Woodgrove and Woodgrove
[2010] FMCAfam 1123
•19 October 2010
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| WOODGROVE & WOODGROVE | [2010] FMCAfam 1123 |
| FAMILY LAW – Property – Twenty year relationship – dispute about the composition of the asset pool – whether there should be add backs - whether the husband’s capital losses from share trading should be treated as property – assessment of contributions – where the husband received a substantial inheritance less than four years prior to separation – where the husband proposed that he retain the assets derived from his inheritance and that the remaining assets be divided between the parties – whether contributions should be assessed globally or on a two pools basis – competing claims for an adjustment for s.75(2) factors - whether the husband’s capital losses from share trading should be treated as a financial resource. |
| Family Law Act 1975, ss.75, 79 |
| Alekovski & Alekovski (1996)FLC92-705 AJO & GRO (2005) FLC93-218 White & Tulloch (1995) FLC92-640 Wimborne & Wimborne (1994) (unreported) Appeals Nos. EA27/92 & 15/93 |
| Applicant: | MS WOODGROVE |
| Respondent: | MR WOODGROVE |
| File Number: | NCC 2017 of 2008 |
| Judgment of: | Terry FM |
| Hearing dates: | 31 May, 1 & 2 June 2010 |
| Date of Last Submission: | 2 June 2010 |
| Delivered at: | Newcastle |
| Delivered on: | 19 October 2010 |
REPRESENTATION
| Counsel for the Applicant | Mr Johnston |
| Solicitors for the Applicant: | Merrick Spicer & Associates |
| The Respondent | Self-represented |
ORDERS
That the money held in trust from the sale of cattle pursuant to Order 2 of the orders made on 2 June 2010 be forthwith paid as to 41% to the wife and 59% to the husband.
That within 42 days of the date of these orders the husband pay the wife the sum of $17,490.80.
That within 42 days of the date of these orders the husband and wife do all acts and things and sign all documents required to discharge Mortgage No. (omitted) registered over Property M, Property C Folio Identifier (omitted) (“the Property M property”).
That the husband forthwith on presentation to him by the wife sign all documents required to transfer to the wife at the expense of the wife the whole of his right title and interest in the Property M property.
That as and from the date of transfer the wife indemnify the husband and keep him indemnified from all liability for all rates taxes and outgoings owing in respect of the Property M property.
That within 42 days of the date of these orders the wife refinance into her sole name the loan secured over Property C (Folio Identifier (omitted)) (“the Property C property”) by mortgage no. (omitted).
That contemporaneously with the wife complying with Order (6) the husband sign all documents and do all acts and things required to transfer to the wife at the expense of the wife the whole of his right title and interest in the Property C property.
That as and from the date of transfer the wife indemnify the husband and keep him indemnified from liability for the said mortgage and for all rates taxes and outgoings owing in respect of the property.
That until the transfer of the Property C property into the sole name of the wife each party shall continue to pay half of the mortgage and half of the rates and other outgoings for the property as they fall due.
That upon the transfer of Property C the wife shall become the owner to the exclusion of the husband of the money standing to the account of the parties in (omitted) Bank Account No. (omitted).
That the husband shall within 14 days of receiving from the wife the necessary documents sign all documents required to transfer to the wife at the expense of the wife the whole of his right title and interest in the Nissan Patrol motor vehicle registered number (omitted).
That subject to Order (14) the wife is declared the owner to the exclusion of the husband of all of the property in her possession and control including the contents of the home on the Property M property, her funds on account, her superannuation interests, the horse “(omitted)” and the horse float.
That subject to Order (14) the husband is declared the owner of the items referred to in Order (14) and all other assets in his possession or under his control.
That within 60 days of the date of these orders the husband shall remove from the Property M property the contents of both sheds (with the exclusion of the horse float) and the farming plant and equipment and two unregistered trucks and the steel and failing strict compliance with this order in respect of which time is of the essence then the ownership in such items shall revert to the wife who shall be at liberty to dispose of the items as she sees fit.
That the wife forthwith resign as a trustee of the Mr Woodgrove Superannuation Fund (“the Fund”).
That the husband indemnify the wife and hold her harmless in relation to any and all claims demands suits actions assessments fines arising out of her trusteeship of the Fund or against the fund generally.
That in the event that either party shall fail, neglect or refuse to execute any deed, instrument or document to give validity and effect to these orders then upon the other party filing an affidavit setting out such failure, neglect or refusal a Registrar of the Federal Magistrates Court at Newcastle is hereby appointed pursuant to section 106A of the Family Law Act to execute any such deed, instrument or document in the name of the party who defaults and to do all things necessary to give validity to the operation of the deed, instrument or document.
That the parties have liberty to apply on 7 days notice in respect of the implementation of these orders.
IT IS NOTED that publication of this judgment under the pseudonym Woodgrove & Woodgrove is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT NEWCASTLE |
NCC 2017 of 2008
| MS WOODGROVE |
Applicant
And
| MR WOODGROVE |
Respondent
REASONS FOR JUDGMENT
Introduction
Ms Woodgrove and Mr Woodgrove separated in September 2007 after a twenty year relationship and a seventeen year marriage. They are 47 and 55 respectively, each have the care of a teenage child of the marriage and are each capable of earning a reasonable income. On any view they have a substantial asset pool, but they have vastly different ideas about how it should be divided.
The major issues in dispute were the composition of the asset pool, how the inheritance the husband received in 2004 should be treated and whether there should be an adjustment for s.75(2) factors in favour of either party.
The parties have agreed assets of about $1.94m. It was the wife’s case that $595,000.00 should be added to the pool, on the basis that the husband’s capital losses from share trading should be treated as an asset, and that money he received post-separation from the sale of cattle and money that he either had and was failing to disclose or had lost through reckless share trading should be included as notional assets.
The wife submitted that she should receive 50-55% of the resulting $2.5m pool (40% for contributions and 10-15% for s.75(2) factors). This would entitle her to at least $1.25 to 1.38m. The husband would be entitled to between $1.12m and $1.25m but his share would include the capital losses and the notional assets leaving him in real terms with between $650,000.00 and $780,000.00.
The husband said that it did not make sense to treat his capital losses as an asset and he opposed any money being added to the pool as a notional asset. He said that he had used the money he received from the sale of cattle for living expenses, he was not hiding assets, and his share trading had not been reckless.
The husband submitted that he should retain all the assets derived from his inheritance ($541,819.00) and that the balance of $1.4m should be divided 60% to him and 40% to the wife (the weighting in his favour being justified either on the basis of contributions or s.75(2) factors). This would entitle the wife to about $560,000.00 and the husband to about $1.38m.
The Evidence
The wife relied on her Affidavit and Financial Statement filed on 7 May 2010. The orders sought by the wife were contained in two Minutes of Order tendered during the hearing.
The husband relied on his amended response filed on 22 April 2010, his affidavits filed on 23 September 2008 and 7 May 2010, his Financial Statement filed on 7 May 2010 and the affidavit of Ms K filed on 23 September 2008.
The husband and wife were cross-examined.
The wife’s counsel submitted that the husband was not a witness of credit and that where his evidence differed from the wife’s, the wife’s evidence should be preferred.
There were certainly aspects of the husband’s evidence and behaviour which caused concern. He was argumentative and sometimes flippant during cross-examination. He admitted breaching interim orders made on 2 April 2009 restraining him from selling assets and was unrepentant about his conduct, blaming the court for making unrealistic orders. He was evasive when questioned about his capacity to obtain paid employment and his answers to questions on this topic were patently unbelievable.
There were however instances (for example in relation to an alleged missing $18,000.00) when he was ultimately able to produce a document which confirmed his oral evidence and there were instances when his failure to disclose was more apparent than real (he did not disclose the sale of a property at Property P for example but did disclose a sum of money in his bank account which turned out to be the proceeds of that sale).
I do not intend to make a general finding that I prefer the wife’s evidence to the husband’s and use that finding to resolve all matters in dispute, rather I will assess the evidence about each disputed matter on its merits.
Background
The husband grew up near (omitted). In 1983 when he was about 28 he moved to Property D and acquired an (omitted) business. He worked that business over the next few years.
I do not know how the wife and husband met but in June 1987 when the wife was about 25 she moved from Sydney to Property D(omitted) and commenced living with the husband. The wife was a qualified (occupation omitted) and found work in this capacity in Property D(omitted).
The husband and wife married in 1990 and they have three children: X, born in (omitted) 1992, Y, born in (omitted) 1994 and Z, born in (omitted) 1996.
The husband has a daughter A from a previous relationship. A was about three when the husband and wife commenced living together and spent time with the husband and his family on alternate weekends and during school holidays until she was about twelve.
From the commencement of cohabitation in 1987 until he sold his (omitted) business in 2006 the husband was a self employed (omitted) farmer. He had begun building up a cattle herd in 2002 and after he sold the (omitted) business he expanded his cattle farming activities.
In 2004 following the death of his father the husband inherited assets to the value of $805,000.00, much of it in the form of a share portfolio.
The wife worked full time as a (occupation omitted) from the commencement of cohabitation until June 1992 when X was born. Between June 1992 and 1988 the wife was primarily engaged in parenting and home duties but also worked one day per week and occasionally more as a (omitted). From April 1988 to the date of separation the wife worked two days per week and occasionally more as a (omitted) while still being primarily engaged in home duties and parenting.
During the relationship four properties were purchased and all are still owned by the parties, namely:
i.130 acres at Property M, (“Property M”). This property was purchased by the husband in about 1988 and later transferred into joint names. The parties built a home on this property and lived there from 1992 until separation. Property M is owned outright.
ii.A residential property at Property D (“Property D”). This property was purchased by the husband in 1997 as an investment property and is subject to a mortgage.
iii.A residential property at Property C (“Property C”). This property was purchased in joint names in October 2006 as an investment property and is also subject to a mortgage.
iv.130 acres at Property W (“Property W”). The property was purchased by the husband in November 2006. The residence on the property was rented out after purchase and the husband ran cattle on the acreage. Property W is subject to a mortgage.
The husband and wife separated in September 2007. For the next six or seven months they both continued to live at Property M, the wife in the house and the husband in a shed. In April 2008 the husband purchased Property P and moved there with X and Y. The wife remained at Property M with Z.
At the date of the hearing the wife was still living at Property M and was working three days per as a (omitted). Z has remained living with the wife.
The husband lived at Property P from about May 2008 until April 2009. He then sold Property P and moved to Property D. X has lived with the husband since April 2008, save for a short period when he lived independently after completing school in March 2009. Y lived with the husband between April 2008 and April 2009, returned to live with the wife between April 2009 and November 2009 and then went back to live with the husband.
Since separation the husband has obtained income from cattle farming, casual labouring and dividends and interest.
The law applicable to the resolution of disputes about property settlement
Pursuant to s.79 of the Family Law Act, a court can make such orders as it considers just and equitable altering the parties’ interests in property.
The procedure usually adopted in determining applications for property settlement is:
i.to identify and value the assets and liabilities of the parties;
ii.to assess the contributions of the parties under s.79(4)(a), (b) and (c) and to express those contributions as a percentage;
iii.to consider the matters set out in s.79(4)(d),(e),(f) and (g), which include the matters in s.75(2), so far as they are relevant, and to determine whether any adjustment should be made as a result to the contribution based entitlements;
iv.to consider the effect of those findings and resolve what orders are just and equitable in all the circumstances of the case.
It is appropriate to follow this procedure in this case.
The Assets and Liabilities
The parties agreed that the following assets should be included in the pool:
Description
Ownership
Value
Property M Joint 656,500.00 Property C Joint 243,750.00 Property D Husband 237,500.00 Property W Husband 534,750.00 Steel On Property M 3,600.00 Nissan Motor vehicle Joint 10,000.00 Contents Wife 10,000.00 Horse “(omitted)” Wife 500.00 Horse float Wife 2,000.00 (omitted) Account Wife 2,425.00 Contents Husband 8,000.00 House boat Husband 3,000.00 Box trailer Husband 500.00 Boat Husband 9,500.00 Motorcycle Husband 2,000.00 Farm plant & equipment Husband 15,000.00 Ford (omitted) motor vehicle Husband 10,000.00 Loan to Ms K
Ms K (with interest)
Husband 62,000.00 Share Portfolio Husband 214,483.00 (omitted) Bank Account Husband 23,336.00 (omitted) Bank Term deposit Husband 263,000.00 Total 2,311,844.00
In addition to the above assets the parties have a joint account with the (omitted) Bank into which the rent for Property C is deposited and from which the loan repayments are taken. The amount in this account fluctuates and if the one statement provided is any guide gets up to something in excess of $1000.00 and then drops back.
Neither party suggested that the money in this account should be included in the pool. The wife proposed that if she retained Property C then the husband should transfer his interest in the account to her and it is sensible that ownership of the account travel with ownership of Property C.
In her financial statement the wife declared ownership of (omitted) shares worth $3,624.00. Their non-inclusion in the agreed pool may have been an oversight but their value is small in comparison to the overall pool. The wife also has additional savings of about $3,000.00 which her counsel marked “not matrimonial property” in the list of assets he prepared. I am not certain why this assessment was made when the wife’s counsel insisted that all of the money in the husband’s bank accounts be included in the pool but the husband did not quarrel with it and again the amount involved is small in comparison to the overall asset pool.
The wife’s counsel submitted that the cattle in the husband’s possession should be included in the pool. I accept this submission. The husband was operating a cattle business at separation and the value of this business is property which should be included in the pool, indeed the husband did not argue against it.
A good deal of time was taken up at the hearing trying to establish exactly how many cattle the husband had, so that a value for the cattle could be determined.
In a letter to the wife’s solicitors sent in April 2010 the husband claimed that he had “approx 35 cows/calves, 22 cows in calf, 35 heifers and steers and 4 bulls.”[1] It was his case that these cattle were worth $47,000.00.
[1] Exhibit M
During cross-examination the husband amended these figures and said that he had 37 cows and calves, 22 cows with calves, 36 heifers and steers and 5 bulls. The husband agreed that the cows either in calf or with a calf were worth $700.00 per unit, the steers and heifers were worth $400.00 each and the bulls $1000.00 each.
The wife’s counsel did a calculation based on the husband’s evidence and submitted that the cattle were worth $60,700.00.
On 2 June 2010 an order was made by consent that the cattle be sold and the money from the sale be held in an interest bearing account pending the making of final orders. The value of the cattle will therefore be determined by their sale. I will include the cattle in the pool at $60,700.00 being the value more likely to be accurate but the final orders will provide for each party to receive a proportion of the actual net amount received upon sale.
The additions to the pool proposed by the wife
The wife’s counsel submitted that three additional amounts should be added to the pool:
i.$134,137.00 being the amount received by the husband between separation and May 2010 from the sale of cattle.
ii.$120,000.00 or thereabouts being money allegedly unaccounted for or wasted or squandered by the husband.
iii.$341,400.00 being capital losses incurred by the husband, in one case as a result of the value of the shares in a company declining and in the other three cases as a result of companies going into receivership.
The cattle sales
The husband commenced running cattle on Property M and other properties in about 2002. It was initially a hobby but after he sold the (omitted) business in 2006 he expanded his operations. He leased 500 acres west of Property C for example to run 60 head of cattle. In November 2006 the husband purchased Property W for $530,000.00, using the $260,000.00 he received from the sale of the (omitted) business and a loan for $270,000.00, and he ran cattle on this property.
At separation in September 2007 the husband had “about 150 cows and heifers on various properties around the district.”[2]
[2] Husband’s affidavit filed 23 September 2008 paragraph 21.
After separation the husband continued to engage in beef cattle farming.
The husband sold cattle from time to time. Documents produced in answer to subpoena established that he received $126,636.66 from the sale of 293 cattle between 19 November 2007 and 12 April 2010. He admitted at the hearing that he had subsequently sold 30 more cattle, for $7,500.00. Since separation he has sold 323 cattle and received $134,137.00 (to use the easier round figure) from the sales.
None of the money still exists in any identifiable form. It was the wife’s case however that $134,137.00 should be added back to the pool as a notional asset.
It is within the discretion of the court to add back to the pool money which no longer exists. In AJO & GRO[3] the Full Court identified three occasions where this might be appropriate, namely:
a.Where monies had been spent on legal fees.
b.Where monies had been disbursed by way of premature distribution of matrimonial assets.
c.Where monies had been lost by one party either during or after the marriage as a result of a course of conduct designed to reduce or minimise the effective value or worth of matrimonial assets or as a result of reckless negligent or wanton behaviours which had the effect of reducing or minimising the value of assets.
[3] AJO & GRO (2005) FLC 93-218
The wife’s counsel argued that by selling the cattle and retaining the proceeds the husband had prematurely disbursed matrimonial assets to himself.
The strength of the wife’s argument is that there were 150 head of cattle in existence at separation to which the wife had made some contribution, and she also continued to make an indirect contribution to the cattle business post-separation insofar as some of the cattle were run on the Property M and Property W properties which are part of the property pool. Some of the cattle in excess of 150 which were subsequently sold by the husband could also have been born from the cows which existed at separation. The husband has therefore sold post separation assets in which the wife had a legitimate interest and has retained all the proceeds for himself.
The wife’s counsel argued that in any event an interim order made on 2 April 2009 positively required the court to add back money received from the sale of cattle post the order.
The 2 April 2009 orders were made on the wife’s application and restrained the husband among other things from:
Selling transferring assigning encumbering or otherwise dealing with any cattle in his possession with the exception of no more than 80 of such cattle which he is permitted to sell and the proceeds of which are to be made available to him and in respect of which he is obliged to account to the wife at the final hearing proceedings for such proceeds of sale.
Between 2 April 2009 and 29 August 2009 the husband sold 76 head of cattle (for $32,388.45 in total). However on 27 February 2010 (in breach of the order) he sold a further 94 cattle (for $33,047.15), on 12 April 2010 a further 5 cattle (for $2,843.00) and prior to the hearing another 30 cattle (for $7,500.00). In summary he sold 205 cattle when he was permitted to sell only 80.
Using a rough pro rata calculation, after 2 April 2009 the husband sold cattle to the value of $34,093.11 which he was permitted to sell and cattle to the value of $41,685.49 in breach of the order.
The wife’s counsel urged me to find that the requirement that the husband “account to the wife” for the proceeds of sale of 80 cattle meant that the proceeds of sale of these cattle (and also the additional cattle the husband sold in breach of the order) must be placed in the pool as an asset available for division between the parties.
The husband argued that running cattle and selling them was his business and that he was entitled to retain the income from it, just as the wife retained her income from paid employment. In addition, the husband would undoubtedly have had expenses in connection with the cattle (eg. costs of leasing land and vet bills) and it is arguable that he is entitled to have these expenses taken into consideration.
Money which has been spent by one party post-separation is not always added back even if it derives from the sale of assets in which both parties had an interest. I am not convinced that the 2 April 2009 order would prevent the husband from successfully arguing on these bases that some or all of the money he received post the 2 April 2009 order should not be added back.
The 2 April 2009 order allowed the husband to utilise the proceeds of sale of 80 cattle. It required him to account to the wife for the money he received and he could account to the wife by first identifying how much he received and then identifying legitimate expenses incurred in obtaining the money and legitimate living expenses on which it had been spent. I am not hearing a contravention application and the same line of argument could apply to the cattle in excess of 80 sold by the husband.
However the first difficulty for the husband is that he provided no comprehensive evidence of how much it cost him to run the cattle. His 2006, 2007 and 2008 tax returns show the business running at a loss but this is not the end of the matter.
Information about costs for the 2007 and 2008 financial years was contained in hand written cashbooks produced to the court, but the husband cannot expect the wife’s legal representatives and the court to go through the handwritten cash books, decipher handwriting, and make decisions about inclusions, and in any event no cash books were produced for 2009 or 2010.
I therefore have no idea how much the husband actually had available to him from the $134,137.00 to use for living expenses after the costs of the cattle business are taken into account.
The wife’s counsel did not concede that it was reasonable for the husband to use the money from the cattle sales for any living costs at all, submitting that he “[chose] not to work and has been living off cattle sales income and capital.” This submission is somewhat unfair. The husband’s evidence was that while the beef cattle operation started as a hobby, it became a business after he sold his (omitted) business in 2006. There is clear evidence in his tax returns to support his contention that prior to separation he was partially earning a living as a “beef cattle farmer,” and I accept that he continued to do so after separation.
Money which has been spent on “reasonably incurred living expenses”[4] is not usually added back. The difficulty for the husband however is that he failed to provide any evidence which would allow me to assess whether it was reasonable for him to use all of the money he received net from cattle sales over a period of three years for his own purposes. During this period he had other sources of income, including share dividends and income from casual work, and I can come to no conclusion about whether he needed all the money from the cattle sales for living expenses.
[4] NHC & RCH (2004) FLC 93-204
Despite the deficiencies in the husband’s evidence however, I am uncomfortable with the proposition that the whole of the $134,137.00 be added to the pool as a notional asset, when clearly the husband must have had costs associated with running the cattle and when it was not unreasonable for him to use some of the money for living costs given that this was his business.
On the other hand 150 head of cattle existed at separation in which the wife had a legitimate interest, and she made some indirect contribution to the cattle enterprise post-separation.
Dealing with this matter by way of an add back presents difficulties because it is hard to fix an appropriate figure which balances the competing interests of the husband and the wife. One option would be to include the entire amount in the pool and then take the husband’s contributions to the costs of running the herd into account in some nebulous way as a post-separation contribution, but this would not allow him anything for reasonable living expenses. Another option would be to take the husband’s retention of the money into account in a nebulous way pursuant to s.75(2)(o).
The wife’s counsel suggested that a solution might be to include as an add back the amount received by the husband for cattle sold after the 2 April 2009 order was made, namely $75,778.60.
This is a fairly rough way to resolve the problem but it does ensure that the husband is effectively given some credit for his contributions to the costs of the cattle farming enterprise and any amount legitimately spent on living costs and that the wife has an opportunity to share in the value of the herd which existed at separation. Given the husband’s failure to present adequate evidence it is the best I can do and I intend to adopt this proposal.
The alleged missing money
The husband’s father died on 20 January 2004. Later in 2004 he received by way of inheritance $144,450.00 in cash and a share portfolio. The husband said that his inheritance was worth $805,000.00 in total, which would mean that the shares, which he listed at page 16 of his affidavit filed on 23 September 2008, were worth about $660,000.00 when he received them.
The evidence the husband provided about how he used his inheritance was scant and disjointed.
The husband’s income tax returns for 2005, 2006 and 2007, the years during which the marriage continued, reveal that he sold shares in those years and most of the shares sold were attributable to his inheritance.
In his 2006 tax return the husband declared the sale of shares worth $526,244.88. He made a capital gain of $366,970.00 and a net capital gain (on which he was taxed) of $138,004.00.
The husband used $65,000.00 to set up a self managed superannuation fund in 2006 but the only other evidence he gave about how he used money from the sale of shares was to say that he used it “for living expenses for the family.”[5]
[5] Husband’s affidavit filed 23 September 2008 paragraph 37b
In his outline of case document filed on 24 May 2010 the husband stated that money he lent Ms K in 2005 ($80,000.00), his share of the deposit for the purchase of Property C in 2006 ($23,500.00) and some of the money used to purchase cattle came from his inheritance. There was no sworn evidence to support these submissions.
Scattered through the husband’s affidavits are references to such things as spending $15,000.00 on repairs to the house at Property W after its purchase in November 2006 and spending $20,000.00 on fertilizer for that property. While it seems unlikely that the husband would have had access to such capital sums after he sold the (omitted) business except from his inheritance, he did not give evidence that any of this money came from his inheritance. He gave evidence that he lived off assets after the sale of the (omitted) business because income was infrequent,[6] but I cannot simply assume that he was living off money received from the sale of shares because I cannot exclude the possibility that he might have been referring to other assets such as cattle or even referring to living off share dividends.
[6] Husband’s affidavit filed 23 September 2008 paragraph 20, 21.
Although he does not directly say so it is highly likely that the husband also used the money from the sale of shares to buy other shares. A perusal of his cash books reveals that in August and September 2005 he purchased shares in (company omitted), (company omitted), (company omitted), (company omitted), (company omitted) and (company omitted), and on 3 November 2005 he purchased shares in (company omitted).[7]
[7] Cash Book Exhibit J
The (omitted) shares declined in value and the husband lost $94,000.00 on these shares but despite the loss on those shares and despite the previous sale of a large parcel of shares, in December 2007, two months after separation, shares owned by the husband (including the shares in the self-managed superannuation fund) were worth $1,020,684.03.
The husband’s 2008 tax return reveals that he sold $408,772.91 worth of shares in the 2008 financial year. He made a capital gain of $113,483.00 and a net capital gain of $21,214.00. It was not in dispute that he used money from the sale of shares to purchase Property P in April 2008. He apparently paid $320,000.00 for the property but provided no breakdown of the costs of the purchase.
In his 23 September 2008 affidavit the assets declared by the husband to be directly attributable to his inheritance were:[8]
[8] Husband’s affidavit filed 23 September 2008 paragraph 37b
Share Portfolio 283,660.00 Property P 320,000.00 Self-managed superannuation fund 42,033.00 Total 645,693.00
Property P was sold in 2009 and at the time of the hearing in June 2010 the husband’s inheritance was represented in the pool by the following assets:
Share Portfolio 214,483.00 (omitted) Bank Term deposit 263,000.00 (omitted) Account 23,336.00 Self-managed superannuation fund 41,000.00 Total 541,819.00
It is self-evident that the husband’s share portfolio has declined dramatically in value since December 2007 and that the total value of the assets derived from his inheritance is now considerably less than it was at the time he first received his inheritance. Capital gains tax and a decline in share values would account for some of this. The wife’s counsel sought to demonstrate however, by comparing the value of share portfolio in December 2007 with the value of the above assets, that the husband had not accounted for all of the decline and that $120,000.00 or thereabouts was missing.
I have carefully considered the reasoning of the wife’s counsel which is contained in the document headed “wife’s submissions” handed up to me on 2 July 2010 and the oral submissions of the wife’s counsel but I am simply not convinced that he has successfully demonstrated that any money is unaccounted for.
The evidence given by the husband about what happened to his inheritance was incomplete but it does not follow that he is hiding assets. I cannot fill the gaps in the husband’s evidence by speculation but there are some obvious possible expenses such as purchase and selling costs for Property P which have not been allowed for in the wife’s counsel’s reasoning, and in any event I am simply not convinced by the reasoning.
The husband vehemently denied that there was any money missing or hidden away in other accounts. He was not always a witness of credit, but I cannot use that fact to make a finding against him in respect of this particular point when I did not find the wife’s counsel’s reasoning on this issue persuasive. I am hesitant to place too much weight on demeanour but do note that while the husband appeared obviously evasive when giving evidence about his future employment prospects, there was nothing in his evidence about his share trading which aroused suspicion that he was not telling the truth, and he was knowledgeable about and accurate concerning the history of his share trading.
The husband was questioned about his failure to comply with an order made on 2 April 2009 which provided that he:
Be restrained from selling encumbering transferring or otherwise dealing with the shareholdings as set out in Exhibit H1 to the order.
Four shareholdings which were listed in Exhibit H1 no longer exist. The husband was able to demonstrate that three of the companies, namely (company omitted), (company omitted) and (company omitted), had gone into receivership. He admitted selling (omitted) shares but purchased alternative shares which were on paper in profit. There was no evidence that his sale of the (omitted) shares diminished the value of his portfolio.
I am concerned about the husband’s failure to comply with the order but I am not hearing a contravention application and his failure to comply does not alter my view that there is no evidence that there are missing assets.
Whether the husband has engaged in reckless share trading
The wife’s counsel submitted that if the court declined to include $120,000.00 in the pool as a notional asset because it was not satisfied that anything was missing, it should include it on the basis that the amount had been lost as a result of reckless share trading by the husband which amounted to nothing more than gambling.
AJO & GRO[9] is authority for the proposition that one circumstance in which the court can exercise its discretion to add back monies is:
Where monies [have] been lost by one party either during or after the marriage as a result of a course of conduct designed to reduce or minimise the effective value or worth of matrimonial assets or as a result of reckless negligent or wanton behaviours which had the effect of reducing or minimising the value of assets.
[9] AJO & GRO (2005) FLC93-218
As evidence that the husband had engaged in reckless negligent or wanton behaviour the wife’s counsel pointed to the fact that the husband no longer owned any of the ‘blue chip’ shares he inherited from his parents and that while he had made a profit on some of his own share purchases he had made significant losses on others. He lost $94,000.00 on the (omitted) shares he purchased and sold prior to separation and a further $247,400.00 on shares in three companies which went into receivership after separation.
The wife’s counsel criticised the husband for selling the ‘blue chip’ shares and buying what the wife’s counsel called ‘cheapies.’ He also accused the husband of blindly buying shares without taking appropriate professional advice or doing research.
The husband gave evidence that he used an internet broker and that research was available online and that he did take it into account when purchasing shares. He emphasised that not all his share purchases had been unsuccessful, and was offended by the suggestion that he did not know what he was doing with buying and selling shares.
The fact that the husband has made losses on some shares does not inevitably lead to the conclusion that he engaged in reckless negligent or wanton share trading. The husband is not only person who lost money on (omitted) shares or on shares in the three companies which went into receivership, and I cannot ignore the fact that the global financial crisis must have had an impact on the value of many of the shares the husband owned (just as it had an impact on the value of many ‘blue chip’ shares).
The husband has made profits or paper profits on other shares.
It is not without irony that on 2 April 2009 the husband owned shares in the three companies which went into receivership. He was restrained from selling the shares (which had already declined in value prior to that point) and the companies failed subsequent to the order being made.
The husband had an unrealistic view of his capacity to present his own case at the property hearing and it is possible that he has an inflated and unrealistic view of his own business acumen and his ability to successfully engage in share trading, but I am not convinced that there is evidence that he engaged in reckless, negligent or wanton share trading either before or after separation.
There is no clear nexus between the amount of $120,000.00 and the argument about reckless negligent or wanton share trading. If I had been satisfied that the husband had committed waste the appropriate place to deal with this issue would have been in the context of s.75(2)(o). I am not so satisfied however.
The husband’s capital losses
The husband lost a significant sum on four shareholdings, as follows:
Description
Purchase Date
Disposal/Receivership
Loss
(omitted) Shares 2005 & 2006 Sold in the 2007 financial year 94,000.00[10] (company omitted) Went into receivership after 2 April 2009[11]
163,000.00 (company omitted) November 2007 onwards Went into receivership after 2 April 2009[12] 62,000.00 (company omitted) November 2007 Went into receivership after 2 April 2009 orders made 22,400.00 Total losses 341,400.00 [10] The husband’s evidence that he lost $94,000.00 on (omitted) Shares which he sold during the 2007 financial year and that he bought further (omitted) Shares for .30c on which he made a profit in the 2008 financial year is corroborated his tax returns.
[11] These shares existed when FM Coakes made interim orders on 2 April 2009
[12] These shares existed when FM Coakes made interim orders on 2 April 2009
The wife’s counsel submitted that the $341,400.00 the husband lost on (omitted) Shares, (company omitted), (company omitted) and (company omitted) shares should be added back to the pool as an asset, because the husband would in future be able to gain a tax advantage from the capital losses.
This submission must fail in relation to the loss on the (omitted) Shares. They were sold during the 2007 financial year and the loss the husband made on them went to reduce his capital gains from the sale of shares in that financial year, a financial year during which the parties were still together.
The issue then is whether the remaining $247,400.00 should be included in the pool as an asset.
The wife’s counsel referred me to the Full Court decision of Wimborne & Wimborne[13] as authority for the proposition that tax losses could be treated as property. In that case the tax losses of a company were included in a list of assets and liabilities prepared by the trial judge, Nygh J, and the Full Court did not criticise his decision to treat them as property. However it is clear from the appeal decision that Nygh J had before him evidence from two accountants about the value of the losses, and that the accountants in arriving at their opinions had regard to the taxable income which the company was likely to earn in the future against which the tax losses could be offset and the benefits which the husband would be likely to derive from the tax losses having regard to his life expectancy and to a particular section of the Income Tax (Assessment) Act.
[13] Wimborne & Wimborne (unreported) Appeals No. EA27/92 & 15/93 judgment date 28 April 1994
Nygh J did not completely accept the opinion of either accountant about the value of the tax losses and included them in the list of assets at a figure different to that proposed by either accountant.
This case does not assist the wife. The wife’s counsel urged me to treat as an asset not tax losses but capital losses. The husband has not filed his 2009 tax return, and has not yet claimed for any of the losses. Three of the company’s are in receivership or liquidation and it does not automatically follow that the husband will be able to claim losses on these shares in the 2009 or 2010 years. There was no evidence before me, and nor could there have been as the losses have yet to be quantified for taxation purposes, about the benefits if any which might flow to the husband from the capital losses. There is no justification for including the capital losses in the pool as an asset and I do not intend to do so.
I will however return to the issue of the value to the husband of the potential tax losses when considering s.75(2) matters.
Conclusion about the asset pool
I am satisfied that the asset pool consists of:
Agreed Assets 2,311,844.00 Cattle in existence 60,700.00 Add back for cattle sold 75,778.60 Total 2,448,322.60
The agreed liabilities are as follows:
Description
Ownership
Value
Mortgage Property C Joint 188,000.00 Mortgage (omitted) Bank Property W Husband 270,000.00 Mortgage (omitted) Bank Property D Husband 84,000.00 Total 542,000.00
The parties have superannuation as follows:
Description
Ownership
Value
(omitted) Wife 41,264.00 (omitted) Wife 5,752.00 (omitted) Husband 19,621.00 Mr Woodgrove Superannuation Fund Husband 43,060.00 Total 109,697.00
The Mr Woodgrove Superannuation Fund was set up in June 2006 and the wife and the husband are the trustees of the fund.[14] The husband said that he set the fund up with an amount of $65,000.00. He now has $42,000.00 in the fund made up of some shares and about $19,000.00 in the bank.
[14] Trust Deed exhibit I
I am satisfied that the parties have non-superannuation assets of $1,906,322.60 and superannuation of $109,697.00, a total of $2,016,019.60.
Contributions
I must now assess the parties’ financial and non-financial contributions to the acquisition conservation or improvement of the property of the parties and to the welfare of the family.
Financial contributions
At the commencement of cohabitation in June 1987 the husband had:
i.an interest in an (omitted) business which he had purchased in 1983;
ii.a motor vehicle and some household contents.
Sometime between June 1987 and about March 1988 the husband sold the (omitted) business for $200,000.00.
The wife alleged that when the business was sold the husband had an overdraft. In her affidavit she alleged that the overdraft was for $50,000.00.[15] During cross-examination it was put to the husband that the overdraft might have been as high as $100,000.00. He said that he really did not know how much the overdraft was in 1988 but conceded that it might have been as high as $100,000.00. It was the wife’s case that in those circumstances the husband could not be credited with bringing in more than $100,000.00, and that it could well have been less.
[15] Wife’s affidavit filed 7 May 2010 paragraph 30
The husband’s evidence was that he would utilise an overdraft during certain parts of the season and later pay it out when income came in from the sale of (omitted).
Not surprisingly given the lapse of time since the business was sold no bank records were available to cast any light on this situation. I cannot be certain about the size of the overdraft or about the effect it had in real terms on the amount received for the sale of the business.
Looking at what happened to the proceeds might cast some light on the amount available to the husband from the sale of the business but the husband’s evidence in this regard was brief and did not refer to monetary amounts.
In his affidavit filed on 23 September 2008 the husband said as follows:
I sold [the first (omitted)] business in 1987 keeping several (omitted) and (omitted)…
I bought back into another (omitted) lease business (I recall selling my business in the afternoon and buying another that night).[16]
[16] Affidavit filed on 23 September 2008 paragraph 17
In his affidavit filed on 7 May 2010 he said as follows:
1988 – Mr Woodgrove buys 130 acres at Property C property was purchased out of proceeds of sold (omitted) business
This is a reference to the purchase of the Property M property, which was purchased for $61,000.00.
The wife’s counsel submitted that all the husband could confidently be credited with was bringing in the $61,000.00 used to purchase Property M. However, the husband must have bought into a new (omitted) business at the time he sold the first one because he continued to own an (omitted) business right through cohabitation until February 2006.
I am satisfied that the husband’s initial contributions, aside from the motor vehicle and furniture, were the $61,000.00 used to purchase Property M, some (omitted) and (omitted) of a value I cannot determine and some monetary amount which went into the acquisition of the second (omitted) business, a business which was eventually sold in 2006 for $260,000.00.
At the commencement of cohabitation the wife had:
i.about $30,000.00 in savings;
ii.a motor vehicle and furniture.
The wife did not provide evidence about exactly how her savings were used but gave evidence of putting cash into the costs of constructing the home on the Property M property and of lending the husband money for use in the (omitted) business.
Between 1987 and 2006 the husband worked as an (omitted) farmer. He worked long hours, and I accept his evidence that in the busy season he worked from 6.00am until dark and often had to work on weekends.
Between 2006 when the (omitted) business was sold and separation in September 2007 the husband earned income running cattle and he received some investment income.
The wife worked full time as a (occupation omitted) between 1987 and mid-1992. She then worked one day a week on average until 1988, and two days a week on average between 1988 and separation in September 2007.
During the relationship each party contributed money they received by way of gifts from their family.
The husband’s parents gave him $20,000.00 in the early 1990’s and this money went toward the costs of constructing the house on Property M. I treat this gift as a contribution by the husband.
The wife’s evidence was that over the years her mother gave her money totalling $30,000.00 in all which the wife applied to general family purposes including the payment of bills and the purchase of items such as a clothes dryer. The husband did not dispute that this occurred and I treat the gifts totalling $30,000.00 as a contribution by the wife.
The husband’s mother died in 2002 and his father died on 20 January 2004. Upon his father’s death the husband inherited half of his father’s estate. He received $805,000.00 made up of:
· $144,544.00 cash and
· a share portfolio.
The wife gave evidence that she provided some assistance with the care of the husband’s father prior to his death, but did not argue against the proposition that the husband’s inheritance should be treated as a contribution by the husband.
The parties’ relationship continued for three years and eight months after the husband’s father died. The husband made a bald assertion that the wife “had the benefit of this inheritance from 2004 to 2008”[17] but he did not provide any detail to back up this claim.
[17] Husband’s affidavit
The husband’s 2006 tax return confirms that he sold $500,000.00 worth of shares during the 2005/6 financial year. He lost his main source of income in 2006 when he sold the (omitted) business and the money from the sale of the (omitted) business went directly into the purchase of Property W, so it is not inherently unbelievable that between 2004 and separation in September 2007 the husband used some of the money from his inheritance to help support his family or in ways which directly or indirectly benefited his family. It is impossible to make any precise findings about this however.
In his outline of case document the husband asserted that he used money from the sale of shares to assist in the purchase Property C, to lend money to Ms K and to buy cattle but he gave no sworn evidence to this effect.
The husband’s inheritance is still in the pool represented by the proceeds of sale of Property P, a share portfolio and the self-managed superannuation fund to the value of $541,819.00.
I am satisfied that the husband’s financial contributions during the marriage considerably exceeded the wife’s.
The contributions of $20,000.00 on the husband’s behalf, which came in early and went directly into construction of the house on Property M, and $30,000.00 on the wife’s behalf, which came in at a range of different times and went into general family purposes, in my view cancel each other out.
The husband’s initial contributions exceeded the wife’s however. The wife brought in $30,000.00 cash, a motor vehicle and furniture and the husband, who also had a motor vehicle and some furniture, must be credited with the $61,000.00 used to purchase Property M and some indeterminate amount used to purchase the second (omitted) business.
I accept that the wife contributed income from employment, but for all but the first four years of the relationship she worked part time. The husband worked full time for all but the last eighteen months of the relationship. The wife did not suggest that (omitted) farming was a hand to mouth occupation and I am satisfied that during the period of the fifteen years when the husband was an (omitted) farmer and the wife was working part time the husband was the primary financial provider for the family.
Finally, the husband’s inheritance, a significant sum received less than four years prior to separation, was a financial contribution unmatched by the wife.
Non-financial contributions
Between June 1987 and June 1992 the parties were both employed full time outside the home and it was not suggested that one or other of them did more housework or yard work than the other.
The husband played an important role in organising the construction of the home on the Property M property. His skills and aptitudes no doubt allowed him to take a greater role in this regard than the wife, although he conceded that the wife made a contribution.
From 1992 until separation the wife was the primary homemaker and parent. She emphasised the significance of her role in this regard in her affidavit and downplayed the husband’s contributions. The husband accepted that he played a lesser role but detailed some of his contributions as homemaker and parent including doing cooking and organising recreational activities.
The wife provided very detailed evidence about her parenting and homemaker contributions and the husband’s evidence about his parenting contributions was more concise. It does not follow however that simply because the wife provided more detail that I should give more weight to her evidence.
I am satisfied that the husband was more involved as homemaker and parent than the wife is now willing to concede. However the wife worked part time and the husband full time for the majority of the marriage and I am satisfied that her contributions as homemaker and parent exceeded the husband’s.
I am satisfied that each party made a variety of other non-financial contributions in accordance with their aptitudes, interests and the time available to them. The husband’s role in organising the construction of the home on the Property M property was important, but I do not consider that one party made a greater non-financial contribution (outside of their homemaker and parenting roles) than the other.
Post separation contributions
The wife has had the primary care of Z since separation. She was keen to emphasise the extent of her financial and non-financial care of Y and X post separation as well but I am satisfied that the husband played a significant role in the financial and non-financial care of these two children post separation, and I am not satisfied that one parties post-separation contributions to the care of the children has exceeded that of the other.
The wife has done some maintenance on Property M since separation and has paid half of the rates, but she has been living on the property. The parties have continued to share equally in the costs of the jointly owned Property C property. The husband met the mortgage repayments for Property W and Property D which were in his sole name, but he has lived at Property D for much of the time and has derived income from Property W. Nothing in this area suggests that one parties’ post-separation contributions have exceeded that of the other.
The husband continued to manage the cattle herd after separation. The wife has made an indirect contribution to the cattle business because some of the cattle were run on the Property M and Property W properties which are part of the pool, but the husband’s contributions to the cattle business exceeded those of the wife.
However when all the post-separation contributions are considered together and weight is given to the fact that each party continued to make an effort post-separation in their own ways I am satisfied that their post separation contributions overall should be judged as equal.
Conclusion about contributions
I must now consider all the financial and non-financial contributions and make an overall assessment of contributions in percentage terms.
Contributions can be assessed either globally, to one pool of assets, or on an asset-by-asset or two pools basis. The wife proposed that contributions be assessed globally. The husband, by seeking to have the assets derived from his inheritance kept separate, was effectively proposing that contributions be assessed on a two pools basis.
Either approach is legitimate.[18]
[18] Norbis v Norbis (1986) FLC 91-713
There is support in the Full Court decision of Bonnici & Bonnici[19] for the proposition that assessing contributions on a two pools basis is to be preferred in a case such as the present where the husband received a large inheritance late in the marriage.
[19] Bonnici & Bonnici(1995)FLC920273
The parties in Bonnici were married for twenty years and their property pool was worth about $585,250.00. The husband had received two inheritances, a small one three years prior to separation and the major one a year before separation. The inheritances totalled half of the asset pool in value.
The trial judge assessed contributions globally and assessed them as equal. The husband appealed and argued that the trial judge’s finding about contributions was not reasonably open to him.
The Full Court upheld the appeal. They were unable to discern the reasons which had led to trial judge to make his findings and said as follows:
In a case such as this, we think that the global approach, taken by his Honour, presents considerable difficulties. If the matter had been approached upon an asset by asset basis, we think that the task of his Honour and this Court would have been a simpler one. To approach the matter globally as his Honour did, in circumstances where the wife had clearly made no contribution to a major asset, must of necessity have involved a greater weighting of her contribution than that of equality to the assets to which she did contribute.
However while adopting a two pools approach has the advantage of ensuring that the significance of the large and late financial contribution by the husband is not overlooked, the danger of adopting this approach is that the wife’s contribution as homemaker, parent and financial contributor over a period of twenty years may be undervalued.
In Alekovski & Alekovski [20] the parties had been married for 18 years. The wife had received a very substantial damages award during the marriage and the issue was the weight to be given to this contribution. The trial Judge and the Full Court (re-exercising the discretion) both assessed contributions globally. Kay J made the following observations about the task facing the trial Judge:
The Judge must weigh up various areas of contribution. In a short marriage, significant weight might be given to a large capital contribution. In a long marriage, other factors often assume great significance and ought not be left almost unseen by eyes dazzled by the magnitude of recently acquired capital. A party may enter a marriage with a gold bar which sits in a bank vault for the entirety of the marriage. For 20 years the parties each strive for their mutual support and at the end of the 20 year marriage, they have the gold bar. In another scenario they enter the marriage with nothing, they strive for 20 years and on the last day the wife inherits a gold bar. In my view it matters little when the gold bar entered the relationship. What is important is to somehow give a reasonable value to all of the elements that go to making up the entirety of the marriage relationship. Just as early capital contribution is diminished by subsequent events during the marriage, late capital contribution which leads to an accelerated improvement in the value of the assets of the parties may also be given something less than directly proportional weight because of those other elements.
[20] Alekovski & Alekovski(1996)FLC92-705
In Bonnici & Bonnici[21] the Full Court went on to say at the end of the passage quoted earlier:
There would, nevertheless, have been nothing wrong with his Honour having approached the matter globally if he had explained how he did so.
[21] Bonnici & Bonnici (supra)
I am satisfied that the appropriate course and the course which is most likely to ensure that due weight is given to the wife’s contributions over a period of twenty years is for me to assess contributions globally.
I am satisfied that the financial and non-financial contributions of the parties during the marriage from their own efforts and by way of capital obtained from family (a $20,000.00 lump sum which went into building the former matrimonial home on the husband’s behalf and $30,000.00 at various times and used for a variety of purposes on the wife’s behalf) when taken together should be assessed as equal.
The husband must however be given credit for both his initial contributions and the contribution of his inheritance.
The husband’s initial contributions were important. In Pierce & Pierce[22] the Full Court said that when considering the weight to be given to initial contributions it was important to look at the use to which the contributions were put, and the sale of the husband’s first (omitted) business allowed the parties to purchase the Property M land outright and also assisted the husband to acquire the second (omitted) business. This second business provided a livelihood for the husband until 2006 and upon its sale the $260,000.00 received went into the purchase of the Property W property.
[22] Pierce & Pierce (1999 ) FLC 92-944
The inheritance was also important. The assets in the pool which derive from it are valued at $541,819.00, equivalent to a little under one quarter of the asset pool.
I take into account that the wife also made an initial contribution however, of $30,000.00, which was of assistance either in the operation of the (omitted) business or in the building of the house on Property M.
The parties have a net asset pool of $2,016,019.60. If I were to adopt the husband’s proposal and give the husband the assets derived from his inheritance and divide the remainder of the assets 60/40 in his favour, the wife would receive $589,680.00 or about 29% of the asset pool. This would simply not be just and equitable.
The wife’s counsel submitted that contributions should be assessed to be 40% by the wife and 60% by the husband. A division on this basis would entitle the wife to $806,407.84 and the husband to $1,209,611.76, and would result in a differential between the parties’ entitlements of $403,203.92.
There is merit in this submission. Such a division gives due recognition to the husband’s initial contribution and it takes account of the substantial inheritance he received, but it also takes account of the fact that the parties worked together over a period of twenty years to bring up three children and acquire assets, and that their contributions in this regard must be given a central place in any assessment of contributions. For reasons explained by Kay J in Alekovski, the husband cannot expect to have his financial contributions recognised in the final outcome of these proceedings in the exact dollar terms of what he put in.
On the basis of contributions therefore I am satisfied that the wife is entitled to 40% of the pool or assets to the value of $806,407.84 and the husband to 60% of the pool or assets to the value of $1,209,611.76.
s.79(4)(d), (f) & (g)
I am required by s.79(4)(d) to consider the effect of any proposed order on the earning capacity of any party.
The wife proposed that she keep Property M. The husband did not oppose this, but he does run cattle on this property. If it ceases to be available to him he may have to pay to use other land for this purpose.
There was no evidence in the case however which would allow me to make any findings about the financial impact on the husband of the loss of use of Property M.
S. 79(4)(f) has no application in these proceedings, and I will consider the issue of future child support in the context of s.75(2)(na).
s.75(2) matters
s.79(4)(e) requires me to consider the matters in s.75(2) of the Family Law Act.
The wife is 47 and is in good health. She is a (occupation omitted), is currently working three days per week and earns $50,000.00 per annum.
The wife has the care of 14 year old Z and lives on a rural property but there was no compelling evidence that she could not work full time if she chose. Indeed in her affidavit the wife said as follows:
There is no impediment of which I am aware to both the Respondent and I continuing to work in our chosen vocations for such periods as each of us chooses.[23]
[23] Wife’s affidavit filed 7 May 2010 paragraph 94
During cross-examination the wife expressed the view that full time work might not be available to her if she looked for it, but conceded that she had not asked all of her current employers if more work was available and had not made any inquiries in (omitted), (omitted) or (omitted) about whether other work as an employed (omitted) was available.
The wife expressed the view that the “future of (omitted) work in the area is questionable and a likelihood of wage reduction is highly likely”. There was no foundation for this expression of opinion by the wife and I do not have regard to it.
Using a pro-rata calculation the wife could earn $83,000.00 per annum if she worked full time.
The wife is entitled to assets to the value of $806,407.84 on the basis of contributions. This will allow her to retain Property M unencumbered and to retain Property C subject to the mortgage. The wife will also retain her superannuation, horse, horse float, savings, motor vehicle and furniture and household contents and her superannuation.
The wife has additional savings of about $3,000.00 which were not included in the pool. She has no significant debts save that she has unpaid legal costs. It was the wife’s evidence that she had paid legal costs of $14,719.58 and that she was required to pay her solicitor an additional $15,000.00 to cover the costs of the hearing.
In Hurst and Weber[24] the Full Court said as follows:
the recognition of a debt for legal fees, when the court is considering s 75(2) factors and the justice and equity of orders, is consistent with the terms of s 75(2)(b) and is part of the discretionary (as distinct from mathematical) exercise.
[24] Hurst & Weber (2009) FamCAFC137
I take into account that the wife has unpaid legal fees but the total of $15,000.00 is not unmanageable given the wife’s income, nor should it inevitably result in a loss of some of the capital to which the wife is entitled to pursuant to these proceedings.
The wife has the care of Z, who is 14. Z attends high school in Property P. The wife hopes that Z will complete Year 12, and said that Z was interested in attending boarding school for her final two years of high school.
The wife is able to adequately support Z on her income.
Neither the husband nor the wife has paid child support to the other parent since separation, nor did either of them propose to make an application for child support in the future, although this might change once Y completes school and only Z, who is in the wife’s care, is left as a dependent child.
There was no evidence that the marriage had affected the wife’s capacity to earn an income as an employed (omitted). She has kept up her skills as a (omitted) throughout the marriage by working part time even after the children were born.
The wife did however give the following evidence:
The lack of help at home by the respondent made it impossible for me to consider buying a (omitted) business or entering into a partnership. The first was in a partnership at (business omitted). The second opportunity came when I was offered the business at (omitted) before it was advertised for sale. The third opportunity was when the (business omitted) came up for sale a second time. At that stage our marriage was particularly unstable and I was neither emotionally or financially secure. I was unable to even consider any of these offers as I felt that my first duty was to my family and my home but often wondered how different things may have been had I had more help from the Respondent.[25]
[25] Wife’s affidavit filed 7 May 2010 paragraph 67
The difficulty for the wife is that there was no evidence (and expert evidence would have been required) as to what financial difference it would have made to the wife had she been able to purchase a (business omitted).
The wife has not re-partnered.
The husband is 55. He is in good health save that he is scheduled to have knee reconstruction surgery in mid 2011.
It was impossible to gain a clear picture either of the husband’s current income or his future income earning capacity.
In his financial statement filed on 23 September 2008 the husband said that he was earning $481.95 per week working casually for (business omitted). His 2008 taxation return revealed income of about $43,000.00 from (occupation omitted), dividends and interest although that gross income was then reduced by application of losses from his primary production enterprise.
The husband has not filed his 2009 income tax return.
In his financial statement filed on 7 May 2010 the husband said that he was receiving $550.00 per week from cattle grazing, $440.00 per week from share dividends and $290.00 rent. The husband has expenses in relation to the rental property and common sense suggests that he must have expenses in relation to the beef cattle enterprise. He provided information about his mortgage payments but no other information about his expenses.
It was the husband’s case that he was not able to obtain paid employment at the moment because he needed a knee reconstruction in mid-2011 and in his opinion nobody would employ him knowing that he would need to take time off in twelve months. This is nonsense and I do not accept it.
I cannot make findings about the husband’s income earning capacity but I am satisfied that he has the capacity to earn an income sufficient to support himself and Y. The husband is a versatile man. He has experience in the operation of (occupation omitted) and he has obtained casual work on (occupation omitted) in the recent past. He is knowledgeable about and interested in beef cattle farming and he has an interest in buying and selling shares although his ventures in that regard have not always been successful.
Although I cannot make precise findings about the husband’s income earning capacity, nothing in any of the evidence supports the finding urged by the wife’s counsel namely that the husband has a greater income earning capacity than the wife.
Y, aged 15, lives with the husband. The husband said that he hoped that Y would complete Year 12. The wife said that Y might leave school after Year 10. Y does not seem to be a strongly academically inclined and it is impossible to be certain about how long Y will remain at school.
The wife hinted at the possibility that if she decided to move from Property C to Property D or Property P then Y might come to live with her. I can make no findings about the likelihood of this. I expect that the parents would go along with whatever Y wanted, but there was no evidence that the wife in fact intended to leave Property C or that Y had any particular desire to change residence.
Although X is now 18 both parents are still making some contribution to his support. As X is living with the husband the support probably falls a little more heavily on him. This may continue for a time into the future.
S.75(2)(o) requires me to consider any other matter which the justice of the case requires be taken into account, and both parties raised matters which are relevant here.
The wife asked me to take into account her contribution to the care of the husband’s daughter A on alternate weekends and during school holidays for a period of about nine years.
The wife said that it was part of the court order concerning A spending time with the husband that the wife be present. The husband denied this. The court order was not available and I cannot resolve this issue.
I take into account that the wife provided some financial and non-financial support for A when she visited but I do not consider it to be a factor of great significance in this case. For the first five years of the parties’ relationship they had no children of their own and were both working and there was no evidence that the care of A on alternate weekends and during school holidays had any financial impact on them or curtailed their lifestyles. The same applies to the following five years when A was visiting the family and the wife was engaged in home duties and working part time.
A second matter which needs to be considered here is the relevance of the husband’s capital losses of $247,400.00.
The wife’s counsel submitted that if these losses were not treated as property they should be regarded as a financial resource available to the husband. He submitted that the husband would be able to offset future profits either from share trading or the sale of real estate against these losses.
The husband said that he would only be able to offset any tax losses on shares against future profits on the sale of shares.
Neither party referred me to any sections of the Income Tax (Assessment) Act which might resolve this dispute. However the husband agreed that he would be able to use losses to offset future gains on shares, and the husband has a history of buying and selling shares.
In my view nothing turns on the issue of whether the potential tax losses can be characterised as a financial resource. Whether they can or not they are clearly a matter which can be taken into account pursuant to s.75(2)(o).
The pool available for distribution has been diminished by the loss of $247,400.00 because three companies failed after the interim orders were made on 2 April 2009. The wife can never recover any of this loss.
The husband however does have the opportunity to recover some of the loss once it is translated into a tax loss, because if nothing else if he makes a profit on the sale of shares in the future he will be able to offset the profits against that loss.
In Cromwell & Cromwell[26] the husband had “an excess of tax losses available to offset against future income in excess of $125,000.00.”[27] Coleman J hearing the matter at first instance took the tax losses into account as one factor which justified an adjustment in the wife’s favour for s.75(2) factors. He said as follows:
Reference was made earlier in [this] decision to the husband's carried forward losses. The evidence is less than clear as to how that will impact upon the husband's income in the foreseeable or more distant future, but the reality is there is no doubt in such fashion and at such time as he is advised, consistent with the income tax laws of this country, the husband will reap the benefits of those carried forward losses in a tangible way. It is not without relevance that the losses appear to have been substantially accumulated during the years of cohabitation between the parties. In all the circumstances, to fail to have regard to this resource as it may be considered, would be unfair to the wife. This should feature in the determination of an appropriate section 75(2) adjustment in the wife's favour.[28]
[26] Cromwell & Cromwell (2006)FamCA1454
[27] Cromwell & Cromwell (supra) paragraph 19
[28] Cromwell & Cromwell(supra) paragraph 13
The husband appealed against Coleman J’s decision and his appeal focussed on the treatment of the tax losses. The Full Court upheld the decision and was satisfied that the trial judge had appropriately dealt with the issue of the tax losses.
This is a s.75(2) factor which favours the wife.
A third issue which needs to be considered in the context of s.75(2)(o) is the husband’s argument that the court should have regard to the fact that the wife is likely to receive an inheritance from her mother.
The wife was reluctant to answer questions about her prospective inheritance but admitted that she was one of three siblings, that her mother had a will, that the wife was one of the executors of the will, that her mother had left her estate between the three siblings and that the wife expected that she might receive about $250,000.00.
In White & Tulloch[29] the Full Court was asked to rule on the admissibility of evidence concerning a prospective inheritance. They considered the relevance of the information which might be obtained. They held that a prospective inheritance could not be considered a financial resource, but that it might ultimately be relevant under s.75(2)(o).
[29] White & Tulloch(1995)FLC92-640
The Full Court said as follows:
An expectancy of inheritance will not be relevant in many s.79 proceedings. In the end, relevance must depend upon the nature of the claims being put forward and the facts of the particular case. For example, if the claims were based entirely upon contributions, it could not be suggested that an issue of expectancy could be relevant because no s.75(2) factors would be involved. Where the claim includes s.75(2) factors, the nature or degree of suggested relevance between those specific claims and the expectancy in question would need to be analysed.
The husband argued that it was unfair that the wife should receive any share of his inheritance, when she would in due course receive an inheritance of her own.
This argument must fail, as I have made an assessment that on the basis of contributions to a pool (including the husband’s inheritance) that the wife is entitled 40% of the pool.
The wife has made a claim for an adjustment in her favour for s.75(2) factors but I am not persuaded that the wife’s prospective inheritance is relevant to an assessment of s.75(2) factors in the particular case before me.
Conclusion about s.75(2) factors
Absent the issue of the benefit the husband might gain from his tax loss once it crystallises, I am not satisfied that any adjustment is warranted in favour of either party for s.75(2) factors.
The husband has the care of Y and is seven years older than the wife, but he has a reasonable income earning capacity and he is entitled to considerably more of the asset pool than the wife on the basis of contributions.
The wife is 47 and has a long working life ahead of her. I am satisfied that she could work full time and earn more income than she currently does if she chose to do so. On the basis of contributions the wife will receive an unencumbered rural property, an investment property (although she will have to refinance the mortgage over it) her motor vehicle, superannuation and some chattels.
The wife has the care of Z at least until she finishes high school, but the husband has the care of Y and for a time at least the parties respective responsibilities will overlap. When they cease to do so the wife can if she chooses make an application to the child support agency for an assessment.
The wife is not optimistic about obtaining child support from the husband in the future should she be entitled to it, and there is some basis for her concern given the way the husband brings in income. However the wife has been able to negotiate agreements with the husband to share the cost of things such as orthodontic treatment for the children and in my view there is no basis for a finding that the husband will totally fail to contribute to any costs for Z in the future.
The wife does not have much superannuation, but neither does the husband, and the wife is seven years younger than the husband and has longer to acquire superannuation from paid employment to provide for her retirement.
In looking to the future rather than the past I also need to be mindful of the fact that although the husband is entitled to $1,209,611.76 on the basis of contributions, he will be credited with the notional asset of $75,778.60 for cattle sold prior to the hearing, and in real terms the amount the husband will receive will be $1,133,833.16, in comparison to the $806,407.84 which the wife will receive.
If the assets are distributed in accordance with the parties’ entitlements on the basis of contributions, the husband will leave the marriage in a stronger financial position than the wife, but she has an income earning capacity to support herself, and will retain the home, and need suffer no alteration to her lifestyle. As Wilson J said in Mallet v Mallet:[30]
“The objective of the section (s 79) is not to equalise the financial strengths of the parties. It is to empower the Court ... to effect a re-distribution of the property of the parties if it be just and equitable to do so ...”
[30] Mallet & Mallet (1984) FLC91-507
The matter which does merit an adjustment in favour of the wife is that while she has permanently lost the right to a share in an amount of $247,400.00 as a result of companies going into receivership, the husband may recover some of this amount over time by being able to offset tax losses against capital gains alone (if the husband is correct) and also a real property (if the wife’s counsel is correct).
According to the calculations by the wife’s counsel the husband has $43,000.00 of gains sitting in his share portfolio at the moment.
No tax loss yet exists and it is very difficult for me to do any precise calculation of how any tax loss will benefit the husband in monetary terms in the future because things such as his marginal tax rate have a bearing. Doing the best I can I intend to make an adjustment in the wife’s favour of 1%, which will give her an immediate additional benefit of $20,160.96 in contrast to the potential benefits to the husband in the future once the tax loss crystallises and he actually sells assets.
The wife will thus be entitled to $826,568.80 and the husband to $1,189,450.80.
Just and Equitable
The wife sought to retain the following property:
Property M 656,500.00 Property C 243,750.00 Nissan motor vehicle 10,000.00 Horse “(omitted)” 500.00 Horse Float 2,000.00 Contents 10,000.00 (omitted) Bank Account 2,425.00 Superannuation 47,016.00 Total 972,191.00
At the conclusion of the hearing the parties agreed to an order that all the existing cattle be sold and the money be held in trust pending the handing down of this decision. I intend to make a separate order about division of the proceeds of sale of the cattle as the amount may be different to the $60,700.00 I have attributed to the cattle in the pool. However I have included the cattle in the pool at $60,700.00 and I need to attribute 41% of this amount to the wife for the purposes of these calculations.
The wife proposed that she receive Property C mortgage free, but on the above figures if she keeps Property C she will need to refinance into her sole name the mortgage of $188,000.00 secured over it.
The wife will thus retain:
Assets as at paragraph 233 972,191.00 Add 41% of $60,700.00 24,887.00 Less Property C Mortgage 188,000.00 Total 809,078.00
The wife is entitled to $826,568.80 on the basis of contributions. The husband will therefore need to pay the wife $17,490.80 if he retains the balance of the assets.
The husband will retain the following assets:
Property D 237,500.00 Property W 534,750.00 Steel on Property M 3,600.00 Contents 8,000.00 House boat 3,000.00 Box trailer 500.00 Boat 9,500.00 Motorcycle 2,000.00 Farm plant & equipment 15,000.00 Ford Courier motor vehicle 10,000.00 Loan to Ms K
Ms K (with interest)
62,000.00 Share Portfolio 214,483.00 (omitted) Account 23,336.00 (omitted) Bank Term deposit 263,000.00 59% of proceeds of sale of cattle sold pursuant to order of 2 July 2010 35,813.00 Add back for cattle sales post-separation 75,778.60 Self-managed superannuation fund 62,681.00 Total 1,560,941.60
He will have the following liabilities:
Property D mortgage 84,000.00 Property W mortgage 270,000.00 Payment to wife 17,490.80 Total 371,490.80
I am satisfied that the outcome, and the orders which I have made, are just and equitable.
The husband and wife will each be left with two real properties. Both of the husband’s properties are encumbered but he could use cash to pay one of the mortgages out if he chose. Both parties have a reasonable income earning capacity.
The husband’s proposal that he retain his inherited assets and 40% of the remainder of the assets would have resulted in the wife receiving less than 30% of the pool. Given that the parties each worked hard over a period of twenty years to acquire assets and bring up three children such an outcome would simply not be just and equitable.
The wife’s proposal that would have seen the husband receiving less than 30% of the pool in terms of real assets retained would similarly not be a just and equitable outcome.
The wife sought an order that a mortgage secured over Property M be discharged. I can only presume that this mortgage was a collateral security for some other loan, as I was not informed that any money was owing for Property M itself. No difficulties should arise arranging for the discharge of this mortgage if this is the case because there is equity in all the other real properties. I will make the order about the discharge of the mortgage registered owner over Property M on this assumption but will also give the parties liberty to apply should any difficulties arise over this issue.
I intend to make the order proposed by the wife about the husband removing items from Property M but consider that the 14 days she proposed to allow him to remove the items is unrealistic and I intend to allow the husband 60 days to remove the property. The husband must carefully note the time limit.
For all of the above reasons the orders shall be as set out at the beginning of this judgment.
I certify that the preceding two hundred and forty-five (245) paragraphs are a true copy of the reasons for judgment of Terry FM
Date: 19 October 2010
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