Young, Joanne Elizabeth v Young, Leslie James
[2012] NSWSC 1230
•15 October 2012
Supreme Court
New South Wales
Medium Neutral Citation: Young, Joanne Elizabeth v Young, Leslie James [2012] NSWSC 1230 Hearing dates: 10/09/2012 and 17/09/2012 Decision date: 15 October 2012 Jurisdiction: Common Law Before: Harrison AsJ Decision: (1) The parties are to produce a document that sets out Mr Young's assets and liabilities as at 30 June 2012 in accordance with the adjusted Financial Statement and with Harrison AsJ's reasons.
(2) The costs of and incidental to the plaintiff's notice of motion filed on 4 May 2012 (including the hearing on 10, 11 and 19 September 2012 of the separate questions dated 12 July 2012) are costs in the plaintiff's substantive application for orders under s 79 of the Family Law Act 1975 (Cth).
Catchwords: PROCEDURE - other rulings - questions pursuant to r 28.2 UCPR - value of assets and liabilities Legislation Cited: Family Law Act 1975 (Cth)
Uniform Civil Procedure Rules 2005Cases Cited: Axon v Axon (1937) 59 CLR 395
R v Noonan (2002) 127 A Crim R 599Category: Procedural and other rulings Parties: Joanne Elizabeth Young (Plaintiff)
Leslie James Young (Defendant)Representation: Counsel:
Solicitors:
File Number(s): 2008/286909
Judgment
The substantive proceedings involve an application for a property settlement under s 79 of the Family Law Act 1975 (Cth). These proceedings were commenced in the Family Court of Australia in 2007 and cross vested to this Court.
The plaintiff is Joanne Elizabeth Young. The defendant is Leslie James Young. They were husband and wife.
On 12 July 2012, Adamson J made an order that four separate questions be answered by this Court pursuant to r 28.2 of the Uniform Civil Procedure Rules 2005 (UCPR). At the hearing of these separate questions, the parties agreed that separate questions (3) and (4) do not need to be answered. The separate questions to be answered are:
(1) What are the assets and liabilities of each of Mr and Mrs Young and their respective values as at 30 June 2012 for the purpose of assessment under s 79 of the Family Law Act 1975 (Cth)?
(2) What were the assets and liabilities of each of Mr and Mrs Young as at 30 June 2000 and their respective values (being the close of financial year of the agreed date of separation)?
Counsel for the defendant, in his submissions, criticised the actual questions that are the subject of separate determination. The time for making those criticisms was when the separate questions were being framed at the hearing on 12 July 2012. A reading of that transcript reveals that they were not made. It is too late to ventilate them now.
The plaintiff's assets and liabilities in 2000 and 2012
It is convenient to deal with the plaintiff's assets and liabilities in 2000 and 2012 first as there is little dispute in relation to them.
Separate question 2 in respect of the plaintiff can be answered as follows.
Answer: As at 30 June 2000 Mrs Young had no assets of any value nor any liabilities (see agreed facts), their respective values being nil.
The plaintiff's Statement of Financial Circumstances was admitted without objection. The plaintiff was not required for cross-examination. This Court accepts that in summary, as at 23 May 2011:
(a) The plaintiff was unemployed, and her only income was the $1000 per week paid to her by the defendant pursuant to orders made by the Family Court;
(b) The plaintiff had credit card liabilities totalling $21,000.00;
(c) The plaintiff's only asset was superannuation worth $9,885.89.
It appears that there has been no substantial change in the plaintiff's financial position between 2000 and 2012. I accept that the plaintiff's position has not materially changed in the period between 23 May 2011 and 3 June 2012.
Separate question 1, in respect of the plaintiff, is answered as follows.
Answer: As at 30 June 2012, Mrs Young has no assets of any value nor any liabilities, their respective values being nil.
The defendant's assets and liabilities
So far as separate question 2 in respect of the defendant, neither party was able to adduce any evidence as to the defendant's financial position as at 30 June 2000 and the plaintiff does not press for an answer to that question in respect of the defendant.
Separate question 2 in respect of the defendant is not answered.
Question 1 in so far as it relates to Mr Young
That leaves the only separate question to be answered by this Court is question 1 so far as Mr Young is concerned. The question is, what are the assets and liabilities and the respective values as at 30 June 2012 for the purpose of assessment under s 79 of the Family Law Act 1975 (Cth)?
The plaintiff submitted that the net value of Mr Young's assets and liabilities as at 30 June 2012 was approximately $11,128,843.00.
The defendant submitted that separate question 1, so far as he is concerned, should be answered as either:
(a) The Court has insufficient evidence to make a finding about the defendant's "assets and liabilities ... and their respective values as at 30 June 2012";
or alternatively
(b) As at 30 June 2012, the net value of the defendant's assets was $9,628,843.00 [being the plaintiff's figure less $1.5m].
The plaintiff relied on her tender bundle (Ex A), which included two reports of Tamara Lindsay of Forensis Accounting dated 3 May 2012 and 29 August 2012 in relation to the husband's financial position. Mr Young chose not to rely upon any expert evidence. The only evidence he relied upon was his Statement of Financial Circumstances as at 30 December 2011 (Ex 1). Those parts of the Financial Statement to which Ms Lindsay refers in her two Reports were admitted as evidence of the facts contained therein. In the summary below the "Para ref" is the reference to the relevant paragraph in Mr Young's Financial Statement.
Ms Lindsay (report, 3 May 2012) sets out a summary of Mr Young's adjusted net worth, based on his Financial Statement, as follows:
Para ref
Value
1
Husband's net worth (deficiency) per the Husband's Financial Statement - Schedule 2
(2,719,520)
2
Add: Increase as a result of adopting 2011 year financial information for the Guildford Hotel Operations Partnership and the Guildford Hotel Freehold Partnership
30
123,117
3
Add: increase as a result of adopting the St George valuations
34
9,108,336
4
Add: increase as a result of reallocating the Guildford Hotel leasehold and freehold based on two-thirds/one third, using the St George valuation of the Guildford Hotel
41
1,500,000
5
Add: book value of motor vehicles of Jetobee
45
209,991
6
Add: mathematical/logic error re Nortons
47
74,628
7
Less: error re GST liability in Jetobee
50
(3,056)
Husband's adjusted net worth
$8,293,496
To this summary, further Items 8 to 11 need to be added.
8
Less: effect of replacing St George valuation of Norton's on Norton with sale price
(125,000)
9
Add: value of the defendant's interest in the Wiley Part development site (not less than 50%) as valued by St George
3,250,000
10
Less: value attributed to 280 Lakemba Street in Jetobee's June 2011 balance sheet
(77,153)
11
Less: 50% of value attributed to 288 Lakemba Street in Les Young Family Trustee's 30 June 2010 balance sheet
(212,500)
Item 8 in the table above was addressed in the supplementary report of Ms Lindsay dated 29 August 2012. Items 9 to 11 were addressed by Ms Lindsay in oral evidence.
As previously stated, the plaintiff's claim that the net asset position of the defendant is $11,128,843.
Counsel for the defendant made an overall general submission that separate question 1 is quite specific; it asks for the defendant's asset and liability position as at 30 June 2012 and there is insufficient evidence permitting the Court to answer that question because the most recent balance sheets relied on by Ms Lindsay are those for 30 June 2011.
While the defendant also pointed out the four property valuations (Ex A, Tabs 10, 11, 12 & 13) relied on by the plaintiff all pre-date 30 June 2011, on 15 May 2012, the parties agreed that the valuations of the St George Bank with respect to the Wiley Park Hotel, the Guildford Hotel and Norton's on Norton Hotel be accepted as admissible and relevant valuations of the identified properties at any hearing of any separate question or questions. As there is to evidence to the contrary, I accept these valuations as being correct despite being dated prior to 30 June 2011. However, events have overtaken the valuation of Norton's on Norton Hotel as it has since been sold and that has been dealt with at Item 8 above.
If the defendant wanted to challenge any of these valuations he should have obtained an independent forensic valuation of the identified hotels and served such a report by 19 June 2012 - see Order 3 made on 15 May 2012. He chose not to do so.
The defendant submitted that apart from the evidence about the sale of the Norton Hotel (Ex A, Tab 7 [15]), there is no evidence of the assets purchased and sold by the defendant or his entities in 2011-2012; the values of any such purchases and sales; or the liabilities, actual or contingent, of the defendant on 30 June 2012. That proposition is not entirely correct as the defendant has set out his assets and liabilities, as at 30 December 2011 - that is six months prior to 30 June 2012. It is noted that Ms Lindsay has updated her report to take into account the calculations in Mr Young's Statement of Financial Circumstances.
In any event, these matters are within the defendant's knowledge (not the plaintiff's) yet he has elected not to put on any evidence, other than his Financial Statement. The defendant has from time to time not complied with court directions - see 15 December 2011 Order 1; 21 June 2012 Order 1 and 12 July 2012 Order 1. The effect of this is that the determination of the defendant's financial position, be it under s 79 or in accordance with the separate question, has been delayed. The plaintiff is impecunious and has incurred additional expense in attempting to ascertain the defendant's up-to-date to financial position. If the defendant wanted to put any of these matters in issue he could have. He did not.
The plaintiff submitted that the Court should draw an inference that nothing of substance changed in the year after 30 June 2011. The defendant submitted that there is no factual basis upon which the Court can draw that inference.
The parties referred to a "presumption of continuity". As Dixon J explained in Axon v Axon (1937) 59 CLR 395 at 404-405:
"When it is proved that a human being exists at a specified time, the proof will support the inference that he was alive at a later time to which, having regard to the circumstances, it is reasonably likely that in the ordinary course of affairs he would survive. It is not a rigid presumption of law. The greater the length of time the weaker the support for the inference. If it appears that there were circumstances of danger to the life in question, such as illness, enlistment for active service or participation in a perilous enterprise, the presumption will be overturned, at all events when reasonable inquiries have been made into the man's fate or whereabouts and without result. The presumption of life is but a deduction from probabilities, and must always depend on the accompanying facts."
The presumption of continuance, it is said, is no more that a convenient way of describing a process of logic by reasoning involving the inferences from established facts: see R v Noonan [2002] NSWCA 46; (2002) 127 A Crim R 599 at [18].
According to the defendant, any presumption of continuity is but a deduction from probabilities. The "accompanying fact" in this instance, is the sale of the Norton's on Norton Hotel. That fact shows that it cannot be presumed that any of the other 2011 assets remained unsold a year later; and the valuations relied on by the plaintiff are likely to be overstated by 6 or 7%. Overall, the defendant submitted that there is insufficient evidence to permit the Court to presume that the facts and figures, which prevailed in 2011, were the same in 2012, let alone prevail upon a realisation of a net position. According to the defendant, it follows that there is insufficient evidence to make findings about the position in 2012. I disagree. The plaintiff's accountant has updated the defendant's assets and liabilities to 30 December 2011. I am prepared to infer that the significant assets and liabilities have not materially changed in the six month period between 30 December 2011 and 30 June 2012.
According to the defendant, the plaintiff's case appears to have proceeded as if separate question 1 asked simply for the net asset or liability position of the parties. But counsel for the defendant says that it does not. I agree. The separate questions ask for the values of each of the assets and liabilities of the parties. In relation to Mr Young, the assets and liabilities of each item are set out in the accountant's report. The separate question 1 does ask for the assets and liabilities and the respective values as at 30 June 2012 and I will adopt the other figures in the adjusted Financial Statement subject to what I say about Item 4.
I now turn to consider the financial position of the defendant as at 30 June 2012.
The defendant makes no submissions on the plaintiff's items 1 to 11 except for item 4. I shall refer to each item in turn.
Item 1: Defendant's asserted net worth per his Financial Statement
The figures that Ms Lindsay took from the defendant's Financial Statement and relied upon are summarised in Schedule 2 of her Report. As Ms Lindsay explained in oral evidence, the column in Schedule 2 headed "Question" refers the reader to the part of the defendant's Financial Statement where those figures appear. Item 1 is contained in the defendant's own sworn Financial Statement. The plaintiff did not challenge his evidence. Hence, I accept the defendant's own evidence.
Item 2: Adopting 2011 year financial information for Guildford Hotel entities
The values of the defendant's interests in two entities associated with the Guildford Hotel - the Guildford Hotel Freehold Partnership (the GHFP) and the Guildford Hotel Operations Partnership (the GHOP) - in his Financial Statement are based on the 2010-year financial statements for those entities.
Ms Lindsay therefore used the 2011-year financial information that was available for GHFP and GHOP to update the defendant's financial position.
Ms Lindsay's analysis is set out in paragraphs 28 to 30 of her report (pages 40-41 PTB). She concludes that updating the financial information for GHFP and GHOP has the effect of increasing the defendant's net worth by $123,117.
I accept the appropriateness and accuracy of Ms Lindsay's update was not challenged in cross-examination and the defendant made no specific submissions on this topic.
Item 3: Adopting St George valuations
The valuations of the Wiley Park Hotel, the Guildford Hotel and Norton's on Norton Hotel commissioned by St George Bank in 2011 (the St George valuations) were admitted without objection and their tender had been the subject of agreement in an earlier directions hearing.
The defendant's Financial Statement did not utilise the St George valuations, but rather relied upon on 'low end' valuations dated 3 June 2011 by Phil Rennie Valuations (the Rennie valuations). The Rennie valuations were not admitted into evidence and cannot therefore be relied upon. The only evidence of the value of the three hotels before the Court is the St George valuations.
Ms Lindsay's analysis of the effect of replacing the Rennie valuations with the St George valuations is set out at paragraphs 32 to 34 of her Report (page 42 PTB) and at Schedule 5 (page 80 PTB).
In oral evidence, Ms Lindsay explained that in Schedule 5 she took exactly the same approach to assessing the defendant's net worth as was taken in his Financial Statement, but merely replaced the Rennie valuations with the St George valuations.
In paragraph 34(i) of her Report (page 42 PTB), Ms Lindsay says that the effect of adopting the St George valuations is to increase the defendant's net worth by (in rounded terms) $9.1M. In her summary table at paragraph 52 of her Report (page 48 PTB), Ms Lindsay sets out the exact figure attributable to this adjustment: $9,108,336.
The consequence of reverting to the original apportionment is to restore $1.5M to the defendant's net worth as set out in his financial statement (see Ms Lindsay's Report at paragraphs 41 (page 44 PTB) and 53 (page 48 PTB)).
The appropriateness and accuracy of Ms Lindsay's update was not challenged in cross-examination. I accept Ms Lindsay's opinion in relation to Item 3.
Item 4: Increase as a result of reallocating the Guildford Hotel leasehold and freehold
Ms Lindsay was instructed to swap the relative proportions of the defendant's interests in the Guildford Hotel freehold (from one-third to two-thirds); and Guildford Hotel leasehold (from two-thirds to one-third) (page 34 PTB, pages 43-44 PTB and instructions at page 69 PTB).
The effect of this instruction is to inflate the defendant's net worth by $1,500,000.
She explains (at para 38, page 43 PTB) that this instruction is a request that she apply the relative proportion which the defendant's accountants "believe ... to be incorrect".
The defendant submitted that the fact that the defendant's accountants believe this proportion is "incorrect" is in evidence although there is nothing further to explain why this is so or whether it is a meritorious belief.
Ms Lindsay was not asked to (and did not) consider the merits of her instruction. She was only asked to carry it out arithmetically. Similarly, she was not asked to (and did not) investigate or consider the merits of the defendant's accountants' belief that the proportion she was asked to adopt was incorrect. In cross-examination Ms Lindsay gave evidence that there was nothing in the books and records that enables her to ascertain whether the one-third or two-thirds or vice versa is correct. She also stated that as she is not a hotel valuer she cannot give an opinion as to whether one-third or a two-third proportion is correct (T44.2-5).
As there is no factual basis that supports the assumption Ms Lindsay was asked to make by Mr Walsh, in swapping the two-third one-third proportions in relation to the Guildford Hotel freehold and leasehold, the sum of $1,500,000 in Item 4 should be deleted.
Item 5: Adding book value of Jetobee motor vehicles
In paragraphs 42 to 45 of Ms Lindsay's Report (pages 45 and 46 PTB) she explains the erroneous writing-back of the book value of motor vehicles owned by Jetobee Pty Ltd in the defendant's Financial Statements.
Ms Lindsay concludes at paragraph 45 (page 46 PTB) that this understated the value of Jetobee Pty Ltd (and thus the defendant's net asset position, given his 100% ownership of Jetobee Pty Ltd) by $209,991. Ms Lindsay explained in giving evidence that the motor vehicles are not included in the St George valuation of the Norton's on Norton Hotel, and so if one is using that valuation then an additional amount of $209,991 needs to be added to the value of Jetobee Pty Ltd (and thus to the defendant's net assets) to account for the motor vehicles Jetobee owns.
I accept Ms Lindsay's opinion in relation to Item 5.
Item 6: Amending mathematical/logical error re Norton's
In paragraphs 46 and 47 of her Report (page 46 PTB) Ms Lindsay points out that the defendant's Financial Statement has double counted the negative book value of the Les Young Family Trust's investment in the Norton's on Norton Hotel, by separately including it in both the value of the Trust and the value of the hotel. The correction of this error adds $74,628 to the defendant's net assets as set out in his Financial Statement.
Ms Lindsay was not cross-examined on this issue or her analysis. I accept her analysis and opinion in relation to Item 6.
Item 7: Amending Jetobee GST liability
In paragraphs 48 to 50 of her Report (page 47 PTB) Ms Lindsay corrects an error in the accounting for Jetobee Pty Ltd's GST liability in the defendant's Financial Statement. The error has the effect of understating Jetobee Pty Ltd's liabilities by $3,056, and so this amount should be deducted from the defendant's net assets as set out in his Financial Statement. I accept this evidence in relation to Item 7.
Summary of Items 1 to 7
The effects of Items 2 to 7 on the defendant's net assets as disclosed in his Financial Statement (which is Item 1) are set out in a table at paragraph 52 of Ms Lindsay's Report (page 48 PTB), and the defendant's Financial Statement is restated by Ms Lindsay at Schedule 6 to her Report (pages 81-82 PTB).
The defendant's adjusted net worth after accounting for Items 2 to 7 is $8,293,496.
Item 8: Replacing St George valuation of Norton's with sale price
The Norton's on Norton Hotel was recently sold, for purchase consideration of $7M.
The plaintiff accepts that the Court should therefore use the actual sale price of the hotel, rather than the St George valuation ($7.5M). In her supplementary report at paragraphs 15 to 17 (pages 118 -119 PTB) Ms Lindsay, having now applied the sale price in place of the St George valuation, states that the defendant's net worth has been overstated by $125,000. I accept this approach as being correct.
Item 9: Adding defendant's interest in Wiley Park development
The defendant has a beneficial interest in a number of properties situated around the Wiley Park Hotel that, when taken together with adjoining properties owned by other parties, have significant development potential.
These properties were described by the defendant in Answers to Interrogatories sworn on 10 August 2012 at answer 1a (pages 141 -142 PTB) as follows:
The development site at King Georges Road and Lakemba Street, Wiley Park consists of 9 parcels of land with several different owners. The site consists of properties at 280, 282, 284, 286, 288, 288B, 290 and 292-300 Lakemba Street and 68 and 70 King Georges Road.
Jetobee Pty Ltd has a 25% share in 280 Lakemba Street, 100% of 282 and 284 Lakemba Street and 100% of 68 King Georges Road.
Smith & Young Pty Ltd as trustee of the Les Young Family Trust and the Josephine Aapa Smith Family Trust owns 50% 288, 288A and 288B Lakemba Street.
The other sites are owned by other parties. In rough terms, my interest of the whole site is approximately 50-52% of the total value. I was advised by the agent, a Mr Joe Owen of Joe's Prestige Real Estate Campsie, that there was a party interested at about $10,000,000. I never met the party and nothing progressed from there.
(emphasis added)
The St George Bank commissioned a valuation of the Wiley Park development site in 2011 (Tab 13 PTB). That valuation was admitted without objection. The valuer values the development site at $6.5M (page 427 PTB). There is no other evidence before the Court as to the value of the development site. I accept this valuation. Hence, as the 30 June 2012, the net value of the defendant's assets was $9,628,843.
I have attached a copy of the adjusted Financial Statement prepared by Ms Lindsay at the end of this judgment. This document refers to various dates, the last being as at 14 December 2011. I direct the parties to produce a document that sets out Mr Young's assets and liabilities as at 30 June 2012 in accordance with the adjusted Financial Statement and with my reasons.
Costs
Costs are discretionary. I order that the costs of and incidental to the plaintiff's notice of motion filed on 4 May 2012 (including the hearing on 10, 11 and 19 September 2012 of the separate questions dated 12 July 2012) are costs in the plaintiff's substantive application for orders under s 79 of the Family Law Act 1975 (Cth).
This Court proposes to answer the separate questions as follows:
Question 1
(1) What are the assets and liabilities of each of Mr and Mrs Young and their respective values as at 30 June 2012 for the purpose of assessment under s 79 of the Family Law Act 1975 (Cth)?
Separate question 1, in respect of Mrs Young is answered as follows.
Answer: As at 30 June 2012, Mrs Young has no assets of any value nor any liabilities.
So far as Mr Young is concerned, this answer is subject to the direction above. Upon receipt of that document, Question 2 will be answered.
Question 2
(2) What were the assets and liabilities of each of Mr and Mrs Young as at 30 June 2000 and their respective values (being the close of financial year of the agreed date of separation)?
Answer: As at 30 June 2000 Mrs Young had no assets of any value nor any liabilities (see agreed fact), the respective value as being nil.
This question is not answered in relation to Mr Young as at 30 June 2000.
Questions 3 and 4
The defendant agrees with the plaintiff's submissions that due to the manner in which the matter has progressed, answers to separate question 3 and 4 no longer appear to be relevant to the resolution of the proceedings. Questions 3 and 4 are not answered.
This Court directs that:
(1) The parties are to produce a document that sets out Mr Young's assets and liabilities as at 30 June 2012 in accordance with the adjusted Financial Statement and with my reasons.
This Court orders that:
(2) The costs of and incidental to the plaintiff's notice of motion filed on 4 May 2012 (including the hearing on 10, 11 and 19 September 2012 of the separate questions dated 12 July 2012) are costs in the plaintiff's substantive application for orders under s 79 of the Family Law Act 1975 (Cth).
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Decision last updated: 16 October 2012
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