons.
Note: The form of the order is subject to the entry of the order in the Court’s records.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Willans & Enmore has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
Note: This copy of the Court’s Reasons for Judgment may be subject to review to remedy minor typographical or grammatical errors (r 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to r 17.02 Family Law Rules 2004 (Cth).
| FAMILY COURT OF AUSTRALIA AT MELBOURNE |
FILE NUMBER: SYC 4725 of 2017
| Ms Willans |
Applicant
And
| Mr Enmore |
Respondent
REASONS FOR JUDGMENT
Introduction
In this proceeding the applicant applied for an adjustment of property interests following the November 2016 cessation of a de facto relationship between the parties. The commencement date of the relationship was given differently by the parties, the applicant contending October 2004 and the respondent contending April 2005.
The interests of the parties in property included shares in a company called J Pty Ltd (“JPL”), real property in New South Wales, cash-at-bank, a self-managed superannuation fund and other property described below in greater detail.
Synopsis
On behalf of the applicant it was submitted that property should be divided in percentages that were 55% in her favour and 45% in the respondent’s favour. Conversely, the respondent submitted that I should make orders the effect of which was to divide property as to 54% in the respondent’s favour and 46% in the applicant’s favour. Even recognising the relatively modest disparity in the parties’ initial contributions, in my view a just and equitable order dividing property interests of the parties is 50% to the applicant and 50% to the respondent. I direct the parties to bring in a minute that gives effect to these reasons.
Some background information
The parties
At the trial of this proceeding, the applicant was 50 years of age and the respondent 57. At the date of their first meeting, it was common ground that the applicant was working in a firm that provided financial services to JPL. The applicant described her occupation as a finance professional. She produced her advanced diploma dated July 2010 that she obtained from AC College. While Mr Coleman SC initially cross-examined the applicant in relation to her status as a qualified finance professional, I accept that she was so qualified albeit not to university level. She said in evidence she has spent substantial periods in practice preparing documents for her clients.
The respondent gave evidence[1] that he was a “tradesperson”. He also described himself at various points of his viva voce evidence as a trade engineer.[2]
[1] Part C of his affidavit made 5 December 2020 (exhibit R6 in the proceeding).
[2] Transcript pages 108 & 170.
The respondent established JPL. The date of its incorporation was not given in evidence nor was a copy of its certificate of incorporation. According to a form 484 lodged with the Australian Securities and Investments Commission (“ASIC”), as at 1 June 2005 the issued share capital of JPL stood at $1. That was increased to $2 upon the allotment to the applicant of one fully paid ordinary share in the capital of JPL. According to a different form 484 lodged with ASIC, the applicant is recorded as having been appointed as a director of JPL on and from 1 May 2005. According to yet another form 484 lodged with ASIC, on 21 February 2006 the applicant is recorded as having ceased to hold office as a director of JPL.
The respondent offered very little by way of explanation of the applicant’s status as a director of JPL. Conversely, the applicant explained the circumstances in which she became a director of and shareholder in JPL then later how she ceased to be a director of JPL. Her evidence was best synthesised as follows –
a)on 1 June 2005 she became a shareholder in JPL;
b)she was also a director of JPL mistakenly believing that she needed to be a director in order to be a shareholder; and
c)when she learned that she did not need to be a director in order to be a shareholder, she resigned her directorship.
She did not produce and minute of a shareholder’s meeting recording a resolution for her appointment either as a shareholder or as a director. It was not readily apparent from her evidence in toto that she was particularly well practised in matters of corporate governance, company law or secretariat matters. That said, the applicant’s role in the financial management of JPL assumed a high degree of importance in this litigation.
The applicant’s property at the commencement of the relationship
The applicant deposed to her relationship with the respondent commencing in October 2004. She deposed in paragraph 12 of her affidavit made 30 November 2020 that she had no liabilities at that time and instead she had assets aggregating in value the sum of $113,712, made up as follows –
a)superannuation entitlements with Super Fund 1 and Super Fund 2, the estimated amount of which was $30,000;
b)Motor Vehicle 1 the estimated value of which was $3,700;
c)cash at bank the estimated amount of which was $7,300;
d)NAB term deposit in the sum of $68,000; and
e)748 CC Company shares (worth approximately $6.30 at the time) totalling $4,712.
Her superannuation component of approximately $30,000 was made up of –
a)Super Fund 1 in the sum of $1,003.20; and
b)Super Fund 2 in the sum of $29,215.02.
The applicant otherwise verified –
a)a bank withdrawal in the sum of $3,708 for the purchase of the Motor Vehicle 1;
b)a bank statement showing cash-at-bank of $7,395;
c)a term deposit certificate in the sum of $68,000; and
d)a dividend payment statement in respect of 748 fully franked shares in CC Company Ltd, the issued share price being $6.30.
The respondent’s property at the commencement of the relationship
The respondent did not record his financial circumstances at the commencement of the relationship. Instead, in the early passages of his trial affidavit made 5 December 2020[3] the respondent deposed to the applicant’s employment history with a particular firm of finance professionals, he deposed to JPL and he deposed to his trust and faith in the applicant. He said the following –
The Applicant was my professional advisor and initially as my lover, I took her advice to be benign and in my best interests because I trusted the Applicant's advice and virtually all of my decisions, were made at the proposal of the Applicant.
[3] Exhibit R6 in the proceeding.
That corresponded with the applicant’s statement in paragraph 11 of her trial affidavit. There she deposed as follows –
As a result of my work for Mr Enmore and JPL prior to and following the commencement of the relationship I was intimately acquainted with the financial circumstances of both Mr Enmore and JPL.
The applicant recorded the respondent’s assets and liabilities at the commencement of their relationship. Aside from her estimated value of the respondent’s interest in JPL described as item (a) in the table below that I ruled inadmissible,[4] the applicant attributed estimated values in the following terms to the corresponding assets –
[4]Willans & Enmore [2021] FamCA 73 (at [2]).
(a)
his interest in JPL
$3,343
(b)
M Street, Suburb N (“Suburb N property”)
$400,000
(c)
one third share in property at DD Street, Suburb EE NSW (“Suburb EE property”)
$160,000
(d)
one half share in property at FF Street, GG Town NSW (“GG Town property”)
$17,000
(e)
storage unit at B Street, Suburb C NSW (“B Street”); estimated
$47,500
(f)
Superannuation in his self-managed superannuation fund, the JPL Superannuation Fund (“SMSF”)
$113,000
$740,843
The applicant also tabulated the respondent’s liabilities to aggregate $523,182, made up of –
a)a credit facility with HH Bank in the sum of $326,000; and
b)the sum guaranteed[5] by the respondent in relation to borrowings over a one third share in real estate known and described as DD Street, New South Wales, namely $197,182.
[5] Strictly speaking, that amount was a contingent liability, there being no actual liability unless and until default under the principal debt occurred enlivening the guarantor’s liability under the guarantee, see Geraldine Andrews QC & Richard Millett QC, Law of Guarantees (Sweet & Maxwell, 6th ed, 2011).
It must be acknowledged that the amounts the applicant attributed to real estate said to represent the value of that real estate were mere estimates. They were not admissible valuations.[6]
[6] Dasreef Pty Ltd v Hawchar (2011) 243 CLR 588, Makita (Australia) Pty Ltd v Sprowles (2001) 52 NSWLR 705 and Honeysett v The Queen (2014) 253 CLR 122.
The balance sheet
Initially the parties each produced a separate balance sheet on which each recorded his and her version of the value of property in issue in this case. However on the final day of this trial a joint balance sheet was put in evidence (agreed exhibit 3) effectively superseding the separate balance sheets produced at the commencement of the trial. The joint balance sheet is set out hereunder –
| Ownership | Description | Wife/de facto partner’s value | Husband/de facto partner’s value | ||
| ASSETS | |||||
| 1 | Joint | F Street, Suburb G | $2,175,000 | $2,175,000 | |
| 2 | Joint | JJ Street, W Town | $750,000 | $750,000 | |
| 3 | Joint | HH Bank acct no. ending …14 | $64,520 | $64,520 | |
| 4 | Joint | HH Bank term deposit acct no. ending …14 | $435,579 | $435,579 | |
| 5 | Joint | HH Bank term deposit acct no. ending …78 | $259,760 | $259,760 | |
| 6 | W | HH Bank Savings acct no. ending …09 (balance at 10.2.21 -see A 39 in W’s tender bundle) | $6,492 | $6,492 | |
| 7 | W | HH Bank cheque acct no. ending …25 (balance at 10.2.21 – see A 40) | $4,167 | $4,167 | |
| 8 | W | HH Bank term deposit acct no. ending …93 (balance @ 10.2.21– see A 42 ) | $50,011 | $50,011 | |
| 9 | W | NAB cheque acct (@10.2.21 – see A 41) | $3,253 | $3,253 | |
| 10 | W | KK Bank acct no. ending …54 (10.2.21 – see A 38) | $5,670 | $5,670 | |
| 11 | W | ANZ ETrade acct no. ending …51 (10.2.21 – see A37) | $1,667 | $1,667 | |
| 12 | W | Funds in trust in solicitor’s trust A/c – $60,000 | N/A | $60,000 | |
| 13 | H | HH Bank acct no. ending …83 | $5,963 | $5,963 | |
| 14 | H | Motor Vehicle 2 | $12,000 | $12,000 | |
| 15 | H | Motor Vehicle 3 | $9,000 | $9,000 | |
| 16 | H | Motor Vehicle 4 | $30,000 | $30,000 | |
| 17 | H | Motor Vehicle 5 | $10,000 | $10,000 | |
| 18 | H | Motor Vehicle 6 | $10,000 | $10,000 | |
| 19 | W | LL Company shares | $2,085 | $2,085 | |
| 20 | W | MM Company shares | $9,079 | $9,079 | |
| 21 | W | NN Company shares | $1,969 | $1,969 | |
| 22 | W | OO Company shares | $5,272 | $5,272 | |
| 23 | W | PP Company shares | $1,132 | $1,132 | |
| 24 | W | CC Company shares | $7,858 | $7,858 | |
| 25 | W | QQ Company shares | $6,351 | $6,351 | |
| 26 | W | RR Company shares | $2,659 | $2,659 | |
| 27 | W | SS Company shares | $5,800 | $5,800 | |
| 28 | W | TT Company shares | $1,038 | $1,038 | |
| 29 | W | UU Company shares | $3,421 | $3,421 | |
| 30 | W | VV Company shares | $3,579 | $3,579 | |
| 31 | H | Share portfolio being WW Company $36,544, XX Company $3,749 (see A 13) and YY Company $1,683 (see A 12); total $41,986 | $41,986 | $41,986 | |
| 32 | Joint | J Pty Ltd shares | $3,592,120 | $3,230,000 | |
| 33 | Joint | Furniture & household items | $11,000 | $11,000 | |
| 34 | ZZ Pty Ltd | $200 | $200 | ||
| 35 | |||||
| Total | $7,528,631 | $ 7,226,511 | |||
| ADDBACKS | |||||
| 36 | |||||
| Total | |||||
| LIABILITIES | |||||
| 37 | Joint | Division 7A loan agreement as at 30 June 2020 | $126,470 | $126,470 | |
| 38 | Joint | Sundry receivable on sale Motor Vehicle 7 | $79,800 | $79,800 | |
| 39 | H | Directors loan 2017 | $4,773 | $4,773 | |
| 40 | H | Directors loan 2018 | $8,268 | $8,268 | |
| 41 | H | Directors loan 2020 | $2,906 | $2,906 | |
| 42 | Joint | Mortgage over Suburb G property | $55 | $55 | |
| 43 | H | Liability to Mr AB | NIL | $15,400 | |
| 44 | H | Liability to repay JPL for SMSF tax | NIL | $16,047 | |
| Total | $222,272 | $253,719 | |||
| SUPERANNUATION | |||||
| Member | Name of Fund | Type of Interest | Wife/de facto partner’s value | Husband/de facto partner’s value | |
| 45 | W | JPL Super fund | SMSF | $721,749 | $721,749 |
| 46 | H | JPL Super fund | SMSF | $1,077,676 | $1,077,676 |
| Total | $1,799,425 | $1,799,425 | |||
The contested issues in this case
Despite the large number of items of property that were involved in this case, and despite the trial of this proceeding occupying eight sitting days, the contested issues in the case were tolerably confined. In précis form, they may be recorded as follows –
a)in relation to the real property called Suburb G, whether an order should be made –
i)requiring the applicant to discharge the mortgage encumbering the property;
ii)requiring the respondent to transfer to the applicant the whole of his right, title and interest in that property;
b)whether the respondent should be ordered to indemnify the applicant and hold her harmless in respect of any liability to which she be exposed in relation to what became known as the Division 7A loan;
c)whether an order should be made requiring the respondent to transfer to the applicant the whole of his right, title and interest in the real property called in this litigation W Town;
d)whether the respondent should be ordered to transfer to the applicant the whole of his right, title and interest in the parties’ joint bank accounts;
e)whether the respondent should be ordered to pay the applicant the sum of $349,000; upon such payment being made, whether the applicant should be required to transfer to the respondent her shareholding in JPL;
f)whether any loan account in JPL in the applicant’s name should be assigned to the respondent;
g)whether the applicant’s interest in the existing self-managed superannuation fund should be rolled into a new fund to be established in her sole name and for her sole benefit;
h)whether an order should be made transferring to the applicant’s new superannuation fund vacant possession of and title to B Street Suburb C, New South Wales with a financial adjustment being made;
i)whether an order should be made requiring the applicant to resign as a director of the existing superannuation fund and to transfer her shareholding in the trustee to the respondent;
j)whether an order for costs should be made; and
k)the true value of JPL.
In opening for the respondent, Mr Coleman SC identified other issues on which he said a determination was needed. They included –
a)whether, as the respondent contended, the respondent was largely responsible for the success of JPL;
b)conversely, whether as the respondent contended, the applicant was properly remunerated at the rate of $400 per day for the two days a week she worked in the JPL business;
c)whether the respondent’s contributions with respect to the acquisition, conservation and improvement of JPL were greater than were those of the applicant;
d)whether the applicant’s receipt of rental income from the W Town property in the post-separation period was relevant; and
e)what was the income generation capacity of W Town.
In final addresses counsel framed the issues that fell for my determination in this case. For the applicant, Ms Christie SC largely embraced the encapsulation of the issues set out immediately above save for the last proposition, somewhat generically formulated by me as “the true value of JPL”. Ms Christie SC refined that issue as follows[7] –
MS CHRISTIE SC: Now, I guess I would unpack 11 to say, has there been adequate disclosure in order to ascertain the true value of the shares in the company.
HIS HONOUR: Well, what happens if the answer to that is no?
MS CHRISTIE SC: Then, consistent with the authorities, we take the information that we have available to us. We are not entitled to guess, but we are entitled to rely upon the expert valuation evidence that we have, and would therefore err on the side of caution in that regard, and prefer, I would say, in this case, the evidence of the applicant’s valuer. I would further unpack the question of the true value of JPL to say, in this particular case the court will also be looking at the value of the entity as a source of income assets and resources of the husband, and I will explore that in my submissions. So that captures the issues from the applicant’s perspective.
[7] Transcript 4 March 2021 P354 L40 – P355 L5.
On behalf of the respondent, Mr Coleman SC neither adopted nor rejected my distillation of the issues from the respondent’s point of view but rather advanced other propositions said to represent the issues on which the respondent sought a determination. They are set out in paragraphs 18 and 19 above.
Agreed issues
Ms Christie conducted her final address on the basis that several issues were agreed. They were as follows –
a)in relation to the real property called Suburb G, whether an order should be made –
i)requiring the applicant to discharge the mortgage encumbering that property; and
ii)requiring the respondent to transfer to the applicant the whole of his right title and interest in that property;
b)whether the respondent should be ordered to indemnify the applicant and hold her harmless in respect of any liability to which she be exposed in relation to what became known as the Division 7A loan;
c)whether an order should be made requiring the respondent to transfer to the applicant the whole of his right, title and interest in the real property called in this litigation W Town; and
d)whether any loan account in JPL in the applicant’s name should be assigned to the respondent.
JPL
A substantial amount of the trial was devoted to establishing the true value of JPL as at a particular date. The applicant and the respondent provided certain factual information that went some way to assisting in the determination of the value of JPL. However, expert evidence was given on point. For the applicant, that expert evidence was given by Mr T, chartered accountant, in –
a)his affidavit made 1 December 2020 and the exhibits thereto;[8]
b)his affidavit made 27 January 2021 and the exhibits thereto;[9] and
c)the joint statement of experts dated 3 February 2021.[10]
[8] Exhibit A6 in the proceeding.
[9] Exhibit A7 in the proceeding.
[10] Agreed exhibit 1 in the proceeding.
For the respondent, expert evidence was given on point by Mr AD in –
a)his affidavit made 23 November 2020 and the exhibits thereto;[11] and
b)the joint statement of experts dated 3 February 2021.[12]
[11] Exhibit R10 in the proceeding.
[12] Agreed exhibit 1 in the proceeding.
Financial information concerning JPL was adduced also by the applicant and respondent.
The parties agreed that Mr T and Mr AD would give their expert evidence concurrently that is to say, “in the hot tub”. The Family Law Rules are silent on the extensive modern practice of concurrent expert evidence, unlike Rule 23.15 of the Federal Court Rules. The parties agreed to adopt the Federal Court’s Concurrent Expert Evidence Guidelines.[13] In the passages below I have extracted the relevant aspects of the evidence each expert gave. Before turning to that it is necessary to make certain observations about JPL based on the documentary and viva voce evidence adduced in this litigation.
[13] Annexure B to Federal Court of Australia, Expert Evidence Practice Note (GPN-Expt), 25 October 2016. The Hon. Justice Rares has written extrajudicially on point in Using the “Hot Tub” – How Concurrent Expert Evidence Aids Understanding Issues (FCA) [2010] FedJSchol 20 and so too has the Hon. Justice John Middleton in Concurrent expert evidence: still flavour of the month? (FCA) [2018] FedJSchol 16.
Very little in the way of JPL’s financial information went into evidence in relation to the years 2005 and immediately following. The JPL trading and profit and loss statement for the year ended 30 June 2005 revealed a gross trading profit[14] of $614,105.70 as compared to a gross trading profits for the previous financial year of $489,718.67. JPL’s pre-tax profit from ordinary activities for the financial year ended 30 June 2004 was $63,207 whereas its pre-tax profit from ordinary activities in the financial year ended 30 June 2005 was $290,603.69. JPL’s unappropriated profit and net assets for the financial year ended 30 June 2004 was $3,343.36 whereas its unappropriated profit and net assets for the financial year ended 30 June 2005 was $86,482.73.
[14] That is to say, not including income derived from interest received.
For the financial year ended 30 June 2004 JPL reported zero taxable income.[15]
[15] Exhibit A42 to the affidavit of the applicant made 30 November 2020, being exhibit A1 in the proceeding.
The parties met in late 2004, as was common cause. They commenced a romantic relationship in early 2005 (according to the respondent) or late 2004 (according to the applicant), in either case during the 30 June 2005 financial year.
At least one reason for JPL’s enhanced profitability was given by the applicant at paragraph 105 and following of her affidavit, exhibit A1 in this proceeding. In essence she deposed to JPL’s bookkeeper “overpaying several suppliers quite excessively” (her words) and she corrected that by inaugurating procedures that ensured stricter levels of internal control. The applicant stated that from early 2005 JPL’s profitability increased. Other financial information about JPL emerged from the documentation exhibited to the parties’ trial affidavits. It was mostly inconsequential. For example, the respondent exhibited minutes of meetings of the director of JPL at which declarations were made in respect of dividends to be paid out of JPL’s profits over several financial years, namely –
a)for 30 June 2005 in which the dividend was $120,283;
b)for 30 June 2006 in which the dividend was $110,156;
c)for 30 June 2007 in which the dividend was $127,000;
d)for 30 June 2009[16] in which the dividend was $60,191; and
e)for 30 June 2011 in which the dividend was $69,450.
[16] No minute was exhibited in relation to the financial year ended 30 June 2008.
In debate with Ms Christie SC I raised with her how the evidence offered very little insight into the parties’ financial position at the commencement of the relationship. She submitted[17] that the evidence revealed that at the commencement of the relationship the parties’ respective financial position was as follows –
a)the applicant – $113,712;[18] and
b)the respondent – $217,661 ($740,843 in assets[19] less $523,182 in liabilities[20]).
[17] In her opening address on 15 February 2021 at T12 L17-22 and then again in her final address on 4 March 2021 at T368 L3-12.
[18] Paragraph 12 of her trial affidavit (exhibit A1 in this proceeding).
[19] Paragraph 19 of the applicant’s trial affidavit (exhibit A1 in this proceeding).
[20] Paragraph 20 of the applicant’s trial affidavit (exhibit A1 in this proceeding).
Ms Christie contended that throughout the duration of their relationship over 11-12 years the parties’ contributions were equivalent, although not necessarily financially equal. By way of amplification of that proposition, Ms Christie argued –
a)the applicant provided financial services to JPL for a substantial period;
b)the applicant provided financial advice;
c)the applicant embarked upon a series of very successful investments, especially in respect of the superannuation fund, now worth approximately $1.8m;
d)she recommended the acquisition of the property in W Town; and
e)the applicant was financially savvy.
Ms Christie SC urged me to adopt an holistic approach towards the assessment of contributions. She relied on observations to that effect in Singerson & Joans[21] and in Dickons v Dickons.[22] Ms Christie submitted as follows –
In those circumstances it’s appropriate to conclude that the contributions have been equal.[23]
[21] [2014] FamCAFC 238.
[22] (2012) 50 Fam LR 244.
[23] T371 L9-10.
On behalf of the respondent, the principle arena of debate related to the value of JPL and certain amounts that ought not be added back, so Mr Coleman SC submitted.
The property
The parties’ agreed balance sheet showed disputed items in a particular manner. Each item was identified by a number and counsel addressed in respect of each disputed item. It is convenient to adopt that approach in this assessment of each disputed item, while concurrently itemising agreed issues. The balance sheet became a separate agreed exhibit[24] and is set out in paragraph 17 above.
[24] Agreed exhibit 3 in the proceeding.
Legal fees
On the joint balance sheet at item 12 an amount of $60,000 was mentioned described as “funds in trust in solicitor’s trust a/c – $60,000”. The value attributed as the respondent’s was $60,000 whereas the value attributed as the wife’s was “N/A”. The entry of $60,000 as item 12 represented a contention that the husband had applied JPL funds towards payment of his personal legal expenses. On behalf of the applicant Ms Christie pointed to certain entries in JPL’s bank statements to substantiate the transfer of funds from JPL to the respondent’s solicitor’s office account. No dispute emerged about the quantum of those transfers and both parties proceeded on the basis that the sum of $60,000 was correct.
Ms Christie argued that the respondent had applied cash-at-bank owned by JPL in payment of his legal fees and that it was necessary for those funds to be brought to account for the purposes of this litigation on the basis that the respondent’s application of those funds in paying his own legal fees had the effect of diminishing the base of assets available for adjustment in this case. Ms Christie relied on the decision in Chorn & Hopkins[25] for the correct approach to be applied in any consideration of legal fees paid from funds otherwise available for adjustment.
[25] (2004) 32 Fam LR 518.
In cross-examination, the respondent gave equivocal evidence about his payment of legal fees.[26] Initially the respondent disagreed that he paid his solicitor Mr Cohen, stating he paid another legal firm, then the respondent said he was unable to remember. Then the following exchange emerged –
[26] T120 – T122.
MS CHRISTIE SC: Wait for the question. In the last two years, have you, on behalf of JPL, engaged Mr Cohen to provide legal services unrelated to any matter involving Ms Willans?
MR ENMORE: Not to my memory.
MS CHRISTIE SC: Right. In the two years prior to that – so, in the last four years – have you engaged Mr Cohen to provide legal services for JPL unrelated to Ms Willans?
MR ENMORE: Not unrelated. It was – it was actually for JPL in relation to a court proceeding.
MS CHRISTIE SC: So, what I want to say to you then is – I am going to ask you the question again. You have used the funds of JPL in the last four years, to pay Mr Cohen, haven’t you?
MR ENMORE: Only if I did not have the money myself, but I do not recall.
MS CHRISTIE SC: So, you would like to change the answer that you gave earlier - - -?
MR ENMORE: I do not know. I really do not know.
MS CHRISTIE SC: which was no?
MR ENMORE: So it depends on which way you ask the question, too.
That evidence was to be contrasted with documentary transfers of funds from the accounts of JPL to the office account of Mr Cohen.
It seemed to me that the agreed joint balance sheet represented the correct resolution of the legal fees issue. It recognised that the respondent’s application of company funds to meet his own legal costs had the effect of diminishing the pool of assets available for adjustment. By including the sum of $60,000 in the manner recorded in item 12 of the agreed joint balance sheet, especially the “N/A” attribution of value to the wife, the legal fees were correctly addressed within the prescriptions of Chorn & Hopkins.
Value of JPL shares
Most of this trial was devoted to the ascertainment of the value of JPL’s shares. According to the joint balance sheet the applicant ascribed a figure of $3,592,120 to JPL’s shares whereas the respondent ascribed a figure of $3,230,000.
The applicant relied on evidence given by Mr T. The respondent relied on evidence given by Mr AD.
Before addressing the individual items that each considered and before recording their evidence on each item, it is important to point up the issue in context.
In this case I was required to determine the legal and equitable interests of the parties in property[27] and to make that determination as at the date of the trial.[28] In the circumstances of this case the valuation of JPL’s shares was undertaken at a particular date, as it happened well prior to the trial.
[27]Stanford v Stanford (2012) 247 CLR 108.
[28] In the Marriage of Zappacosta (1976) 2 Fam LR 11,214, In the Marriage of Myerthall (1977) 3 Fam LR 11,324 and In the Marriage of Waters (1981) 6 Fam LR 871.
In essence, the applicant contended that the books, records and accounts of JPL were not reliable and they did not accurately state the true financial position of JPL. The applicant’s expert, Mr T, undertook a detailed review of certain aspects of JPL’s book and records. He freely conceded he did not conduct an audit as he was not retained to conduct one. Mr T identified certain irregularities in or arising from JPL’s books and records. Mr AD, for the respondent, was invited to express his opinion on the issues that Mr T identified. During the conduct of the hot tub, each expert was invited to comment on the opinion of the other on identified issues. Those issues that caused Mr T to express his opinion on the overall value of the JPL shares, and in particular the reasons why Mr T expressed the view that the overall value of the JPL shares required enhancement, are set out below.
Before going to the minutiae it is important to point out certain other matters. First, when expressing opinions about taxation or superannuation, each of Mr T and Mr AD frankly conceded he was not an expert in those fields. Second, neither Mr T or Mr AD conferred with the respondent to canvass in detail the views each expert was forming. In consequence, neither expert interrogated or challenged the respondent about any perceived irregularity in the documentation relevant to the books of account of JPL nor was the respondent given an opportunity to explain why the JPL records were in the condition they were. Third, it must be acknowledged that the respondent, as sole director of JPL used certain bookkeepers periodically, he was not a sophisticated businessman nor was he well versed in accountancy procedures or practices. He conceded a general inability to recall precise monetary amounts when cross-examined on point[29] and he freely acknowledged that the applicant was better than him in accountancy related activities.[30] To record that is to make no criticism of the respondent. I accept that he was a successful trade engineer who commenced in 2004 in a garage at Suburb AE[31] subsequently building the JPL business into a valuable enterprise. Conversely, he conceded he did not understand trusts and that the applicant created the trusts relevant to JPL.[32] The respondent also conceded that the applicant, not him, provided advice on the amount that could be paid into superannuation.[33] Similarly, the respondent frankly conceded that he used JPL funds when he needed money but he took any such funds as wages or salary.[34] He freely gave evidence that he paid for personal expenses on a particular JPL credit card then he instructed staff members he generically described as “the girls” how that amount should be treated in JPL’s accounts.[35]
[29] T112.
[30] T172.
[31] T132.
[32] T174
[33] T175.
[34] T177.
[35] T182.
In the extreme category of the respondent’s personal expenses being paid on the JPL credit card was skin rejuvenating cream and aftershave the respondent used so he could “keep myself looking young”.[36] Not all personal expenses that the respondent paid on the JPL credit card were entered thereafter as loans from JPL to the respondent. That prompted a question from me the answer to which was as set out below –
HIS HONOUR: Mr Enmore, can you help me with something that has been operating on my mind. Where various increases are notched up progressively and they get somehow transferred to a director’s loan account, are there journal entries within the accounts that reflect this, so?
MR ENMORE: I think it was brought up at the end of the thing, when we had the accountant come in, in the – because we had two accountants, one girl – the first one, sort of, she could not deal with it, and she sort of left me in the lurch, and then we went to the one that we have got now. But, in all honesty, whatever was for me, I paid for, your Honour.
HIS HONOUR: So, who – I presume you are the one who – who said “just treat this particular payment as an increase of the director’s loans,” but the question?
MR ENMORE: Well, he told me.
HIS HONOUR: Beg your pardon?
MR ENMORE: Like, I – depends what it was. Like, if it was a small thing, if it was much larger, I would take it as a director’s loan, or I would try and take it off somewhere that will pay it back.
HIS HONOUR: Forgive me, I am only talking about those that are treated as director’s loans, but you are the sole director, you are the one who – you do not have board meetings to discuss these things, so how are we to follow the proper corporate governance that one would expect to see in these types of situations?
MR ENMORE: Well, from my – best of my knowledge, they were all marked up on the statements. I do not know why that statement is not marked up. So.
[36] T185.
It must be recognised that the applicant ceased to have a hands-on role in the accountancy record keeping of JPL from 17 March 2017 when her employment was terminated. Prior to that date, the applicant gave evidence that she was the financial brain of JPL,[37] a point not challenged by or on behalf of the respondent.
[37] T18.
Mr T’s central thesis was that JPL’s financial records and related information were not accurate. Conversely, Mr AD proceeded on the basis that JPL’s financial records and related information were accurate and reliable,[38] subject to certain adjustments Mr AD wished to make.
[38] Paragraphs 1.3 and 1.4 of the joint statement of experts being agreed exhibit 1.
After referring to Makita (Australia) Pty Ltd v Sprowles[39] and Dasreef Pty Ltd v Hawchar[40] Mr Coleman SC contended that it was within the permissible exercise of my power of evaluation to make a finding that did not embrace the findings on point of either expert. Mr Coleman submitted –
[39] (2001) 52 NSWLR 705.
[40] (2011) 243 CLR 588.
a)a finding that JPL’s value was $3,592,120 as urged by the applicant carried with it the acceptance of the applicant’s contentions concerning 172 product units and on Mr T’s own evidence JPL’s books and records were unexceptional;
b)it was inconsistent for the applicant to present a detailed examination of all facets concerning the 172 units while concurrently contending that the JPL books and records were unexceptional;
c)the applicant’s submissions to the effect that JPL’s true value is $3,592,120 cannot be supported by the proposition that the respondent’s disclosure about JPL has been defective.[41] Mr Coleman put the submission in the following terms –
Unless and until one finds something that not only causes suspicion, you know, if the suspicion – if it’s suspicion and the obscurity that the controller of a corporate entity or a trust or a partnership has created, and the authorities say this, prevent the real value of the asset being ascertained, then it is, with respect, open slather. But that’s not this case. What the highest – and it’s significant that at its highest, Mr T, fairly and in a measured way, says, “Maybe.”
d)on the state of the experts’ evidence (especially that of Mr T) suspicion is not made out but rather, on the balance of probabilities, Mr T’s evidence amounts to his inability to reconcile information on 22 or 23 invoices he was handed but no more than that;
e)even if there be merit in the applicant’s contentions about deficiencies in the respondent’s disclosure, the evidence concerning the 172 units and the evidence about Ms AN’s salary was reflected in the balance sheet;[42] and
f)accordingly, any deficiencies of disclosure did not axiomatically lead to an open slather approach to adjusting property interests.
[41] T385.
[42] T388.
First contested issue among the experts – the value of stock
The experts agreed that as at 30 June 2020 JPL had a valuation depending on certain assumptions embedded in each valuation. They were as follows –
a)$3,147,671 assuming the accuracy of the JPL financial records and that no value was attributed to stock;[43]
b)$3,177,671 assuming the accuracy of the JPL financial records and that the value attributed to stock was $30,000;[44] and
c)$3,462,821 assuming the accuracy of the JPL financial records and that the value attributable to stock was $315,150.[45]
[43] The experts called this “scenario 1”.
[44] The experts called this “scenario 2”.
[45] The experts called this “scenario 3”.
The three scenarios in tabular form were as follows –
| Scenario I | Scenario II | Scenario III | |
| (Stock at Nil) | (Stock at $30,000) | (Stock at $315,150) | |
| Unadjusted Net Assets at 30/6/20 | $3,137,648 | $3,137,648 | $3,137,648 |
| Plus: Inventory/Stock Adjustment | $0 | $30,000 | $315,150 |
| Plus: Future Income Tax Benefit | $36,289 | $36,289 | $36,289 |
| Less: Provision for Annual Leave (after-tax) | ($25,980) | ($25,980) | ($25,980) |
| Less: Unchanged Lease Liability | ($286) | ($286) | ($286) |
| Adjusted Net Assets at 30/6/20 | $3,147,671 | $3,177,671 | $3,462,821 |
Mr AD sought an amendment to the table in relation to inventory and stock adjustment for scenario 2 by changing $30,000 to $43,000.[46]
[46] T218.
Self-evidently all three scenarios were predicated upon the assumption that the financial records of JPL were accurate. Mr AD proceeded on the basis that they were. Mr T proceeded otherwise. It is utile to record Mr T’s stated reasons why he contended that the JPL financial records and other financial information relation to JPL was concerning. They included –
a)inconsistent information he was given and which he considered in relation to stock;[47]
b)purchases as a percentage of sales;
c)wages costs and employees of a percentage of sales; and
d)delays and difficulties in obtaining documents and response to requests.
[47] This became the AG Company issue.
Mr AD stated in the joint statement of experts[48] that Mr T’s issues did not cause Mr AD to have concerns about the reliability of the financial statements provided. He recorded that his position was premised on several matters, including the following –
a)he said Mr T used high level ratio analysis without undertaking substantive testing of the underlying transactions for confirmation;
b)he said that in a financial audit of a business, it is not appropriate to qualify accounts on the basis of the ratio analysis;
c)he said Mr T had not compared the ratio analysis he undertook and compared those to other comparable businesses; and
d)he said that even if the ratio analysis for JPL were different to comparable businesses, JPL’s business may have unique characteristics causing JPL to have different characteristics.
[48] Agreed exhibit 1.
Mr AD was cautious about concluding that JPL’s accounts were unreliable.
Each area of difference between each expert was explored during the session of concurrent evidence (hot tub). It is utile to examine the evidence of each when given concurrently.
The hot tub
The four matters over which the experts disagreed were the subject of concurrent evidence in the hot tub. The respondent also gave evidence about certain of those issues. It is necessary to go to the evidence of the respondent as well as the experts.
Stock – the respondent’s evidence
In cross-examination the respondent addressed the number of units in the possession of JPL as at 30 June 2020. Specifically, the number of product units were scrutinised and whether the true number of those items in JPL’s possession as at 30 June 2020 was 172 or 100. The respondent answered Ms Christie[49] that the total number of product units on hand was 172 made up of 100 AG Company machines and 72 generic machines. He said JPL received the machines over a period of seven months and that all 172 of them had been sold by 30 June 2020.[50] He was then cross-examined about the accuracy of his evidence that all of the 172 units had been sold by 30 June 2020. He admitted JPL rented a certain number of machines (he said 37 in total) to an entity called AH Company. The respondent said the arrangement was in truth one of hire because title to the machines did not pass[51] to AH Company. He said the majority in number of the units was earmarked for the two AH Company projects.[52] He disagreed that four machines of the 172 machines the invoices of which were marked “AJ Company” corresponded to their being used on the AJ Company project in Suburb AR and Suburb AT.
[49] T140.
[50] T159.
[51] T161.
[52] T195.
The respondent’s evidence about the 172 units was confused, it seemed to me. However he consistently answered questions under cross-examination on point by stating that 172 units were deployed on hire between JPL and AH Company for use on projects. But that did not address the number of units on hand as at 30 June 2020. I accept that the units deployed to the AH Company projects were not physically at JPL’s operational headquarters and I also accept that JPL let those units, at no stage passing title in them, to AH Company. Whether used units retained any real value or not was a different issue. The respondent did not address the point beyond stating that the used machines were “not worth owning, at the end of the day”.[53]
[53] T160.
The experts’ evidence
In the joint experts’ statement, Mr T attributed the sum of $315,150 for 100 product units, the vendor being AK Company in relation to the AG Company units. Mr AD adopted 172 as the relevant number of units.
When responding to Mr Coleman’s questions of him in the hot tub, Mr T said several things about the units on hand. They were –
a)the product unit invoices marked as AL Company were paid in cash with invoices addressed to the respondent personally and not to JPL;[54]
b)the purchase of 172 AG Company units was unusual;[55]
c)no reason existed to conclude that the AJ Company invoices were not genuine or that the invoices had not been created by AM Company;
d)he was unable to say whether the product units were in JPL’s possession;[56]
e)the units used by AH Company are now not worth their purchase price;[57]
f)the amount of $315,150 is solely referrable to AG Company units;[58] and
g)he was told no list existed in respect of the 172 units actually purchased by JPL so he was unable to say whether the items on the invoices included the 172 AG Company units.[59]
[54] T208 – 209.
[55] T213.
[56] T231.
[57] T237.
[58] T235.
[59] T239.
Mr AD also gave evidence in the hot tub about stock. His evidence on point included the following –
a)in arriving at a value of stock as at 30 June 2020 he needed to know what stock was actually on hand and he did not ask the respondent for that information;[60]
b)he admitted that the valuation of stock as at 28 January 2020 could be the same as the valuation of stock as at 30 June 2020 if JPL owned exactly the same stock as at both dates;[61]
c)Mr AD took photographs of stock but he did not reconcile stock numbers[62] and he spent four hours in total on JPL’s premises;[63]
d)he relied on the information in the respondent’s affidavit but he did not independently verify aspects of it;[64] and
e)the value of stock materially fluctuated and an anomaly existed in respect of the 172 product units.[65]
[60] T223 – 224.
[61] T225.
[62] T227.
[63] T229.
[64] T229.
[65] T241 – 242.
By way of summary in relation to the first issue (stock) each of the experts expressed views. Mr T said the following –
a)it was unusual for JPL to have spent approximately $400,000 on purchasing product units without receiving a list of the units it actually purchased;[66]
b)Mr AD agreed with that proposition;
c)whether or not the purchased items were accounted for in the company’s records, the absence of a list of items purchased was unusual;[67] and
d)it is misleading for him to assume that the JPL financial statements were accurate.[68]
[66] T247.
[67] Ibid.
[68] T249.
Mr AD’s overall thesis was that the JPL accounts were regular and should be accepted on their face.[69] He said JPL had a very diligent bookkeeper.[70]
[69] T251.
[70] T250.
My finding on the first issue – stock
The experts did not conduct an audit, nor were they requested to conduct one.
JPL’s bookkeeper maintained the JPL financial records.
I accept that it may well have been unusual for a purchase of approximately $400,000 worth of product units to not be accompanied by a list of items purchased. However the absence of any such list does not mean that JPL’s financial accounts were erroneous. I accept Mr T’s evidence that certain aspects relating to stock may have been unusual. That was not the same as his saying that the financial information recorded by JPL in relation to stock was positively wrong.
In his evidence in the hot tub Mr AD explained how he changed his figure in scenario 2 from $30,000 to $43,000[71] in relation to stock. Mr T gave evidence that reasonable minds might differ[72] on the valuation of stock.[73] Mr T said that Mr AD took a different view, namely that reasonable minds will not differ on the treatment of stock. Mr AD gave evidence[74] that he “completely disagreed” (his words) that reasonable minds might differ on the treatment of stock, especially in respect of an item of inventory that was used on a day to day basis to run a business.[75]
[71] T218 and T221.
[72] Mr Coleman SC in final addresses referred to Sir Anthony Mason’s observations on point in Federal Commissioner of Taxation v St Helens Farm (ACT) Pty Ltd (1981) 146 CLR 336, 381 et seq. to the effect that valuation is a matter of estimation not of precise mathematical calculation. It involves the making of a value judgment in the metaphorical as well as the literal sense.
[73] T325.
[74] T324.
[75] T323.
Both experts recognised that such accounting standards that existed dealing with stock did not address the issue of the valuation of stock on hand at a particular date.
It will not have gone unnoticed that JPL derived rental income from the product units it had deployed to the AH Company project.
In my view the stock valuation as at 30 June 2020 was not the amount attributed by Mr T of $315,150 or the greater figure he mentioned in the hot tub.[76] I accept the logic and arithmetic applied by Mr AD for stock, namely $43,000. Mr T’s attribution of an amount for stock was reconstructed based on information and documentation that was tenuous. I was not persuaded on the balance of probabilities that his figure was correct. The amount of zero for stock was equally tenuous. After all, JPL was deriving rental income from the product units deployed to the AH Company project. It could not be said that those product units bore no value at all. They did have a value but the units were not to be given the value Mr T ascribed to them. The value ascribed by Mr AD was more likely correct on the balance of probabilities.
[76] T322 and T323.
Second contested issue among the experts – purchases as a percentage of sales
It is necessary to put this issue in context. The relevant portion of the joint statement of experts was between paragraphs 4.6 and 4.9. Paragraph 4.6 of the joint statement was in the following terms –
Purchases, being the cost of goods purchased for sale, would usually be expected to be a similar percentage of sales on a year-by-year basis. Whilst there might be some fluctuations, the fluctuations would not be expected to be significant unless there was a significant change in the business.
The MYOB records of JPL disclosed three items, namely sales installations, purchases for sales and percentage of sales over three financial years, those being 30 June 2018, 30 June 2019 and 30 June 2020. In their joint statement the experts expressed the position in the following terms –
Year ended June
2020
2019
2018
Sales - Installation
1,111,459
1,478,861
1,712,338
Purchases for sales
304,467
812,883
384,192
Percentage of sales
27.4%
55.0%
22.4%
Mr T focused on the financial year ended 30 June 2019 and concluded that the purchases for installations were abnormally high both in absolute dollar terms and as a percentage of sales. He took the view that the purchases as a percentage of sales for the financial year ended 30 June 2019 were double that of the preceding and subsequent financial years and were more than double in absolute dollar terms. Mr T stated in the joint statement of experts that he considered such a set of circumstances to be “very unusual”.[77] Mr T approached his examination of that unusual phenomenon by excluding 100 units from AK Company having a cost of $315,150. He reconfigured the table the experts had earlier formulated over the same three financial years thereby producing the table set out under paragraph 4.8 of the experts’ report. Over the three financial years the percentages of sales disclosed more minor variations ranging between 22.4% and 33.7% as opposed to those variations ranging between 22.4% and 55%.
[77] Paragraph 4.8, third line.
Mr T considered the percentage of sales variations between 22.4% and 33.7% to be more normal than the range between 22.4% and 55%.
In the hot tub Mr T said he arrived at the figure of $315,150 by totalling the amounts on two invoices for AG Company units and dividing that by 100.[78] In fixing upon 100 as the appropriate division figure, he said he was unable to say whether that number was accurate but it was the best he could do.[79]
[78] T231.
[79] T232.
In the passages already set out I have recorded the experts’ evidence in the hot tub concerning the existence of 172 or 100 AG Company units. Each of the experts addressed the two methods that could have been employed in ascertaining with precision which of those two methods was more appropriate in the circumstances.[80] Mr T said he was unable to be more accurate than he had been. Mr AD said both methods were capable of being undertaken but it was not appropriate to add the units back into inventory because JPL needed the units to run the business.
[80] Mr T explained this at T247, Mr AD at T249.
So far as ratios were concerned Mr AD made what I took him to express as a generic statement whether in respect of wages or purchases as a percentage of sales, that any examination of ratios was a first step, but only a first step, as it was never determinative.[81]
[81] T250.
When one adds to that observation Mr T’s own statement that he was unable to be more accurate than he had been, I was left with Mr T’s qualified evidence to the effect that the abnormally high amount of purchases as a percentage of sales was not necessarily accurate as compared to Mr AD’s evidence that any expression of ratios was only ever a first step in the financial analysis.
In those circumstances I was not persuaded on the balance of probabilities that the JPL accounts were irregular in regards to sales over the three financial years ended 30 June 2018, 2019 and 2020.
Third contested issue among the experts – wages, costs and employees as a percentage of sales
This issue enlivened the treatment given to wages, paid employees and hours worked.
In Mr T’s view, labour costs that were required to install and service product units would normally remain relatively stable as a percentage of sales yet between 2016 and 2020 labour costs increased significantly as a percentage of sales. He said that despite an increase in the number of employees with a corresponding increase in the number of hours worked, no commensurate increase in sales was recorded. Mr AD stated that any increase in labour costs was likely explained by the increasing seniority of staff.
In the hot tub, Mr T addressed this issue. He conceded he had not seen records of time spent by JPL staff and that he had not investigated the task each employee was performing per hour per day.[82] However, he said[83] that if in one year an apprentice advanced to the ranks of a qualified tradesperson, Mr T expected that the hourly rate incurred in relation to that tradesperson would increase and, as such, the business would charge more.
[82] T264.
[83] T266.
Mr AD repeated in the hot tub his earlier comments on ratios referrable to sales on this issue in the context of wages as a ratio to sales. Mr AD said he was not concerned about wages as a percentage of sales[84] and he also pointed to a revenue decrease over a particular period with a decrease in wage and contractor expenses.[85] Mr AD said that one explanation for increased wages was the increased seniority of staff.[86]
[84] T256.
[85] T261.
[86] T264 – T265.
Even accepting that in certain financial years wages increased yet revenue did not, that did not mean that JPL’s financial records were erroneous. No lay evidence was adduced to explain why wages may have increased yet revenue did not commensurately increase. Any number of commercial reasons may have explained why revenue remained static yet wages increased. That was not explored in the evidence.
One component of this area of disagreement between experts related to the treatment of an employee by the name of Ms AN. The treatment of her salary in JPL’s financial records was the subject of lay evidence by the respondent as well as expert evidence by Messrs T and AD. The relevance of Ms AN was referrable to Mr T’s exclusion of her wages because, so he said, Ms AN was not involved in the installation or servicing of product units.
The respondent explained Ms AN’s role in JPL. He said the following –
a)Ms AN was employed as a contractor and sub-contractor;[87]
b)she was engaged to help with JPL dealing with a Chinese company;[88]
c)she liaised with the factory;[89]
d)she spoke English and Chinese;[90]
e)she negotiated with the Chinese factory to ensure all went smoothly;[91]
f)she was employed over a period of a year;[92]
g)she was employed by the time AK Company quoted but not on 5 June 2017;[93]
h)the respondent was not in a relationship with Ms AN;[94] and
i)the respondent was in a relationship with Ms K.[95]
[87] T145.
[88] Ibid.
[89] T146.
[90] Ibid.
[91] Ibid.
[92] Ibid.
[93] T147.
[94] T149.
[95] T150.
Mr AD gave evidence in the hot tub about a salary paid to Ms AN. He said he knew a question had been raised about that issue. He said he did not believe he raised any questions with the respondent about it.[96] Mr AD said he understood Ms AN’s role related to the acquisition of product units in China although he said he did not know how much she was paid nor did he know that the amount paid to Ms AN was greater than the amount paid to the JPL operations manager.[97] He said that he was not concerned about the reliability or accuracy of the data underlying his valuation having regard to the fact that he did not know that JPL paid Ms AN a sum for less than a year’s work and an amount greater than the sum it paid its operations manager.[98] He said that even if the quote for the production of the relevant product units post-dated Ms AN’s employment with JPL, Mr AD may have made further enquiries.[99]
[96] T283.
[97] T284.
[98] T285.
[99] T286.
To my mind, Mr AD’s position is to be preferred over the contrary position adopted on the subject of wages, costs and employees as a percentage of sales. I see nothing inherently improbable about Ms AN’s salary being paid at any particular level, whether proximate to, comparable with or in excess of the salary paid to the operations manager. Equally, I see nothing inherently improbable about there being some time differential between the work she did and the actual acquisition of the units. If Ms AN’s role involved the smooth facilitation of works in the Chinese factory and the actual acquisition of the units, that may have involved negotiations over time. Very little evidence on point was adduced. Based on the evidence that was in fact adduced, on the balance of probabilities, I take the view that Mr AD’s treatment of this issue is to be preferred.
Before leaving this issue it is necessary to say something about submissions concerning Ms AN.
In final addresses Ms Christie characterised the respondent’s evidence about Ms AN and the manufacture of the AG Company units as deliberately false.[100] Ms Christie argued that it was her theory that the respondent’s evidence about JPL employing Ms AN to ensure the smooth manufacture of the units was given to backfill an otherwise inexplicable collection of transactions.[101] I do not agree. I am unable to conclude that such evidence was deliberately false and I say that having listened to the respondent, heard his evidence as well as the way he gave it.[102] Ms Christie placed a highly nefarious character on the respondent’s evidence. I do not share her characterisation of the respondent’s evidence. His memory was not precise, that much was true, and his command of the detail of the minutiae was not demonstrable. However, that does not equate to a construction of the respondent’s evidence about Ms AN that the respondent gave deliberately false evidence.
[100] T377.
[101] T378.
[102] Coghlan v Cumberland [1898] 1 Ch 704, Dearman v Dearman (1908) 7 CLR 549, Owners of SS Hontestroom v Owners of SS Sagaporack; SS Hontestroom v SS Durham Castle [1927] AC 37, Paterson v Paterson (1953) 89 CLR 212, Warren v Coombes (1979) 142 CLR 531, Brunskill v Sovereign Marine & General Insurance Co Ltd (1985) 59 ALJR 842, Jones v Hyde (1989) 63 ALJR 349, Abalos v Australian Postal Commission (1990) 171 CLR 167, Devries v Australian National Railways Commission (1993) 177 CLR 472, State Rail Authority of New South Wales v Earthline Constructions Pty Ltd (1999) 73 ALJR 306, Fox v Percy (2003) 214 CLR 118 and Husain v O & S Holdings (Vic) Pty Ltd [2005] VSCA 269.
Division 7A loans and the payment to Mr AB
The agreed joint balance sheet revealed the amount of $126,470 as a joint liability in relation to Division 7A loans. The respondent gave evidence in cross-examination that two Division 7A loans were entered into during the relationship.[103] The respondent conceded that the applicant was in charge of that aspect of their finances. One Division 7A loan was exhibited by the applicant as exhibit A35 to her trial affidavit.
[103] T171.
In his hot tub evidence Mr AD said he asked for details of the Division 7A loan and received information in the MYOB file. Mr AD said JPL transferred the asset despite the fact that the asset was not paid for.[104] Mr AD said that if it was a liability as at the valuation date, it was likely included in the value of the company.[105] Mr T gave evidence that he did not identify a liability that was not disclosed in the JPL financial statements.[106]
[104] T270.
[105] T271.
[106] T277.
Based on Mr AD’s evidence that a related party loan was a liability likely to have been included in the value of JPL and based on Mr T’s evidence that he did not identify a liability not disclosed in the JPL financial statements, I take the view on the balance of probabilities that item 37 being a joint liability in the form of the Division 7A loan was correctly recorded as a joint liability of the parties in the joint balance sheet.
Item 43 on the joint balance sheet, being a liability to Mr AB, was agreed in final addresses as an amount to be excluded. In final addresses Ms Christie SC explained that the sum related to a payment to Mr AB for his preparing superannuation returns for both parties. According to Ms Christie, the respondent instructed Mr AB to prepare returns for both parties yet the applicant did not authorise Mr AB’s activity nor did the applicant consent to those returns being prepared for her. The applicant contended items 43 and 44 can be deleted.
The applicant gave evidence in response to questions put by Mr Coleman SC.[107] She said she had no intention of paying Mr AB’s fee of $16,000 or contributing to the payment of that sum. She said she had refused to allow the superannuation fund to pay Mr AB’s fee from superannuation funds. She said she expected the respondent to pay the amount.[108] In final address Mr Coleman SC submitted that the respondent was going to pay the sum so it made little difference whether the relevant amount was recognised on the balance sheet or whether the relevant amount was recognised as a liability for which the respondent was liable.
[107] T76 et seq.
[108] T76.
It seemed plain enough that the respondent acknowledged his liability for that sum. Whether that acknowledgment went as far as taking the form of an admission as if in a pleading[109] was a different matter on which it is not necessary for me to express a view.
[109] Pioneer Plastic Containers Ltd v Commissioners of Customs and Excise [1967] Ch 597 and Divcon (Australia) Pty Ltd v Devine Shipping Pty Ltd [1996] 2 VR 79.
Non-financial and indirect contributions
In the passages above I have recorded the parties’ relative positions upon commencing their relationship. As has also been recorded above, the applicant contended that her contributions throughout the relationship were equivalent, if not equal. Ms Christie SC placed heavy reliance upon the applicant’s “organisation, the financial planning, the investment, the strategy”[110] as representing a significant non-financial and indirect contribution.
[110] T370.
Ms Christie highlighted how the applicant and respondent separated in or about October 2016 yet the applicant continued to work in the company until March 2017. Thereafter, the applicant received no benefit from the company except for the dividends in JPL declared and paid to the parties to enable them to deal with the Division 7A loan.
Conversely, on the applicant’s case the respondent at the date of separation paid himself in the immediately preceding financial year the sum of $423,000. The applicant argued[111] –
a)the parties’ joint financial endeavours had been afoot for 17 years even though the duration of the parties’ relationship was less than that;
b)it was necessary for me to have regard to the parties’ initial contributions, direct financial contributions, salaries, wages, dividends, indirect financial contributions, investments, income splitting and non-financial contributions;
c)in 2004 the parties’ assets were modest, JPL employed one person and the respondent had occupied a garage at Suburb AE while living in a two bedroom apartment;[112] and
d)upon the applicant immersing herself in the business of JPL, that company became profitable.[113]
[111] T372.
[112] T132.
[113] T372.
It is relevant to point out that prior to the parties’ cohabitation in 2004, certain real estate had been acquired relevant to this case. After cohabitation, other real estate was acquired so in the chronological sequence of events relevant to this case, it is necessary to chronologically record those acquisitions and sales as best I can.
In November 2003, prior to cohabitation, the respondent had acquired a one-third interest as tenant-in-common in real property known and described as DD Street, Suburb EE.[114] Details of the overall purchase price were not given, although in the applicant’s case outline in a section entitled “statement of uncontentious matters,”[115] none of which was contradicted by or on behalf of the respondent, it was asserted that when DD Street Suburb EE was sold, a modest shortfall of $8,099.45 emerged. The sale was settled in February 2007.
[114] No certificate of title was put in evidence however a memorandum of transfer (exhibit A8 to the applicant’s affidavit made on 30 November 2020) evidenced the transfer for consideration of $480,000.
[115] At paragraph 10 of that document.
At the commencement of cohabitation, the respondent’s legal and equitable interests in property included interests additional to his one-third interest in DD Street, Suburb EE. Those additional interests were as follows –
a)registered proprietorship of a fee simple estate in M Street, Suburb N;
b)a storage unit; and
c)superannuation entitlements.
On 20 June 2005 the applicant and the respondent purchased D Street, E Town, Western Australia for $348,000 financed as to the entirety of the purchase price by mortgage lending from HH Bank.
Pursuant to an agreement made on an unspecified earlier date, on 28 December 2006 the respondent transferred his interest in M Street, Suburb N from his sole name into the joint names of the applicant and the respondent. Exhibit A21 to the applicant’s affidavit made on 30 November 2020[116] recorded the consideration for that transfer as being “natural love and affection”.
[116] Exhibit A1 in this proceeding.
The applicant and respondent as joint proprietors sold the whole of their interest in M Street, Suburb N on 4 December 2007. The applicant asserted in her case outline and the respondent did not challenge that the sale price thereby generated was $545,699, although it was not stated whether that figure was the contractual purchase price, the adjusted contractual purchase price or the net price after encumbrances were discharged.
By November 2007 the respondent’s half interest in FF Street, GG Town had been sold. The respondent became entitled to half of the sale proceeds of $30,600.
The self-managed superannuation fund
JPL was at one time the trustee of the parties’ self-managed superannuation fund. JPL was the trustee of the fund when the applicant became a member of the fund. At about the same time as she became a member of the fund, she also became a director of JPL, albeit for a short period. The applicant and the respondent incorporated AQ Pty Ltd to replace JPL as the trustee of the self-managed superannuation fund. Upon the incorporation of AQ Pty Ltd the applicant resigned her directorship of JPL.
The amount of funds under the control of the trustee of the self-managed superannuation fund fluctuated over the period of the parties’ cohabitation. No real dispute emerged about the amount in the fund or the transfer of the applicant’s funds rolled over into the parties’ self-managed superannuation fund. Specifically –
a)members’ funds stood at $101,351.72 as at 30 June 2005;
b)the applicant rolled over her entitlements from Super Fund 2 in the amount of $29,215 on 19 August 2005 into the self-managed superannuation fund; and
c)on 14 September 2007 the applicant rolled over her entitlements in Super Fund 1 into the self-managed superannuation fund in the amount of $1,003.20.
According to agreed exhibit 3, the total amount standing to the parties’ credit in the self-managed superannuation fund as at the date of trial was the substantial sum of $1,799,425.
Later acquisitions of real property
It will be recalled that in June 2005 the parties acquired the property at E Town, Western Australia for $348,000. They sold that parcel of land on 20 May 2008 for $530,000 and discharged the mortgage encumbering the title to that land, receiving net proceeds of $162,355.63.
A little earlier, on 4 December 2007 the parties purchased F Street, Suburb G. They paid $1,300,000 for that property using the proceeds of the sale of the Suburb N property towards the purchase price.
Among the volumes of documents in this case, no details of conveyancing file extracts were put in evidence. Had that been done, a vastly more sophisticated factual basis could have been deduced of the flow of funds for each purchase and sale of each property. It would have been possible to have seen –
a)the contractual purchase, especially in whose name each property had been purchased;
b)the deposit and adjusted purchase price;
c)the amount of mortgage funds provided; and
d)the manner in which the settlement funds were disbursed.
For each sale, equally critical information could have been ascertained. In particular the details ascertainable could have included –
a)the identity of the purchaser;
b)the deposit paid and to whom it was paid;
c)the adjusted contract price;
d)to whom that amount was paid;
e)the sum paid to each mortgagee; and
f)the net balance that was deposited to which bank account in whose name.
No issue was taken in this case about any of the matters raised in the two immediately preceding paragraphs so the point may have been moot. However, in order for me to discharge my duty of weighing the parties’ respective contributions, the absence of that information impaired my task. That said, it seemed sufficiently apparent that subsequent to their cohabitation, the applicant and the respondent purchased a succession of real properties using funds jointly borrowed as well as the proceeds of sale of real property jointly owned. In those circumstances the conclusion urged on behalf of the applicant was correct, it seemed to me, namely, that items of real property were bought and sold jointly using joint funds in respect of which capital accretions in the value of that real property benefitted both applicant and respondent jointly in like proportions.
In the applicant’s outline of case filed 11 February 2021 some information was given about the application of funds advanced pursuant to a Division 7A loan agreement made between JPL, the applicant and the respondent. Those advances were applied towards meeting the parties’ mortgage liabilities in respect of the Suburb G property. Again, no dispute arose about the propriety of that or the sums involved.
Storage units
Two storage units were among the items of property in issue in this litigation, the first being unit 9. The respondent acquired that unit on 22 January 2002 for $47,700. After the parties commenced cohabitation, in 2006 the respondent transferred his title in unit 9 to JPL at what was said to have been a commercial value of $49,500. It was common ground that the trustee of the self-managed superannuation fund paid rent from 2006 to JPL for its occupation and use of unit 9.
The second storage unit was at Suburb C. The applicant contended that she suggested the acquisition of that storage unit. No cross-examination was directed to that assertion. That storage unit had a value of $61,372.70 in the JPL superannuation fund balance sheet as at 30 June 2005. Details on the date of purchase, purchase price and other documentation relevant to the acquisition of the second storage unit were near impossible to ascertain from the voluminous documentary evidence in this proceeding.
The applicant contended that rental in excess of $260 per week has been paid for each storage unit.
Two units at H Street, Suburb AO
According to the applicant, she recommended that the respondent and she should procure the trustee of the self-managed superannuation fund to purchase unit 3 H Street, Suburb AO as well as unit 5 H Street, Suburb AO. JPL was installed as the tenant of those two premises, paying rent. For unit 3, JPL has paid rental at the rate of $1,075.87 per week. For unit 5 JPL has paid rental at the rate of $456.92 per week.
JJ Street, W Town
On 20 June 2014 the trustee of the parties’ self-managed superannuation fund purchased the fee simple estate in JJ Street, W Town, New South Wales. The trustee paid $480,000, plus or minus adjustments for that parcel of land. Pursuant to the terms of a Division 7A loan, JPL advanced funds for the purchase of that land. It was common ground that the Division 7A loan was repaid.
The W Town property has been used as short term holiday accommodation. Some cross-examination of the applicant was directed to whether the applicant had been sufficiently diligent in her steps to obtain the best rental return available in relation to the W Town property. That cross-examination was general and did not involve any puttage of specific sums lost or of the best price obtainable over specific periods. To my mind, that cross-examination did not enable any meaningful assessment to be given about rental income foregone or lost.
Miscellaneous financial matters
No real dispute emerged on several other issues. They included the following –
a)JPL paid the respondent $180,000 per annum;
b)the respondent had the use of two motor vehicles owned by JPL being a sedan and a utility vehicle;
c)the applicant’s employment with JPL was terminated on 17 March 2017; and
d)the applicant currently operates a business called AP Company, although in recent times she has been in receipt of Jobkeeper payments.
Weighing the parties’ respective contributions
One of the main arenas of debate in this case was the parties’ respective contributions whether direct or indirect and whether financial and non-financial in nature. As has already been recorded, the applicant contended that a finding should be made to the effect that her contributions in the overall had been equivalent to those of the respondent, although for other reasons, she argued that property interests should be divided as to 55% to her and 45% to the respondent.[117]
[117] T357 L47.
It became necessary to assess and weigh the parties’ contributions.
At the commencement of their relationship the parties’ financial circumstances were not equal. The applicant deposed to her financial position, as compared to that of the respondent. The respondent’s financial position was nearly double the applicant’s. No real dispute emerged about that.[118] At the commencement of the parties’ cohabitation, JPL was not profitable. It was operated by the respondent from his garage in the early years following the parties’ cohabitation. At about the same time, the applicant was working elsewhere. Soon after the parties commenced cohabitation, the applicant devoted considerable time to the business of JPL. Equally, it was common ground that the respondent was the face of JPL[119] who was hardworking, leaving home at 6am and returning at 6pm in the evening.[120]
[118] T12 L8-10.
[119] T143.
[120] T41.
Considerable store was placed by the applicant in her role as the guiding mind behind the financial investments made by the parties in this case. Again, no serious challenge was made to such a characterisation of her role. I accept that the applicant was, strategically speaking, the guiding mind and influence of the parties precipitating the acquisitions of the many parcels of real estate in this case. I also accept that the applicant was highly instrumental in the couples’ decision to appoint a new trustee of their self-managed superannuation fund and for that trustee to make acquisitions of other real estate. On his own admission, the respondent was a talented trade engineer whose command of business and financial issues was less than was the applicant’s. The applicant’s evidence was to the effect that she conceived of many financial ideas with a view to enhancing the parties’ joint prosperity. I accept that evidence. The respondent did not seriously contend otherwise.
Some debate emerged about the likely number of hours per week the applicant was actually engaged in the operations of JPL while the parties’ de facto relationship was intact. The parties did not conduct their operation of JPL according to timesheets.
The respondent described himself as the face of JPL. That seemed to be a valid characterisation. He seemed to attend to the day-to-day operational issues of JPL, and very successfully. However, at an administrative and organisation level the services provided to JPL by the applicant were superior. She was not the face of JPL. The evidence did not reveal that she was recognised among JPL’s client base. It seemed readily apparent that the applicant and the respondent arranged their respective roles in JPL in such a way that the respondent was the face of JPL and the person with technical skills while the applicant was the person within JPL who provided well contemplated and considered strategic direction for JPL. It is significant that the respondent conceded an unfamiliarity with financial planning matters, superannuation and issues of trusts. The applicant provided those skills. It seemed to me that Ms Christie SC was correct when she submitted that the applicant’s and the respondent’s indirect and non-financial contributions were equivalent.
So far as direct financial contributions were concerned, the parties acquired and sold several parcels of land during the course of their de facto relationship. The properties concerned were D Street, E Town, Western Australia, funded wholly by mortgage finance which, when sold, the sale proceeds paid out the mortgage and left net proceeds of $162,355.63. The property at M Street, Suburb N was transferred to joint names and was thereafter sold for $545,699. The property at F Street, Suburb G was acquired with the proceeds of sale of the Suburb N property. The property at FF Street, GG Town was sold and the respondent’s half share of the net sale proceeds was about $15,300 (half of $30,600), although listed at $17,000 in the table set out in paragraph 14 above.
One of the storage units was acquired prior to cohabitation. The second storage unit formed part of the assets of the trustee of the superannuation fund. The two units at 15 H Street, Suburb AO are among the assets of the JPL Superannuation Fund and JPL continues to pay rent on each.
It seemed that most of the properties described in this section of these reasons were acquired from the sale of other jointly owned assets. Put slightly differently, no real case was advanced by either party to the effect that one or more parcels of real property should be treated in a discrete manner by reason of there being very specific facts surrounding its acquisition or by reason of there being a very specific flow of funds from a specific source for its acquisition.
In those circumstances it seemed to me that Ms Christie SC was also correct in her submissions that the direct financial contributions during the currency of their cohabitation was largely equivalent.
In this case the respondent’s approach to the provision of evidence of property matters was poor. In many instances the details about one or more specific assets have been defective, making it difficult to reliably make the findings required by s 90SM of the Family Law Act. That led me to consider whether it was better, in the circumstances of this case, to adopt a global approach towards the property as a whole. Such an approach has been sanctioned in cases such as In the Marriage of McMahon[121] and by the earlier decisions of this court in In the Marriage of Gill[122] and In the Marriage of Ahmad.[123]
[121] (1995) 19 Fam LR 99.
[122] (1984) 9 Fam LR 969.
[123] (1994) 18 Fam LR 514.
In this litigation each party did not advance her and his case on the basis that a specific factual narrative attended each item of property thereby requiring a detailed but discrete analysis of that particular item of property. The global approach has been sanctioned in such authorities as In the Marriage of Gill,[124] In the Marriage of Ahmad,[125] In the Marriage of McMahon[126] and more recently in Zaruba & Zaruba.[127] It seems to me to be just and equitable to proceed on that basis, consonant with the authorities recorded immediately above.
[124] (1984) 9 Fam LR 969.
[125] (1994) 18 Fam LR 514.
[126] (1995) 19 Fam LR 99.
[127] [2017] FamCAFC 91.
No post-separation contributions were identified by the parties.
The parties’ proposals
The applicant provided a minute of orders sought which became exhibit A12 in this proceeding. It is utile to set out the applicant’s proposal in full –
1.That each of the parties do all acts and things and give all consents and execute all documents and writings necessary to give effect to the orders made herein.
2.In the event of either party failing, refusing or neglecting to sign within seven (7) days after receipt of a written request to do so, any documents necessary to put into effect any term or terms of these orders, the registrar or deputy registrar of the Family Court of Australia at Sydney is hereby appointed pursuant to section 106A of the Act, to execute all such documents on behalf of the defaulting party, and to do all other things necessary to give validity and operation to the said orders.
3. That within 28 days of the date of these orders –
3.1the applicant discharge the liability in respect of the Suburb G mortgage;
3.2the respondent transfer to the applicant the whole of his right, title and interest in the Suburb G property.
4. That within 42 days of the date of these orders –
4.1the respondent discharge the applicant’s liability in respect of the Division 7A loan and do all acts and things necessary to remove any encumbrance on W Town;
4.2the respondent transfer to the applicant the whole of his right, title and interest in W Town.
5.That within 7 days of the date of these orders the respondent transfer to the applicant the whole of his right, title and interest in the joint bank accounts.
6.That on or before the expiration of 42 days the respondent pay to the applicant, or as the applicant’s solicitor may direct in writing, the sum of four hundred and seventy six thousand dollars ($476,000).
7.That upon compliance by the respondent with order 6, the applicant transfer to the respondent her shares in JPL.
8.That in respect of any loan account of the applicant with JPL whereby the applicant is indebted to JPL, the responsibility for the repayment of the loan/s is assigned to the respondent and the parties are to do all acts and things and sign all documents necessary to give effect to this order.
9. That within 60 days of the date of these orders –
9.1the applicant establish a complying self-managed superannuation fund (“the applicant’s SMSF”);
9.2the parties are to cause the entitlement of the applicant’s interest in the SMSF to be rolled over into the applicant’s SMSF as follows –
a)transfer to the applicant’s SMSF of 4 B Street and 6 B Street at a total value of $153,000;
b)the difference between that total value and the value of the applicant’s entitlement in the SMSF at the time of roll over in cash.
10. Upon compliance by the parties with order 9 –
10.1 the applicant resign as a director of the SMSF trustee;
10.2the applicant transfer to the respondent her shares in the SMSF trustee.
11.The applicant is declared as against the respondent to have the sole legal and beneficial interest in any items of property which are held in her sole name or which are in her possession and control at the date of the orders, including but not limited to –
a) bank accounts;
b) shares; and
c) household contents and personal belongings.
12.The respondent is declared as against the applicant to have the sole legal and beneficial interest in any items of property which are held in his sole name or which are in his possession and control at the date of the orders, including but not limited to –
a) motor vehicles and motorcycles;
b) bank accounts;
c) shares; and
d) household contents and personal belongings.
13. That the respondent pay the applicant’s costs.
The respondent’s proposal was incorporated into his case outline. It was as follows –
1.That the parties shall do all acts and things and sign all necessary documents, including instructing third parties where appropriate to give effect to these orders.
2.That the respondent forthwith transfer to the applicant all his right title and interest, if any, in the properties and improvements known as and situated at F Street, Suburb G (“Suburb G“) being the whole of the land and improvements in folio identifier … and at JJ Street, W Town (“W Town“) being the whole of the land and improvements in folio identifier … absolutely and beneficially and free of encumbrance.
3.That the applicant indemnify the respondent and forever keep him indemnified with respect to any liability, outgoing or charge with respect to Suburb G and W Town as and from the date of transfer of the property to her pursuant to order 2 hereof, including any liability for income tax of the respondent arising from the receipt by the applicant of rental income from W Town prior to that date.
4.That the applicant forthwith transfer and assign to the respondent her shares in J Pty Ltd (ACN …) (“JPL”) together with any entitlements to or in respect of JPL, howsoever arising and resign as a director of JPL.
5.That, as and from the time of the applicant complying with order 4 hereof, the respondent indemnify the applicant and forever keep her indemnified with respect to any liability to, or arising from her shareholding in or directorship of JPL, save and except for any liability for income tax assessed and levied with respect to salaries or wages paid to the applicant in respect of which the applicant has not paid.
6.That the parties jointly and severally do all acts and things and execute all documents necessary to cause the interest of the applicant in the JPL Superannuation Fund to be rolled in cash into an industry superannuation fund or SMSF nominated by the applicant for that purpose in accordance with the superannuation splitting provisions of the Family Law Act 1975 (Cth).
7.That the parties do all acts and things and execute all documents necessary to cause their interests in the parties’ joint HH Bank accounts ending 014, 114 and 678 and any other jointly held shares or accounts to be divided in equal shares.
8.That, save to the extent otherwise provided by these orders, the parties retain absolutely and beneficially, all real or personal property owned by each of them.
9.Reserve liberty to apply with respect to implementation of these orders.
Various percentages were attributed to the parties’ respective proposals. On behalf of the applicant, Ms Christie SC propounded a division of property in the applicant’s favour that represented 55% of the value of the property.[128] A division in those terms was explained on the basis, so the applicant asserted, of greater s 90SF(3) factors.
[128] T357 L47.
Conversely, on behalf of the respondent Mr Coleman SC propounded a division of 54% in his client’s favour,[129] the differential being explained by greater initial contributions having been provided by the respondent.
[129] T396 L30-39.
section 90SF(3) considerations
The applicant urged me to have regard to her several unsuccessful IVF attempts. It was put on behalf of the applicant that this was a matter warranting an additional weighting in her favour. Very little evidence was adduced on point and the point was not well developed in order for me to ascribe any particular conclusion in respect of it.
Equally, the respondent argued that he will face an uncertain future[130] if the property orders sought by the applicant are made because he will have no property of his own in which to live. That was overstating his circumstances, it seemed to me. The respondent will remain the single shareholder of a valuable corporate enterprise. There was no particularly meaningful evidence about his future earning capacity. However, the respondent’s financial circumstances will not be bleak even when a property order is made.
[130] P395 L41 – P396 L28.
So far as other post-separation issues were concerned, it was put on behalf of the applicant that post-separation, the respondent has had the benefit of the conduct of JPL. On the other hand, it was also put that in the post-separation period the respondent while running JPL made all payments.
It is also relevant to record that the standard of living of each must be taken into account, which I have done.
Expressing certain views
It seemed to me that several conclusions may be drawn from the findings of fact, as have been determined above. In no special order –
a)the duration of the applicant’s and respondent’s de facto relationship was between late 2004 to late 2016 or early 2005 to late 2016, approximately 11 years in total;
b)the applicant’s financial contributions at the commencement of the relationship were minimal;
c)conversely, the respondent’s financial contributions at the commencement of the relationship were more substantial than were those of the applicant;
d)over the duration of the relationship the applicant’s non-financial contributions were significant in the form of strategic financial planning, sourcing real property to acquire, dealing with the vendors of property the parties purchased and dealing with the purchasers of property to whom the parties sold;
e)over the equivalent period, the respondent left to the applicant the activities described in the immediately preceding subparagraph as he chose to immerse himself for long hours in the business of JPL, he had little aptitude for or interest in matters of wealth creation or property buying and selling and he was very adept at running the business of JPL;
f)over the duration of the relationship, the respondent received a salary and director’s emoluments which exceeded the salary that was paid to the applicant;
g)jointly the parties applied their earnings to meet mortgage payments due on real estate they acquired and in some cases the parties entered into Division 7A loans in order to do so;
h)for the most part, during their relationship the parties applied the proceeds of sale of their real estate to acquire subsequently-acquired property;
i)the parties did not maintain timesheets recording the actual hours each devoted each day to the operations of JPL;
j)the evidence revealed that the respondent worked long hours, usually leaving home around 6am and returning around 6-7pm;
k)the evidence did not reveal that the applicant was correspondingly devoted to the business affairs of JPL for the same period each day; and
l)that said, I accept that without the applicant’s strategic investment planning in overview, on the balance of probabilities, it is highly unlikely that the property purchases and sales in which the parties engaged would have taken place at all.
In my view, while the parties’ initial financial contributions were different, the respondent’s being superior, the parties’ financial and non-financial contributions during cohabitation were largely similar – or, as Ms Christie SC put it, equivalent if not equal. So far as s 90SF(3) factors were concerned, none were particularly relevant or operative.
In those circumstances I reject –
a)Ms Christie SC’s quantification of percentages on the basis of 55% in favour of the applicant and 45% in favour of the respondent; and
b)Mr Coleman SC’s quantification of percentages on the basis of 54% in favour of the respondent and 46% in favour of the applicant.
Instead I take the view that, despite the disparity in initial contributions, applying an holistic assessment of the parties’ direct and indirect financial and non-financial contributions, in percentage terms the just and equitable assessment is 50% each.
Analysing those findings against the parties’ proposals
In order to properly adjust the parties’ property interests on a just and equitable basis, it is necessary to commence with the agreed balance sheet.
In relation to disputed items, certain findings must be recorded. To that I now turn.
Item 12 on the balance sheet related to legal fees. In view of my earlier observations, in my view it is erroneous to include $60,000 as the respondent contended. No amount should be recorded. That accords with the applicant’s contentions.
Item 32 on the balance sheet related to the value of JPL. The applicant said the appropriate figure was $3,592,120. In arriving at that figure she adopted Mr T’s methodology. Conversely, the respondent asserted that the amount was properly assessed at $3,230,000. I take the view that Mr AD’s evidence on the value of JPL is to be preferred. In my view, Mr T’s detailed examination did not demonstrate that on the balance of probabilities JPL’s financial condition was as Mr T asserted. It seemed to me that for the reasons earlier stated, Mr AD’s evidence was to be preferred. In consequence, I find that the proper amount for the purposes of item 32 was as the respondent contended, not the sum for which Mr T advocated.
The upshot was that the sum of $60,000 needed to be deducted from the respondent’s version of the total asset base of $7,226,511 thereby $7,166,511. So far as the value of JPL was concerned, I prefer the figure of $3,230,000 and not the sum of $3,592,120.
So far as liabilities were concerned, two contentious items were recorded in the balance sheet, namely items 43 and 44. So far as both items were concerned each was the respondent’s responsibility as the passages above reveal. Accordingly, it was not appropriate for those items to be incorporated in a collection of joint liabilities. As such the joint liabilities were as the applicant contended, namely $222,272.
Superannuation was agreed as amounting to $1,799,425.
Applying that arithmetic, the position may be expressed in the following manner –
a)assets – $7,166,511;
b)liabilities – $222,272; and
c)superannuation – $1,799,425.
The net position was therefore $8,743,664. Half of that was $4,371,832.
Percentages
As has already been mentioned, the respondent contended for the property interests to be divided as to 54% to him and 46% to the applicant. Conversely, the applicant submitted that the respective proportions should be 55% to her and 45% to him.
I do not accept that an adjustment should be made by reason of failed IVF attempts. No evidence (beyond the applicant’s imprecise evidence) was adduced especially about expenses associated with those attempts.
The respondent submitted that the percentage division he proposed was supported by the fact that he made the superior initial contributions. That was true. It seemed to me that such a differential was dissipated if not extinguished by the parties’ equivalent contributions thereafter. I see no justification in the respondent’s proposal that all other aspects being equal, an additional 4% in the respondent’s favour beyond a simple 50/50 split was just and equitable.
According to the respondent’s proposal, any sum divisible to the applicant was achieved by transferring the respondent’s interest in W Town and Suburb G encumbrance free.
On the agreed values in the balance sheet, the total value of those two parcels of land was $2,925,000. The applicant was entitled to receive the monetary equivalent of $4,371,832. The transfer of the respondent’s interest in those two properties was not sufficient to reach that monetary sum. The discrepancy was $1,446,832. The total of items 3, 4 and 5 on the agreed balance sheet was $759,859. Items 14, 15, 16, 17, 18 and 31 on the balance sheet was $112,986 which, when added to the value of the two parcels of land plus the total of items 3, 4 and 5 was as follows –
items 1 and 2 – $2,925,000;
items 3, 4 and 5 – $759,859;[131]
items 14, 15, 16, $112,986
17, 18 and 31
$3,797,845
[131] Another option is to focus on superannuation.
The difference between the sum corresponding to a 50% division ($4,371,832) and the total of the items 1, 2, 3, 4, 5, 14, 15, 16, 17, 18 and 31 ($3,797,845) was $573,987. In other words –
a)I have found that the applicant is entitled to be paid 50% of the net joint asset position of the parties;
b)the sum corresponding to 50% of the net joint asset position of the parties is $4,371,832;
c)in order to generate the sum of $4,371,832, the net value of the two parcels of land (W Town and Suburb G) may be the starting point as they total $2,925,000;
d)to that may be added cash-at-bank in various accounts and assets of relatively minor value which, when aggregated, amount to $3,797,845;
e)a discrepancy is thereby produced;
f)that discrepancy must be met and may possibly be met by borrowings; and
g)the precise form of order should be formulated by the parties in order to give effect to these reasons and the observations above in the preceding subparagraphs are illustrative only of certain means of achieving a 50% alteration of property interests.
List of issues revisited
In paragraph 18 above I have set out a list of the issues that fell for determination in this case. In the passages above I have addressed them, although not necessarily in the order as they were recorded in that paragraph and not necessarily with the precise emphasis as was recorded in the listed issues. The comments below are indicative only.
Paragraph 18(a)(i) recorded the issue as being whether an order should be made requiring the respondent to discharge the mortgage encumbering the title to the Suburb G property. The balance sheet, item 42, showed that a $55 mortgage encumbered the Suburb G property. The mortgage is modest.
In paragraph 18(a)(ii) above, the issue is recorded as being whether an order should be made requiring the respondent to transfer to the applicant the whole of his right, title and interest in that property. The parties are required to formulate a minute of orders to give effect to these reasons. On the above arithmetic, one option is for the title to the Suburb G property to be transferred solely into the applicant’s name.
Paragraph 18(b) recorded the issue as being whether the respondent should be ordered to indemnify the applicant and hold her harmless in respect of liabilities concerning the Division 7A loans. Very little attention was given in submissions to the respondent indemnifying the applicant in relation to the Division 7A loans. Based on the earlier examination of the subject matter of the Division 7A loans I have found that they were a joint liability. But according to Mr AD the Division 7A loans were likely to have been included in the value of JPL. It seems to me that if the applicant transfers her share in JPL, she will thereafter derive no ongoing benefit from JPL. It follows that in that eventuality she should not be required to be exposed to the prospect of liability in relation to a Division 7A loan. It also follows that upon the transfer of her share in JPL to the respondent, he should indemnify her thereafter in relation to any such loan. Of course, it is a matter for the parties to endeavour to reach agreement in that regard.
In paragraph 18(c), the issue posed is whether an order should be made requiring the respondent to transfer to the applicant the whole of his right, title and interest in W Town. On the above arithmetic, in order to achieve the financial result equivalent to a 50/50 division, one option is for the respondent to transfer his title to that property to the applicant.
In paragraph 18(d) the issue posed is whether the respondent should be ordered to transfer the whole of his right, title and interest in the parties’ joint bank accounts. In order to achieve a financial result of 50/50 alteration of property interests, the total amount in joint bank accounts should be addressed.
In paragraph 18(e), the issue posed is whether the respondent should be ordered to pay the applicant the sum of $349,000 and upon such payment being made, whether the applicant should be ordered to transfer her shareholding in JPL to the respondent. In my view the answer to that question is in the negative. For reasons canvassed extensively above, in my view the amount properly attributable to JPL as representing its value is as the respondent stated, namely $3,230,000 and not the amount recorded in the balance sheet as ascribed by the applicant, namely $3,592,120.
In paragraph 18(f) above the question posed was whether any loan account in JPL in the applicant’s name should be transferred to the respondent. Items 39, 40 and 41 of the balance sheet revealed three director’s loans, one in 2017 for $4,773, one in 2018 for $8,268 and one in 2020 for $2,906. It will be recalled that the applicant’s employment within JPL was terminated in March 2017. She has been recorded since 2017 as being indebted to JPL pursuant to three loan accounts. Admittedly, those debts are not vast. Yet they were seemingly “incurred” after the applicant departed JPL. The respondent will henceforth control JPL absolutely and with that control, he will have the ability to enforce or forgive director’s loans, subject of course to his acting in the best interests of the company when doing so, consistent with his statutory duties as a director under s 180 of the Corporations Act. In my view, in respect of the director’s loans for $4,773, $8,268 and $2,906 it would make sense for the respondent to assume liability for those three loans.
In paragraph 18(g) the issue posed was whether the applicant’s interest in the existing self-managed superannuation fund should be rolled into a new fund to be established in her sole name for her sole benefit. Item 45 of the balance sheet revealed the applicant’s superannuation entitlements to be $721,749.
In order to achieve a 50/50 alteration of property interest, it would follow that the sum of $721,749 should be rolled into a new superannuation fund.
In paragraph 18(h) above the issue posed was whether an order should be made transferring to the applicant’s new superannuation fund vacant possession of 4 and 6 B Street Suburb C, New South Wales with a financial adjustment being made. Each storage unit is recorded in the JPL books and accounts. JPL receives rent from each. The storage units have a distinct function in relation to JPL’s operations. They are of no utility to the applicant. Moreover, if an order is made in the manner proposed, the applicant and respondent will have ongoing interaction, which is undesirable in a case where a search is being undertaken to finally and exhaustively extricate the parties from ongoing involvement with one another.
The issue posed by paragraph 18(i) is whether the applicant should be ordered to resign as a director of the existing superannuation fund and to transfer her shareholding in the trustee to the respondent. That proposal has a certain attraction to it. Pursuant to it, the applicant will establish a new superannuation fund, roll into that fund her existing entitlements and then resign after transferring her shareholding in the existing trustee to the respondent. To my mind, that makes sense and I support it.
In paragraph 18(j) an issue was raised about whether a costs order should be made. It is appropriate that I hear submissions on costs. If the parties seek such an order, I have in mind that any submissions on which the applicant relies in relation to a costs application must be filed and served on or before 4pm on 28 June 2021 and any submissions on which the respondent relies in relation to costs must be filed and served on or before 4pm on 28 July 2021. If the parties wish it I will set aside an hour on 2 August 2021 at 1pm to hear viva voce submissions on costs, to the extent that those submissions go beyond the written submissions.
The issue posed by paragraph 18(k) has already been addressed.
For the respondent, the issues he said called for adjudication were set out in paragraph 19 above.
In paragraph 19(a) the issue posed was whether, as the respondent contended, the respondent was largely responsible for the success of JPL. In the passages above I have addressed that question in the context of the applicant’s contentions in that regard. At the risk of repetition, I take the view that each of the applicant and the respondent contributed to the success of JPL. They provided different skills yet together they took a fledgling company and built it up to a very successful commercial enterprise. The respondent brought his technical skills whereas the applicant brought her skills in strategic advisory work and financial wealth creation. In the passages above I stated that I agree with Ms Christie’s characterisation of the contribution of each towards JPL’s success as being equivalent, if not equal.
The issue posed in paragraph 19(b) was whether the applicant was properly renumerated at the rate of $400 per day for two days a week she worked in JPL’s business. This issue seemed to invite an assessment of whether the applicant’s remuneration of $800 per week was the total for which she was entitled to assert a claim. In my view $800 per week was not. In my view it is opportunistic for the respondent to endeavour to argue that the applicant was no more than a clerical employee who was adequately renumerated at $800 per week. The applicant’s skills went very substantially beyond that and her contribution towards the enhancement of the business of JPL could not adequately be measured by the fact that she was paid at the rate of $400 per day over two days. So, in answer to the issue posed in paragraph 19(b), several things must be said –
a)the applicant was paid at the rate of $400 per day over two days for her work in the business of JPL;
b)that salary was modest even if the applicant agreed to it;
c)the applicant’s contributions must also be measured against the stipulations in the legislation about her contributing towards the acquisition, conservation or improvement of JPL; and
d)when measured on that basis, her salary of $400 per day was not the totality of the claim she was entitled to make.
In paragraph 19(c), the issue posed was whether the respondent’s contributions with respect to the acquisition, conservation and improvement of JPL were greater than were those of the applicant. In my view the answer is in the negative. The contribution of each was equivalent if not equal.
In paragraph 19(d) the issue posed was whether the applicant’s receipt of rental income in respect of W Town was relevant in the post-separation period. The evidence on this issue was imprecise both as to the amount paid as well as the dates on which that rental was paid. Ordinarily, receipt of post-separation income may well be relevant if it was possible to identify precisely the amount involved and the dates on which it was paid. No attempt to quantify the amount involved was made nor was a ledger produced showing the dates on which that rental was paid. In those circumstances, I was left guessing at the amount paid and date of any such payment. Such evidence may have been relevant if reliable and here it was not.
In paragraph 19(e) above, the issue posed was the income generating capacity of W Town. It will be recalled that in her evidence the applicant stated that she was presently undecided about the use to which she would put the property at W Town. No valuation or other evidence from a real estate or rental agent was adduced about the income earning capacity of W Town as a holiday rental. In those circumstances I was unable to ascribe a figure to W Town’s income generating capacity. However, I do observe that it is capable of generating rental income.
So far as contributions generally were concerned, at a general level of abstraction several matters may be extracted from the authorities. In no special order, they may be recorded as follows –
a)the court must weigh the myriad of contributions made by the parties during the course of the relationship;[132]
b)the court must weigh contributions of all kinds and from all sources as were made by each, throughout the period of the parties’ cohabitation and the court must then translate such an assessment into a percentage of the overall property of the parties;[133]
c)the court must approach the task of assessing contributions holistically[134] and by analysing the nature, form, characteristic and origin of the property comprising that to which s 90SM applies;[135] and
d)it is dangerous for a court to isolate indirect contributions referrable to one property only in the context of a global assessment of contributions.[136]
[132] Williams & Williams [2007] FamCA 313, Baker v Towle (2008) 39 Fam LR 323, Bilous v Mudaliar (2006) 35 Fam LR 55, Jabour v Jabour (2019) 59 Fam LR 475 and In the Marriage of Aleksovski (1996) 20 Fam LR 894.
[133]Dickons v Dickons (2012) 50 Fam LR 244.
[134]Eufrosin & Eufrosin [2014] FamCAFC 191.
[135]Dickons v Dickons (2012) 50 Fam LR 244.
[136]Hurst & Hurst [2018] FamCAFC 146.
A useful statement of principle concerning the task facing the court was given in Singerson & Joans.[137] There, the court held as follows –
The court is mandated to look at the totality of what the parties have contributed in a financial and non-financial sense, including contributions to the welfare of the family and to the acquisition, conservation and improvement of assets. The court is required to evaluate the significance of all the various contributions to the property, notwithstanding there may be different categories of that property.
[137] [2014] FamCAFC 238 (at [66]).
In this case considerable emphasis was placed on the significance of the fact that the respondent’s initial contributions were greater than were those of the applicant. In Jabour v Jabour it was held, by reference to In the Marriage of Pierce,[138] that the weight to be attached to an initial contribution must be assessed against the rubric of all other contributions, both financial and non-financial, made by the parties over the course of their relationship.
[138] (1998) 24 Fam LR 377.
I accept that at the commencement of their relationship the parties’ initial contributions were different. Whether that difference can be called in aid to sustain an assessment of contributions over the duration of the relationship that is other than equal was a threshold issue in the case. On behalf of the respondent it was contended that –
a)he made a larger initial contribution to the relationship; and
b)throughout the relationship, he worked for more than 12 hours a day providing his skills as not only the face of JPL, but also the technician without whose skills JPL would not have existed.
The applicant argued that her non-financial contributions were equivalent to the respondent’s and she conceded that her initial contributions were less than were the respondent’s.
Accepting that the parties’ initial contributions were unequal, that is but one of the myriad of contributions I am required to take into account. Of course, that disparity must be assessed among a myriad of contributions, all of which must be weighed, as I have done. In the upshot I take the view that by reason of the disparate initial contributions, the respondent is not entitled to an additional 4% in his favour. The percentage division is 50% each.
A single pool
The parties did not conduct this case on the basis that superannuation was to be treated differently from any other aspect of the property in the case. Accordingly, I have proceeded on the basis that all property was to be assessed on the same basis, there being no submission that I should adopt a contrary approach.
The specifics of s 90SF(3)
Various authorities[139] have emphasised the importance of separately considering each discrete subsection of s 90SF(3). To this I now turn.
[139] For example, Hurst & Hurst [2018] FamCAFC 146.
The age and state of health of each party must be taken into account under s 90SF(3)(a). As at the date of the trial of this proceeding, the applicant was 50 and the respondent was 57. Each was in reasonable health.
Subsection 90SF(3)(b) called for an examination of the income, property and financial resources of each party and the physical and mental capacity of each for appropriate gainful employment. Neither suffered from any impairment in the nature of a mental capacity. The property of each party has been addressed above. The evidence about current income of the applicant was scant. So far as the respondent was concerned, his income in the last financial year was given in evidence as $423,280, including allowances.[140]
[140] T115 L42-43 and T117 L36-37.
Neither party had the care or control of a child under 18 years for the purposes of s 90SF(3)(c).
Similarly, the evidence was scant in relation to the matters set out in s 90SF(3)(d).
There was no evidence that either party was responsible for supporting any other person for the purposes of s 90SF(3)(e).
Subsection 90SF(3)(f) was not relevant.
So far as s 90SF(3)(g) was concerned, that subsection enquired into the standard of living that is in all the circumstances reasonable. In this case the respondent’s lifestyle is not lavish nor has it been. He has collected vintage cars but each is not worth a large sum. Similarly, there was no evidence of extravagance on the applicant’s part. Each lived a modest lifestyle.
Maintenance was not relevant so s 90SF(3)(h) did not call for consideration.
There was no evidence of any pressing creditor or creditors for the purposes of s 90SF(3)(i).
Section 90SF(3)(j) was not relevant as maintenance was not in issue.
Nor was s 90SF(3)(k).
There was no child so s 90SF(3)(l) was not relevant.
The evidence about either party cohabiting with another was imprecise and it was insufficient for me to make any findings for the purposes of s 90SF(3)(m). Neither party addressed on point.
Bankruptcy issues were not involved in this case so s 90SF(3)(n), (o) and (p) were not enlivened.
Subsection 90SF(3)(q) was also not relevant as no issue was raised about child support.
The terms of a financial agreement for the purposes of s 90SF(3)(s) and (t) were not relevant.
That left s 90SF(3)(r), namely, whether there existed any fact or circumstances which in the opinion of the court the justice of the case required to be taken into account. Neither party addressed on any issue relevant to this subsection.
The justice and equity of the circumstances
Section 90SM(3) forbids a court from making an order under s 90SM unless the court is satisfied that, in all the circumstances, it is just and equitable to make the order. In accordance with principles espoused in Stanford v Stanford[141] upon the parties’ separation, the financial unity that had existed came to an end, and with it the “stated and unstated assumptions upon which the parties’ relationship had proceeded together with the roles within that relationship which those assumptions directed and which the parties each performed.[142]
[141] (2012) 247 CLR 108.
[142]Hurst & Hurst [2018] FamCAFC 146 (at [24]), citing Stanford v Stanford (2012) 247 CLR 108.
It is just and equitable to make orders altering the property interests of the parties as to 50% each.
I certify that the preceding two hundred and nine (209) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Wilson delivered on 28 May 2021.
Associate:
Date: 28 May 2021
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