WITHERS & WITHERS
[2013] FamCA 596
•16 August 2013
FAMILY COURT OF AUSTRALIA
| WITHERS & WITHERS | [2013] FamCA 596 |
| FAMILY LAW – PROPERTY – Value of property – Expert evidence – Where the husband’s parents had their share of the family company to the husband and his brother at a discounted price – Gift – Where there had been an interim distribution of property by Court Order – Shares. FAMILY LAW – PROPERTY SETTLEMENT – Just and equitable – Contributions – Family company – Property acquired before marriage – Superannuation split – Where the parties had been married for over 20 years – Whether a Kennon adjustment is appropriate. FAMILY LAW – EVIDENCE – Evidence in relation to family violence – Admissibility – Hearsay. FAMILY LAW – COSTS – Between parties – Where an order was made for costs on a party-party basis in relation to a subsequent application to reopen evidence. |
| Evidence Act 1995 (Cth) Part 3.2 Family Law Act 1975 (Cth) s 4, s 75(2)(o), s 79, s 79(4) |
| Bevan & Bevan [2013] FamCAFC 116 Kennon & Kennon (1997) FLC 92-757 Ramsay and Ramsay (1997) FLC 92-742 Yunghanns & Ors & Yunghanns & Ors & Yunghanns [2000] FamCA 681 |
| APPLICANT: | Ms Withers |
| RESPONDENT: | Mr Withers |
| FILE NUMBER: | BRC | 2405 | of | 2011 |
| DATE DELIVERED: | 16 August 2013 |
| PLACE DELIVERED: | Brisbane |
| PLACE HEARD: | Brisbane |
| JUDGMENT OF: | Forrest J |
| HEARING DATE: | 29 and 30 March 2012 |
REPRESENTATION
| SOLICITOR FOR THE APPLICANT: | Mr Cooper Charles Cooper Lawyers |
| COUNSEL FOR THE RESPONDENT: | Mr Page QC |
| SOLICITOR FOR THE RESPONDENT: | Pender & Whitehouse Solicitors |
Orders
All existing interim property and spousal maintenance orders are discharged.
The husband shall within four weeks of the date of these Orders transfer unencumbered all of his right, title and interest in and to the property and improvements situated at 37 V Street, Suburb P in the State of Queensland being Lot … on RP … County of … Parish of … Title Reference number …52 to the wife.
Contemporaneous to the transfer provided for in paragraph 2 of these Orders, the wife shall transfer unencumbered all of her right, title and interest in and to the property and improvements situated at 32 V Street, Suburb P in the State of Queensland being Lot … on RP … County of … Parish of … Title Reference number …40 to the husband.
The wife shall indemnify the husband and hold him indemnified in relation to any liabilities relating to the property at 37 V Street, Suburb P incurred from the date of these Orders.
The husband shall indemnify the wife and hold her indemnified in relation to any liabilities relating to the property at 32 V Street, Suburb P.
The wife shall retain as her sole property absolutely, free of all claims by the husband, all property in her possession or control including the following property:
(a)The J1 motor vehicle currently in her possession;
(b)Money standing to the credit in any bank account in her name;
(c)The … boat and trailer;
(d)The … jet ski and trailer;
(e)The debt in the amount of $13,000 owing by the wife’s adult daughter, Ms K, to the husband; and
the husband shall do all things necessary to give effect to this paragraph of these Orders, including preparing and signing any necessary documents and delivering in good order any such items of property that are currently in his possession to the wife, as soon as is practicably possible.
The wife shall retain as hers absolutely all of her interest in the RR superannuation pension in its payment phase and all of her interest in the GC superannuation pension in its payment phase.
(a) Within three calendar months of the date of these orders the husband shall sell his right, title and interest in the … Golf Club Equity Membership (“the husband’s Equity Membership”) at a price to be agreed between the husband and the wife and, upon sale, 48% of the net proceeds of sale are to be paid to the wife and should the husband’s Equity Membership remain unsold at the expiration of those three months the wife is hereby appointed as trustee for the sale of the husband’s Equity Membership and shall sell it at the best price she can obtain and she shall pay the husband, upon sale, 52% of the net proceeds of sale.
(b) The husband shall indemnify the wife and hold her indemnified in respect of any fees or charges levied against the husband’s Equity Membership by the … Golf Club such that the wife receives 48% of the sale proceeds of the husband’s Equity Membership after deducting only reasonable costs of sale such as commission and advertising charges.
In accordance with section 90MT of the Family Law Act, whenever a splittable payment becomes payable in respect of the superannuation interest of the husband in the Withers Self-Managed Superannuation Fund (“the Fund”), the wife or her personal representative will be entitled to be paid an amount calculated in accordance with Part VI of the Family Law (Superannuation) Regulations 2001 using the base amount of $1,424,491.50 (one million four hundred twenty four thousand four hundred ninety one dollars fifty cents) and there will be a corresponding reduction in the entitlement of the husband.
The trustee of the Fund must comply with the obligations imposed upon trustees of eligible superannuation plans under the Family Law Act and the Family Law (Superannuation) Regulations 2001.
Paragraphs 9 and 10 of these Orders bind the trustee of the Fund when these paragraphs take effect from the operative time being the fourth business day after the date of these Orders.
The husband and the wife shall do all such things and execute all such documents as are necessary to facilitate the rollover by the trustee of the Fund of the wife’s entitlements pursuant to paragraph 9 of these Orders to another regulated superannuation fund, an approved deposit fund, or a retirement savings account or other such applicable fund or account at the sole nomination of the wife as soon as that is practicably possible after the operative time.
The trustee by himself, his servants or agents shall not do any act or thing that would prevent the wife or her personal representative from receiving the benefits and the fund to which she is entitled pursuant to paragraph 9 of these Orders.
Save as otherwise provided for in these Orders, the husband shall retain as his sole property absolutely, free of all claims by the wife, all other property in his possession, ownership or control including motor cars, credit balances in bank accounts in his name, a 3.75 metre tinny (boat), shares in listed public companies, shares in private companies, life insurance policies, debts owed to him by companies, a caravan, his investment with RR and the balance of the assets of the Withers Self-Managed Superannuation Fund after the wife’s entitlement pursuant to paragraph 9 of these orders is rolled out of that Fund.
The husband shall pay the wife’s costs of and incidental to his application in a case filed on 5 June 2013 on a party/party basis as agreed or in default of agreement as assessed under the Family Law Rules 2004 (Cth).
It is certified that it was reasonable for the wife and her solicitors to engage counsel to advise, assist and appear on the husband’s application in a case filed on 5 June 2013.
The wife shall pay the husband the sum of $3,630 as her agreed half share of the costs of engaging the single expert real property valuers in the proceedings such sum to be paid by the wife by being deducted by the husband from the costs payable by him to the wife pursuant to paragraph 15 of these Orders.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Withers & Withers has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
| FAMILY COURT OF AUSTRALIA AT BRISBANE |
FILE NUMBER: BRC 2405 of 2011
| Ms Withers |
Applicant
And
| Mr Withers |
Respondent
REASONS FOR JUDGMENT
When Ms Withers (“the wife”) and Mr Withers (“the husband”) commenced living together as a couple in 1989, not long before they married in October of that year, each had been married before, each owned a number of properties, each had superannuation interests, each had children of their own and the husband owned a 20 per cent share in the business operated by him, his parents and his brother.
They stayed together as a married couple, investing all they could into their joint lives, including the husband later taking over his family’s business, until differences caused them to separate in January 2011, some twenty-one years and several months after they started their married lives together. Apart from mutually caring and providing in various ways for each other’s children of their former marriages, they had no children together during their own marriage.
Unable to agree on how to then demerge their joint financial affairs after their separation, the wife commenced proceedings in the Federal Magistrates Court (as it then was) seeking property adjustment orders pursuant to s 79 of the Family Law Act 1975 (Cth) (“the FLA”). Some interim orders were made there, including as to spousal maintenance and occupation of property and the matter was transferred to this Court.
The trial took place before me over two days in late March last year. At the end of the trial, it became clear that although property division could not be agreed between the parties, there were only a few issues for the Court to actually decide to finalise the division of property between the parties: There was said to be disagreement between them as to the value of the shares in the company, Withers & Co Pty Ltd, still owned and controlled by the husband; there was disagreement as to the amount of a debt owed to the husband by one of the wife’s adult daughters and how that should be treated; most importantly, though, the parties could not agree on the exact percentage division of their property and superannuation interests on account of the contributions made by each of them across all spheres of their married relationship. The husband submits it should be a 65/35 division in his favour. The wife submits it should be an equal division.
I have determined though that the appropriate orders to make in this case will divide the parties’ net property and superannuation interests ( in addition to some agreed notional “add backs”) between them as to 52 per cent to the husband and as to 48 per cent to the wife. I will now set out how I have come to that determination.
What are the parties’ interests in property and superannuation?
At the trial, the parties agreed that they had the following interests in property and as to the value of those interests set out in this table.
Ownership
Description
Value
ASSETS
1
Jointly owned
Real property at 32 V Street, Suburb P
$1,550,000.00
2
Jointly owned
37 V Street, Suburb P
$1,310,000.00
3
Wife
J1 Motor Vehicle
$60,000.00
4
Husband
J2 Motor Vehicle
$60,000.00
5
Husband
Toyota Motor Vehicle
$75,000.00
6
Husband
J3 Motor Vehicle
$35,000.00
7
Husband
Boat
$36,000.00
8
Husband
Jet Ski
$8,000.00
9
Husband
3.75 metre Tinny
$3,000.00
10
Husband
Equity Membership Golf Club
$23,000.00
11
Husband
Bank of Queensland web savings account no. 21… as at May 2011
$Nil
12
Husband
Bank of Queensland cheque account no. 10… as at May 2011
$5,631.00
13
Husband
Bank of Queensland cash management account no. 93… as at May 2011
$13,205.00
14
Husband
Bank of Queensland web savings account no. 20… as at May 2011
$1,051.00
15
Husband
Bank of Bendigo savings account no. 11… as at May 2011
$3,029.00
16
Husband
Shares – Bank of Queensland Telstra Bendigo
$13,004.00
17
Husband
Colonial life insurance policy surrender value
$12,089.00
18
Wife
Westpac Choice …91
$9,467.00
19
Owed to Husband
Loan owed by Withers & Co Pty Ltd as at time of trial
$51,146.00
20
Husband
Caravan
$54,000.00
Sub-Total
$3,322,622.00
SUPERANNUATION INTERESTS
24
Wife
RR Superannuation
$144,284.95
25
Wife
GC Superannaution
$150,099.82
26
Husband
Withers Self-Managed Superannuation Fund (SMSF)
$2,273,396.00
27
Husband
RR Superannuation as at May 2011
$108,556.00
Sub-Total
$2,676,336.77
TOTAL
$5,998,958.77
The husband concedes that he owns all of the shares in Withers & Co Pty Ltd and that it is his “alter ego”; that is, that he controls it completely. Although the matter was argued as if the parties had not been able to agree on the value of the company, from the balance sheets that were put before me by each of the parties it is clear that they agree that the assets of the company are as follows:
Cash at bank in a BOQ account as at 12 March 2012 $17,357.39
Cash at bank in another BOQ account as March 2012 $21,199.74
400 shares in IAG Ltd
400 shares in Telstra Ltd
Real property at Suburb S $690,000.00
(as valued by the joint expert)As already noted in the table above at [6] - item 19, the parties also agreed that the company owed the husband $51,146 at the time of the trial.
The husband sought leave at the commencement of the trial to rely upon an affidavit of his own accountant containing evidence going to the value of the company. That was objected to and, for reasons I gave at the time, I refused to grant the husband that leave. However, that said, as I have just pointed out, the parties agreed as to the value of most of the assets of the company. It was only a parcel of 400 Telstra shares and another parcel of 400 IAG shares about which there was no actual agreement. I do not know why agreement could not be reached as to the value of those shares and it completely surprises me that it could not be. Both companies are listed on the Australian Stock Exchange and agreement as to the value of their issued shares on any given day should be easily reached, particularly when both parties are represented by experienced lawyers as these two parties were and given how easily accessible ASX listed share prices are. Mr Cooper, solicitor who appeared for the wife, included some figures in the balance sheet that he handed up for those listed shares. He had the IAG Ltd shares at $1,296 and the Telstra Corporation Ltd shares at $1,216.
I was not told by Mr Page SC (as he then was) who appeared for the husband why agreement was not able to be reached about a matter as simple as that. Instead, Mr Page made the submission that I should either order the sale of the shares in the company, not being able to be satisfied as to their value, or simply transfer them to the wife. Both were, I consider, remarkable submissions in the circumstances.
The wife made it clear she does not want the shares in the company or any of the underlying assets of the company that ownership of the shares in the company would entitle her to. I do not consider that it is appropriate in the circumstances of this case to order either the sale of the shares in the company or their transfer by the husband to the wife. As was said for the husband, the company is his ‘alter ego’. There is no good reason, at least in my view, for it not to remain his company, at least as between him and the wife.
I consider that the husband’s obligation to disclose the value of those shares as part of his obligation to fully and frankly disclose all of his financial circumstances has not been met in circumstances where that would have been very easy. As a consequence, I am satisfied that a “robust” approach can be taken to this particular matter. Although I do not consider it an entirely satisfactory outcome, in the absence of admissible evidence from the husband as to value and in the absence of any explanation for the failure to accept the figures put forward by Mr Cooper for the wife, I am prepared to accept, for the purposes of this case that the two small parcels of listed shares owned by the company had the value as asserted by Mr Cooper for the wife at the time of the trial. I am reassured of the suitability of this approach by my own knowledge of the approximate value of the shares in those listed companies and the lack of any submission for the husband that the figures asserted by Mr Cooper were, in fact, wrong.
Accordingly, I find that the husband’s shares in the company, Withers & Co Pty Ltd were worth $679,923.13 at the time of the trial, including the amounts of $1,296 and $1,216 for the two parcels of shares.
Accordingly, I find that the parties’ interests in property and superannuation at the time of trial had a value of $6,678,881.90. Of that, the wife only has interests that she does not hold jointly with the husband in property and superannuation to the value of $363,851.77
Is it Just and Equitable to make Property Adjustment orders at all?
The husband and wife in this case no longer live together in a marital relationship as a matter of choice, yet they remain connected by joint ownership of property and are unable to move on with their lives until those connections are unwound. As was recognised by the High Court in Stanford & Stanford (2012) 293 ALR 70, the agreements or assumptions upon which the parties had organised their joint affairs whilst they remained a couple no longer exist. I am satisfied, in these circumstances, that it will be just and equitable for the Court to make orders that adjust their property interests so that they may move on with their lives without being financially entwined in arrangements that they cannot agree to unwind. Of course, it is for the Court to determine the orders that are appropriate to achieve that and also that they are just and equitable having regard to the matters required to be considered pursuant to s 79(4) of the FLA.
Against what “pool” should the Property Adjustment Orders be made?
As I have previously said,[1] I am satisfied that there are circumstances where it might still be just and equitable to include amounts that notionally represent assets or money already unilaterally disposed of by one or each of the parties alongside other existing property, superannuation interests and liabilities against which contributions are considered and assessed. Where legally represented parties agree to such a course, it is difficult for me, at this point in time at least, to imagine circumstances in which I might not do that. In this case, the parties agreed to the following amounts being notionally added back to what I would still conveniently refer to as the “pool”. They also agreed to them being treated as property already received by the wife in the division of their property.
[1] K v A delivered 26 July 2013 at [24] – [25]
ADDBACKS
1
Wife
Original partial property amount ordered by Judge Spelleken
$80,000.00
2
Wife
Amount paid off the wife’s credit card by husband in June 2011 that the parties actually expressly agreed in writing at the time would be treated as part of the wife’s property division already received by her
$7,000.00
These “add back” items take this “pool” against which I consider it just and equitable to assess contributions to the value of $6,765,881.90. Of course, I recognise and acknowledge, as the Full Court has recently said, that s 75(2)(o) of the FLA is another provision that easily facilitates the just and equitable determination of orders in cases where there has been unilateral disposal of property.[2]
[2] See Bevan and Bevan [2013] FamCAFC 116 (8 August 2013) at [79]
Should the debt from the Wife’s daughter to the husband be added back?
For the husband, it was also submitted that an amount of $29,400 still said to be owed to him by one of the wife’s adult daughters should be ‘added back’ to the “pool” against which contributions are to be assessed and property adjustment orders determined. For the wife, it was submitted that the amount still owed to the husband by the wife’s daughter is only $13,200. It was also submitted for the wife that the amount of the debt should not be added back to the “pool” but left as a matter between the husband and the wife’s adult daughter to finalise.
It is clear though that both parties agree that the wife’s adult daughter Ms K still owes the husband money. In such circumstances, there can be no doubt that the debt owed to the husband is “property” within the meaning of that word as defined in s 4 of the FLA. As such, it should, in my view, be directly included in the “pool” as property in which the husband has an interest and not simply as a notional “add back”.
The evidence about the quantum of the debt is confusing to say the least. At [139] on page 20 of his trial affidavit filed 25 November 2011 the husband said he loaned the wife’s daughter, Ms K, two sums - $31,750 and $12,250 “about two (2) years ago”. That would have been around 2009/2010 and would total $44,000. He said the money was to be paid back “in five years” when Ms K would refinance her property. Then, without further explanation, the husband goes on to say that at the date of his affidavit there is a loan for $13,000 outstanding from Ms K.
When Mr Page cross-examined the wife, he put to her that $12,250 had been loaned to Ms K on 19 December 2006 and a further $7,000 on 31 January 2007. The wife could not say she recalled that exactly. It was then suggested to the wife that Ms K repaid $44,000 on 22 October 2007 to which the wife agreed. It was then suggested to her that repayment was in fact $7,000 short of what Ms K owed the husband to which the wife disagreed. Then it was suggested to the wife that a further sum of $13,400 was loaned to Ms K on 22 December 2009 to which the wife said “yes, $13,000”. When it was then suggested to the wife that another $9,000 was loaned to Ms K on 11 January 2010 the wife said “no” and made it clear that she did not agree with that proposition. When asked how she knew that her daughter only owed the husband $13,000 the wife said that was always what she understood to be the amount still owed and that the husband had actually represented as much to her in a written schedule he had previously put to her of property that she should keep in their property division.
The only actual evidence I have from the husband on the point is that contained in his affidavit referred to in [20] above. Considering that evidence of the husband and the evidence of the wife in cross-examination, which I had no particular reason to doubt, I find that the debt owed by the wife’s daughter Ms K to the husband is $13,000 (the amount both the husband in his affidavit and the wife in her oral evidence referred to as being the amount outstanding). I also consider it is to go into the “pool” as actual property of the husband not as an “add back”.
Accordingly, its addition takes the “pool” to $6,778,881.90.
What findings are to be made as to the Parties’ contributions across all spheres of the marriage?
As I understood the parties’ cases and the submissions made by their lawyers, they seemed to be at issue really in respect only as to the assessment of their respective contributions having particular regard to the fact that the husband brought in to the marriage his 20 per cent interest in the family company that provided the bulk of the family’s income throughout their marriage and also the fact that he gradually acquired all of the shares in that company over time, including by the purchase by him and his brother of his parents’ 60 per cent share in 1996 for a substantial discount on their actual value. Otherwise, I understood them to effectively agree that their other contributions in the various spheres of the marriage should be assessed as equal, each of them having contributed to the best of their abilities to the common purpose of their lives together.
I am satisfied that the wife owned two unencumbered real properties at the time that her relationship with the husband commenced. She owned a home in Suburb Y in Brisbane and another property in Suburb U in Brisbane. She also had an investment of $200,000 in funds managed by MLC and was receiving the dividends from that invested amount as income that she was using at the time to help support herself and her children of her former marriage. She had been unfortunately widowed in an accident some years before meeting the husband.
Mr Cooper submitted at the end of the case that I should also find that the wife also had $70,000 in bank accounts at the time of the commencement of the relationship. She had not deposed to that fact in her affidavit evidence but had mentioned at one point in her cross-examination that she had “probably another $70,000” in another bank account. I expect that is where Mr Cooper’s submission was based. However, I noted that the wife quickly went on to say after she had given that evidence that she did not have much of that money left when she met the husband. I will not include such an amount in my consideration of these matters.
I am also satisfied that at around the time the parties’ relationship commenced, the husband owned 20 per cent of the issued shares in the family company through which his parents, he and his brother ran their business. Expert opinion of Mr H, accountant, as to the value of the husband’s shares in that company at 30 June 1989 is in evidence. He opined that the husband’s 20 per cent share in the company was worth $113,347 at the time and noted that the husband was also owed a debt of $25,858 at the time, taking his net interests in that company at that time to $139,205.
Mr H was not jointly instructed as a single expert. His evidence was obtained by the husband and put before the Court in support of his case. Mr Cooper for the wife objected to it being admitted as evidence but, for reasons I gave at the time, I allowed it in. Mr Cooper cross-examined Mr H and ultimately submitted that the Court should discount the value that Mr H had put upon the husband’s shares because of Mr H’s failure to discount his pro-rata valuation of the husband’s 20 per cent share in the net assets (including goodwill) of the company at the time. His submission was based firmly on the general proposition that because it was a minority shareholding in a tightly held family company the pro-rata portion of the net value of the whole should be discounted both for lack of control and lack of marketability. An examination of decisions in this Court over the years certainly reflects that such discounts are commonly applied by valuers and, ultimately, the Court in such circumstances[3].
[3]See a particularly good discussion of the case law and the applicable principles in Manx & Jenner [2009]FamCA1264 per Burr J from [48] to [75]
However, in this particular case, Mr H was cross-examined by Mr Cooper as well as being asked questions by me as to the discounting issue. He noted that there were two potential sale scenarios at that time. The business could have been sold out of the company to a third party, which would have resulted in all of the shareholders getting full value for their shares. Alternatively, the husband’s shares could be sold to his parents and/or his brother. Mr H said that when that type of sale happened, in his experience, family members usually do not even bother getting a valuation and just strike a price for the transaction. He could not remember any actual sale like that which he was aware of where a discount was applied by the parties. He certainly was not moved by the idea that discounting of the pro-rata net asset value of the husband’s shares was appropriate in this case for lack of control or lack of marketability. He had not been provided with, and had not seen, any Articles of Association or any company documents prescribing the shareholders’ rights in this particular company.
Ultimately, it is for the Court to determine the value to the owner of the property, in this case, the shares held by the husband at the time. Any discounting of minority shareholdings in companies is for the Court to determine as part of that process. It is for the Court to consider the matters of fact that guide any discounting practice. It is for the Court to make assessments of the probability of certain events occurring that might impact on this determination.[4]
[4] See particularly Ramsay and Ramsay (1997) FLC 92-742 per Warnick J
It is clear that the husband ultimately gained control of the company. It is now said to be his “alter ego”. Given that it is the value of a minority interest in a company at the commencement of the marriage that is being considered, questions about probabilities of certain facts occurring are no longer very helpful in determining the retrospective value. It is a matter of history now that the husband held his shares, acquired more and ultimately gained total control of the company. In those circumstances, and given the fact that Mr H was unmoved in his assessment by questions of discounting and there was no contrary expert opinion evidence before me, I accept that the husband’s shares in the company were worth $113,347 at the commencement of the relationship and that he was also owed $25,858 by the company.
The husband also had interests in four real properties at around the time of the commencement of the relationship with the wife. Two of those were situated at Suburb M, one was at Suburb E and the other at Suburb B. They were all subject to mortgages securing debts. He also had superannuation worth approximately around $155,000 and a boat that he had bought using company profits for $17,000.
The parties bought their first property together at Suburb O in late 1989 for around $300,000. The wife sold her U property and contributed the net sale proceeds of $145,000 to the joint purchase. The husband sold three of his properties; the two at M and the one at E. The net sale proceeds of those three properties, I am satisfied, fell short of the balance needed to make up the purchase price of the parties’ joint purchase at Suburb O after the wife’s contribution of $145,000. The husband’s evidence is that he put in $100,000 towards the purchase price of their new property. I accept that and find that was the total of the equity he had in the three properties he sold at the time. The parties, I find, having regard to the evidence of a letter from the Bank of Queensland at the time, borrowed the balance of the purchase price of the O property.
The wife’s Y property was sold in mid-1991 for $122,000. It was unencumbered at the time. The wife contributed the net sale proceeds to the parties’ common purposes.
The husband’s B property was sold in 1996 and the husband realised net proceeds of approximately $81,000 which he contributed to the parties’ common purposes.
My findings as to the property the parties brought in to the marriage at the start are then as follows:
Property brought in by wife
Property brought in by husband
Item
Value
Item
Value
Direct cash contribution from equity in Uproperty
$145,000
Direct cash contribution from equity in three properties
$100,000
Investment in Managed Fund
$200,000
Superannuation interest
$155,000
Unencumbered Property in Y (value at commencement of relationship not known)
Sold in 1991 for $122,000
Encumbered property in B (value at commencement of relationship not known)
Sold in 1996 for net realisation of $81,000
20% interest in company
$113,347
Loan to company
$25,858
Totals
$467,000
$475,205
As I understand the husband’s evidence, the family company secured a significant national contract and by the time the parties’ relationship started, the husband was running the Queensland operations of the company and his brother was running the New South Wales and other operations of the company. In 1996, their parents, who had by then retired, sold their 60 per cent interest in the company to their two sons in equal shares. This took the husband’s interest to 50 per cent. The husband’s evidence, which was not challenged or disputed in any way, was that the parents’ shares were valued at $600,000 and that they sold them to him and his brother at a substantial discount of 25 per cent for the price of $450,000. This would amount to a “gift” to the value of some $75,000 worth of value in the business to the husband, the equivalent of 7.5 per cent of the total value of the business on those figures.
The husband’s evidence is that he and his brother then set up two separate companies to run the separate State businesses through. The husband had control of the Queensland business through one company in which he owned 99 shares and the wife owned 1 share. The husband’s brother took over the New South Wales business through the other company. This restructure left the original company owning only two industrial properties. One of those two properties was sold by the original company in 2003 and the husband bought his brother’s half share in the company at around that time. He has totally owned and controlled the company since.
In February 2008, the Queensland business that had been run by the husband for over 20 years, was sold and $638,200 was netted on the sale.
The husband and the wife have been employed by the companies over the years of their relationship and the income they have been paid by the companies has been used by them for their common purposes. Income generated by the companies, in addition to the other property that each of them owned at the commencement of their relationship, has been used to buy property and invest into superannuation and they have managed to grow their property and superannuation interests from the near $1,000,000 they owned between them at the start of their relationship to the total of $6,778,881.90 that I have determined is the “pool” in this matter.
Mr Page for the husband submits that the husband’s ownership of his share in the business at the commencement of the relationship, as opposed to the actual value of that share, is what is particularly relevant to this determination. He submits that it was this business interest that provided the foundation for the generation of their income, their superannuation interests and their capacity to acquire real estate. This submission seeks to overcome, as I see it, the plain fact that the actual value of the property, superannuation and business interest that the husband came into the relationship with barely exceeded the value of that brought in by the wife.
On the other hand, Mr Cooper for the wife submits that a comparison of the value of the property the parties each brought in will inexorably lead to a conclusion that their contributions must be given equal weight in the determination of just and equitable orders.
Of course, consideration is not just to be given to the value of property brought in at the commencement of the relationship, but also to what has become of that property over the years. In this respect, I am satisfied, as I have already remarked, that the parties both contributed all of the property they brought in, including the sale proceeds of all of the real properties they brought in, the superannuation interest of the husband, the investment of the wife, and the husband’s interest in the business, to the common purposes of the parties, including the generation of wealth through further careful investment.
The value of the husband’s interest in the business at the commencement of the relationship was determined by Mr H by capitalising the future maintainable earnings of the business at the time, determining goodwill and adding that to the balance sheet to determine the net asset value of the business. Accordingly, the value of the husband’s interest that he is credited with bringing in to the marriage was valued having regard to the income it was considered to be able to generate into the future. As such, I do not think it would be just and equitable to consider all of the income the husband’s interest in the business brought in to the parties’ household over the years of their marriage as a feature of his initial contribution that somehow gives greater value to the husband’s initial contribution of his interest in the business that was otherwise worth just under $140,000. To do so would seriously risk double counting the income that he did generate through the business which he contributed to the parties’ household during the marriage. I consider that is appropriately considered and assessed at the same time as considering and assessing the contribution by the wife of all of the income she earned during the marriage that was contributed to the parties’ household. In that regard, as I understood Mr Page’s submissions, he agreed that the wife’s contributions during the marriage could be assessed as equal to those of the husband during the marriage despite those being accepted as quantitatively different between the parties across the income generation and homemaking spheres.
Ultimately, I do not assess there to be any disparity in contributions of the parties attributable to the direct contributions initially made by the parties, particularly when one has regard to the likely difference in value of money between 1991 (when the wife realised and contributed $122,000 on the sale of her Y property) and 1996 (when the husband realised and contributed $81,000 on the sale of his B property).
However, before I move on from the consideration and assessment of contributions, I must say that I consider the gift by the husband’s parents to the husband of $75,000 worth of equity in the business (7.5 per cent of the total value of the business at the time, on the evidence) in 1996 to be, in accordance with principle, a direct contribution on the husband‘s part, unmatched by the wife. I therefore consider that justice and equity requires that it be acknowledged by notionally dividing the net property, superannuation interests and other notionally included amounts in the “pool” unequally in favour of the husband. Given the timing of the gift (about seven years into a 20 year relationship) and the nature and value of it at the time, I consider a 2 per cent notional adjustment in the husband’s favour which would create a 4 per cent disparity in the parties’ overall entitlements (equal to approximately $271,000 difference having regard to the value of the “pool” being considered) to be appropriate.
Need there be any further adjustment to this considered division having regard to the provisions of s 79(4)(e), in particular the matters set out in s 75(2)?
The answer to this this proposition is, I consider, an easy one. Both Mr Page for the husband and Mr Cooper for the wife readily conceded in their submissions that there can be no case for any further adjustment to a division assessed as appropriate and just and equitable having regard to the parties’ contributions. I accept their concessions and agree that they were appropriately made. I will not make any further adjustment to the division considered appropriate so far.
The Outcome
A notional 52/48 division of the “pool” in favour of the husband sees the wife assessed as being entitled to retain net property, superannuation interests and that which the parties have agreed she has already received as part of her property division entitlement to a total value of $3,253,863.31.
The wife already has the following property, superannuation interests and agreed entitlements already received:
1
Original partial property amount ordered by Judge Spelleken
$80,000.00
2
Amount paid off the wife’s credit card by husband in June 2011 that the parties actually expressly agreed in writing at the time would be treated as part of the wife’s property division already received by her
$7,000.00
3
Westpac Choice …91
$9,467.00
4
J1 motor vehicle
$60,000.00
5
RR Superannuation interest
$144,284.95
6
GC Superannuation interest
$150,099.82
Sub-total
$450,851.77
Having regard to all of the rest of the net property and superannuation interests held by the husband, that would see the wife entitled to receive property, superannuation and/or a cash settlement of an additional $2,803,011.54.
The wife wants to retain the jointly owned property that she has been living in at 37 V Street, Suburb P. The husband agrees that she should. That property, at $1,310,000, will take the value of that retained by the wife to $1,760,851.77.
I am also of the view, notwithstanding submissions made to the contrary by Mr Cooper for the wife, that the wife should retain the debt owed to the husband by the wife’s daughter in the sum of $13,000. I consider it a far more appropriate result for that money to be owed to the wife by her adult daughter than to the husband, in circumstances where I have no doubt that it was loaned to her by the husband without security because of his marriage relationship and the family connections. It is preferable, in my view, for its repayment or otherwise to be determined as between the wife and her daughter, whose relationship is clearly a good one, than to leave it as between the husband and the wife’s daughter, whose relationship is clearly no longer a good one. Adding that to the property to be retained by the wife takes her total to $1,773,851.77
The wife also wants to retain the motor boat and trailer and the Jet Ski and trailer. The husband agrees that she should. They had an agreed total value of $44,000 at trial. That takes the wife’s total to $1,817,851.77. This results in the wife still requiring $1,436,001.54 in property, superannuation or cash.
The husband wants to transfer his equity membership in the Golf Club to the wife at the agreed sum of $23,000. He maintains that he does not want to keep it. The wife does not want it either. In such circumstances, I will order that it be sold within a reasonable period of time and for the wife to be paid 48 per cent of the net sale proceeds. At the same time I must allow for the wife’s further entitlement to be reduced by an amount of $11,040 (48 per cent of $23,000) to reflect that decision. That would reduce it to $1,424,971.54.
Mr Cooper for the wife informed the Court that the wife will happily receive a portion of her entitlement in the form of a split of the husband’s superannuation. Mr Page for the husband actually proposed the alternative submission of providing for the wife’s entitlement through a superannuation splitting order. That does not seem to create any particular issues of concern as the wife is now 70 years of age and clearly able to access all of her superannuation entitlements and the husband is now 64 years of age and also clearly able to access all of his superannuation entitlements.
The parties agreed at trial that the husband’s superannuation interest in a self-managed superannuation fund known as the Withers Self-Managed Superannuation Fund was valued at $2,273,396.00. The assets of the fund consisted of a mix of cash investments, managed fund investments and real property investments. I consider it most appropriate in all of these circumstances to make up the balance of the wife’s entitlement by way of a splitting order for the full amount from the balance of the husband’s entitlement in the SMSF and will do so. Accordingly, my orders will include such a splitting order for the amount of $1,424,971.54.
I consider then that the orders I will make adjusting property interests as between these parties are, in all the circumstances of this particular case, appropriate and just and equitable.
Existing orders and spousal maintenance
Mr Cooper for the wife conceded that no further spousal maintenance would be required by the wife to be paid to her by the husband once the final orders are made. My orders will discharge all the existing orders that provide for spousal maintenance and other expenses associated with the wife’s occupation of the property that she lives in to be paid by the husband.
Reasons for striking out wife’s evidence on issue of domestic violence
At the commencement of the trial I struck out portions of the wife’s affidavit evidence, including affidavit evidence of one of her daughters, which detailed allegations of the husband committing domestic violence against the wife. That was done on the husband’s objection to that material being admissible. I indicated at the time that I would give reasons for doing so when I delivered judgment in the matter.
In the Summary of Argument filed on behalf of the wife on 28 March 2012 the wife’s solicitor included the written submission that the wife’s contributions were made more onerous due to domestic violence suffered by the wife during the marriage and the husband’s conduct towards her. It was further submitted that the husband was controlling, violent and emotionally abused the wife during the relationship, and the Full Court’s well-known decision in Kennon & Kennon (1997) FLC 92-757 was cited as authority – somehow supporting the wife’s case in these proceedings. Interestingly though, no written submission was made as to exactly how consideration of the evidence going to this matter, as well as the Kennon decision, would impact in the determination of appropriate property adjustment orders that were just and equitable.
I upheld the husband’s objections to the evidence going in having regard to the nature of the evidence and the principles outlined by the Full Court in the Kennon decision. In that decision, the Full Court made it clear that a trial judge is entitled to take into account in assessing the parties’ respective contributions within s 79 “a course of violent conduct by one party towards the other during the marriage which is demonstrated to have had a significant adverse impact upon that party’s contributions to the marriage … or… to have made his or her contributions significantly more arduous than they ought to have been”. The Full Court emphasised that the cases in which this could be expected to happen would be exceptional and went on to say that it would be necessary to show that the conduct occurred during the course of the marriage “and had a discernible impact upon the contributions of the other party”.
It is not enough for a party to simply depose in affidavit evidence to actual incidents of violence alleged to have been perpetrated by the other party against him or her and for submissions to then be made that such violence must be taken to have made the victim’s contributions more arduous such that it is relevant to take it into account in assessing contributions. By saying this, I am in no way suggesting that violence directed by one party to a marriage to the other party to a marriage is acceptable at all. It is clearly hideous in all its forms and must be discouraged, never condoned.
In my view, the Full Court’s decision in Kennon never elevated family violence in itself to some special status mandating consideration in every property division dispute between couples who experienced violence in their relationship. Particular care must be taken by legal representatives to determine those cases which may fall within that exceptional band of cases described by the Full Court in that decision and even more care must be taken in the presentation of the evidence said to support the necessary finding that violence had a discernible impact on the victim’s contributions during the marriage.
I was quite satisfied that the evidence led by the wife in this case, as confronting as it was, went nowhere near supporting such a finding. As such, it could not be considered to be relevant and its prejudicial value had to be considered as outweighing its probative value. In those circumstances, it was struck out.
Costs application associated with recent application in the case
On 23 July, 2013, listed for hearing before me was an application made by the husband for his case to be reopened and for further evidence to be considered going to alleged changes in values of certain items of property of the parties. The evidence the husband relied upon could fairly, in my view, all be described as offending the principle against hearsay evidence. However, on that day, at the commencement of the hearing of that application, I informed the parties that I expected to be able to deliver my judgment and reasons for judgment within three weeks of that day if the application did not have to be determined or was not successful. Upon hearing that, through Mr Page who appeared for him, the husband immediately withdrew his application.
The wife then, through Mr McGregor of counsel, made an application for the husband to pay her costs of and incidental to the application that he withdrew. Mr McGregor handed up a schedule of the wife’s costs incurred. The schedule showed the wife’s costs and outlays with her solicitor to be $10,171.64 (including $1,387 for 3 hours anticipated attendance at Court plus travel) and counsel’s fees to be $4,180 being $880 for reading the brief, $660 for a conference with the solicitor and client, $440 for settling Court documents and $2,200 for the appearance in Court on 23 July. The application was for all of these costs to be paid, that is, on an indemnity basis.
The wife’s evidence included written communication between the two sets of solicitors. The wife’s solicitors had written to the husband’s solicitors on 5 June telling them clearly that the wife did not agree to an application to reopen the case, that she did not agree to the different values proposed by the husband and that she did not agree that the assets had reduced in value as the husband claimed. They informed the husband’s solicitors that they considered that the husband’s application had no merit “in light of recent case law in this area”. They advised that if the husband proceeded with the application they would seek an order that he pay the wife’s costs on an indemnity basis. They included a copy of the costs agreement that they had entered into with the wife reflecting the fees and charges that they would be charging their client.
After receiving a request from the husband’s solicitors to identify the “recent case law” to which they had been referring, the wife’s solicitors wrote back on 6 June telling the husband’s solicitors that they did not consider the husband’s “material” disclosed a case that merited reopening. Again, they mentioned that costs would be pursued against the husband if the application was persisted with. It nevertheless was persisted with, at least up until the point that the husband was told the final judgment in the case as it stood could be delivered within three weeks of the hearing date.
It is reasonably clear to me that the husband was concerned with the delay in the delivery of the judgment in this matter. That possibly explains, to some extent at least, the reason why he persisted in bringing the application to reopen up until he was informed that the matter could be soon finalised in the event it was not re-opened. However, it was the husband who chose, at the very last minute, not to prosecute his application for reopening. He did that when he and his legal representatives were fully aware of the fact that the wife had indicated that she would be pursuing her costs if the application was unsuccessful.
As I have already observed, the evidence that the husband had put before the Court in support of his application was full of hearsay assertions about changed values. No affidavit of an expert had been filed in support. The wife had indicated in her material that she had an intention to object to the evidence that was inadmissible as hearsay. Having regard to the provisions of Part 3.2 of the Evidence Act, I am of satisfied that there may have been force in the wife’s objection. Without all of the hearsay evidence, and before even going on to consider other matters relevant to the exercise of the discretion whether or not to reopen, the husband’s application would have had little prospect of success, I can only now conclude.
As it happened, I was not called on to determine the application to reopen on its merits. The husband simply withdrew it and the wife, who was there with solicitor and counsel to argue her opposition to it, on its merits, was left having incurred substantial costs that she would not have otherwise incurred but for the application.
I acknowledge that there was a long delay between finishing the trial and delivering my judgment and reasons. I appreciate the distress this long period of time would have caused both parties. The responsibility for hearing and deciding so many complex parenting and property adjustment disputes in this Court has, regrettably, prevented me from finalising my judgment in this particular property adjustment dispute before now. It cannot, however, be appropriate to bring an application to reopen a case in the hope that it might speed up delivery of a delayed judgment.
However, whatever was the husband’s primary motivation for bringing the application to reopen, he did not proceed with it at the last minute. I am satisfied, in the circumstances, that an order for the husband to pay the wife for costs she has incurred is justified. The apparently surprising, late withdrawal of the application without arguing it on its merits in the face of twice being warned by the wife’s solicitors that indemnity costs would be sought by the wife if the application was not successful draws me to that conclusion.
I am also mindful of the financial circumstances of the parties and the relative financial security each of them will be left in at this stage of their lives having regard to the property adjustment orders I will be making in the substantive proceedings. However, that fact alone does not persuade me that each party should bear his or her own costs of this application to reopen that was withdrawn at the last minute.
I have had regard to decisions where questions about indemnity costs have been authoritatively discussed.[5] I am not satisfied that the husband’s conduct is such, in all the circumstances, particularly those that led to the withdrawal of the application, as to justify costs being awarded on an indemnity basis. I will not make such an order. However, I consider an order that the husband pay the wife’s costs of and incidental to the application that he withdrew on a party/party basis to be a just order. I will make such an order. I also consider it was totally reasonable for the wife’s solicitors to have engaged counsel as they did in the process of responding to and defending the application.
[5]See Yunghanns & Ors and Yunghanns & Ors & Yunghanns [2000] FamCA 681 and the decisions cited therein.
The costs of the valuer
Finally, it was agreed between the parties that the husband had paid $7,260 on behalf of both parties to the firm of real property valuers who had been engaged to private expert opinion to them on a single expert basis. It was further agreed that the wife owes the husband half of that sum as being her agreed share of that outlay and that the Court’s orders should make provision for that. They will.
I make the orders set out at the commencement of these reasons.
I certify that the preceding seventy-seven (77) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Forrest delivered on 16 August 2013.
Associate:
Date: 16 August 2013
Key Legal Topics
Areas of Law
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Family Law
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Property Law
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Equity & Trusts
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Costs
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Remedies
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