FEDERAL MAGISTRATES COURT OF AUSTRALIA
CONNORS & CONNORS	[2010] FMCAfam 47	

FAMILY LAW – Whether matrimonial home and business should be sold or divided between parties – whether just and equitable that wife keep matrimonial home and husband keep family business.	

Family Law Act 1975 (Cth), ss.75(2), 81	

Hickey [2003] FLC 93-143
C v C [2005] FLC 93-220	

Applicant:	MS CONNORS	

Respondent:	MR CONNORS	

File Number:	DGC 4074 OF 2008	

Judgment of:	Phipps FM	

Hearing dates:	29 & 30 June, 1 & 2 July 2009	

Date of Last Submission:	2 July 2009	

Delivered at:	Melbourne	

Delivered on:	28 January 2010	

REPRESENTATION
Counsel for the Applicant:	Mr R. Weil	

Solicitors for the Applicant:	Jane Curtis & Associates	

Counsel for the Respondent:	Mr Holmes	

Solicitors for the Respondent:	Sullivan Braham Pty Ltd	

ORDERS
(1)	That the husband and wife take all steps necessary to:
(a)	sell the assets of the company [Mr & Ms Connors] Pty Ltd, (except the husband’s motor vehicle and the wife’s motor vehicle) in a manner to be agreed.  If the manner of sale is not agreed within 30 days of the date of this order, then the sale of assets take place within a further 45 days as follows:
(i)	major items of plant and equipment by unreserved auction with a firm conducting such auctions;
(ii)	all other items by clearance auction sale at Property M.
(b)	apply the proceeds of the sale of assets:
(i)	first in payment of costs and expenses of the sale of assets, the debts of the company and the costs and expenses of winding up the company;
(ii)	thereafter pay the balance 65% to the wife and 35% to the husband and wind up the company [Mr & Ms Connors] Pty Ltd.
(2)	That the property situate at and known Property M (the property) be sold in a manner agreed and if not agreed by an agent and in a manner nominated by the President for the time being of the Real Estate Institute of Victoria or his or her nominee and the proceeds be applied:
(a)	first in payment of the costs and expenses of the sale;
(b)	second in discharge of the mortgage and any other encumbrances over the property;
(c)	last by payment of 65% of the balance less $31,936 to the wife and the remaining balance to the husband.
(3)	Pending settlement of the sale of the property the following amounts be paid from the income and assets of the company [Mr & Ms Connors] Pty Ltd:
(a)	all mortgage payments, rates, taxes, insurance and similar outgoings for the property;
(b)	loan payments secured against the property;
(c)	the sum of $400 per week to the wife.
(4)	Otherwise each party retains ownership to the exclusion of the other party of all property now in the possession of that party including chattels, bank accounts, choses in action and superannuation.  The furniture and chattels in the property are deemed to be in the possession of the wife.
IT IS NOTED IN CONNECTION WITH THESE ORDERS that the judgment of Federal Magistrate Phipps delivered this day will for all publication and reporting purposes be referred to as Connors & Connors.

FEDERAL MAGISTRATES
COURT OF AUSTRALIA AT
MELBOURNE	
DGC 4074 OF 2008
MS CONNORS	
Applicant

And

MR CONNORS	
Respondent

REASONS FOR JUDGMENT
Introduction
1.	Ms Connors and Mr Connors are separated.  They own a home and [omitted] business and a small [omitted] business at [M]. They disagree on the percentage distribution of assets and how that distribution should be brought about.  They disagree on whether the wife should be paid spousal maintenance.
Proposals
2.	The wife proposes that she keep the former matrimonial home and the husband keep the business and move it to other premises. The husband's original proposal was that he keep the matrimonial home and the business and he make a cash payment to the wife.  This would have required him to borrow the whole of the amount of the cash payment.
3.	By the conclusion of the hearing the husband had adopted a position that this proposal was unrealistic because the existing home loan and business borrowings were such that he could not borrow enough against the security of the house.  This was the only way he could raise enough money to make a cash payment to the wife.  His final proposal was that the home and the business be sold and the proceeds divided.
4.	The husband’s response to the wife's proposal is that the expense and uncertainty in transferring the business from the former matrimonial home to alternative premises would not be practical and unfair to him if it was practical.
Issues
5.	Therefore, a significant issue is whether the wife should retain the house.  The issue must be placed in the context of the four step property consideration process.  The steps are:
What are the assets and liabilities?
What are the parties’ contributions?
What are the parties future needs?
Is the order just and equitable?
Background
6.	The husband was born [in] 1963.  He is 46.  The wife was born [in] 1967. She is 42. The parties married [in] 1987. They separated in May 2008 when the husband stopped residing in the matrimonial home. Since then he has returned to the premises to operate the [omitted] business and the smaller business selling [omitted].
7.	There are three children of the marriage.  The two eldest, [X] and [Y], are over 18.  [Y] is financially independent.  He lives with the wife and pays board.  [X] has a son.  She and her son lived with the wife during 2008.  [X] may need financial support in the future.  The youngest child is [Z] born [in] 1995.  She lives with the wife.  She attends [M] Secondary College.
8.	Neither party had assets of any significance when they married.  In 1988 they purchased a home at Property C for about $32,000.  They borrowed most of the purchase price.  They sold the property in 1996 and received about $64,000.  They purchased Property P for $130,000 using the proceeds from Property C and a loan.  They sold Property P in 2006 for $240,000 and purchased the former matrimonial home at Property M for $380,000.
9.	The parties are sole directors and shareholders in their family [omitted] business, [Mr & Ms Connors] Pty Ltd. The husband says it commenced in 1993, the wife says in 1999.  The difference is immaterial.  For the last few years the company has [tasks omitted].  It has an arrangement with [business omitted] to borrow equipment and use the [workplace omitted] on the basis that the company pay $35 for every cubic metre of [omitted] sold.
10.	The wife worked as a [occupation omitted] until prior to the birth of the eldest child.  Since then she has cared for the home and children and until separation done work for the company.  In 2007 she undertook a one week Occupational Health and Training Course and in 2008 undertook a one-day Gaming License Course.  She has been offered a few days work since completing the course in 2008 but has not been able to find any other paid employment.  Since separation the husband has been paying the wife $400 per week from the business earnings.
11.	The husband works in the business which at the time of the hearing had three employees, including the parties’ son [Y].
What are the assets and liabilities?
12.	The assets and liabilities are agreed except for some dispute about the valuation of the business.
13.	The business was valued by Mr. H, a forensic accountant.  He concluded that the business had no goodwill value and so its value is the value of its net tangible assets.  After making adjustments he concluded that the value of the business is $386,358. He made adjustments using the last available balance sheet of 30 June 2008.
14.	Most of the assets are the plant and equipment. This was valued by 
Mr. A of [A] Equipment Pty Ltd. He placed a high valuation and a low valuation on each item of equipment.  Mr H used the midpoint.  The total of low valuations was $363,200, high valuations $404,100 and the midpoint $383,650.
15.	Mr. A prepared a report and gave oral evidence. He said he is confident in his valuations. He thought the larger items would be harder to sell, the smaller less expensive items easy to sell.
16.	He described the various methods of sale.  Sale by consignment with a dealer such as his company was likely to achieve the best prices.  It would take longer than sale by auction and it was impossible to say how long it would take to sell at a set price.  He said in October 2005 he was asked to sell some plant and equipment for a marital settlement.  The first item sold in December 2005 and the final sale in 2007.
17.	The other method of sale is by auction. There are three types of auctions. The first is by unreserved auction. These are conducted quarterly by a firm in Geelong.  Some refurbishment of the plant may be required. Everything is sold on the day.  The sale is unreserved and all the items are sold to the highest bidder no matter what the amount.  The seller must transport all items to Geelong and they must have clear title.
18.	The second is by on line auction.  These are conducted weekly.  Plant is sold from the seller’s yard and is sold as is.  Starting prices are usually low.  Mr. A said sale prices are usually lower.  The third is by standard auction.  Various companies hold these monthly.  The seller must transport all items to Melbourne.  There is no guarantee of sale at the auction.  All items are sold as is.
19.	For his valuations Mr. H made adjustments to the balance sheet at June 2008.  Using similar adjustments the adjusted balance sheet at May 2009 is $280,851.  For the purpose of final submissions the wife's case used this valuation of $280,051.  The husband used a figure of $225,000.  The explanation for some of the difference may be that the balance sheet includes an amount for the shed and fixtures and fittings.  Mr. A valued the shed at $10,646 and the fixtures and fittings at $6,788.
20.	For the business to be valued on the basis that the husband must move to new premises, allowance would need to be made for the move.  The husband said that the premises must be large enough to allow [the equipment to function].  He estimated premises large enough would cost $200,000 to buy.  Alternatively he would have to lease premises.  He would need to buy a shed which he estimated at $50,000.  A concrete floor for the shed would cost $20,000 and connection of power would cost $20,000.
21.	The husband claimed no particular expertise in making these estimates.  However, the photographs of the existing premises and general description of the plant and business shows that a substantial area and a large shed is needed.  If premises with suitable facilities could not be found, substantial expenditure would be needed.
22.	The husband said that in addition there are costs involved in the relocation of the equipment.  He estimated it would take about a week of continuous work by him and the employees of the company to carry out the relocation.
23.	Consequently, the valuation of the business for the purpose of the wife's proposal is problematic. For reasons given later I have concluded that the implementation of the wife's proposal would not be just and equitable, and so I do not need to determine a value for the business, other than that it is in the region of $225,000 to $280,000.
24.	The matrimonial home has an agreed value of $390,000, less mortgage $71,000, a net value of $310,000.  The wife has 388 AMP shares valued at $1,536, a motor vehicle valued at $35,000 and superannuation of $19,000.  The husband has a motor vehicle valued at $5,000 and superannuation of $21,500.
Assets and liabilities (non superannuation)

Property M   	$390,000
	             less mortgage 	$  71,000	$319,000
Wife's AMP shares	$    1,936
Wife's motor vehicle	$  35,000
Husband’s motor vehicle	$    5,000
[Mr & Ms Connors] Pty Ltd	say $250,000

Total		$610,936

25.	The financial picture requires completion.  Included in the accounts of the company are an overdraft of $80,000, a bank loan for the purchase of a Freightliner truck, $61,000 and a high purchase liability of $99,000 for [equipment omitted].  The overdraft and truck loan are secured against the matrimonial home.  The total debt secured against the matrimonial home is
Mortgage	$  71,000
Overdraft	$  80,000
Truck loan	$  61,000
Total	$212,000

26.	The husband had a coin collection which he says he sold for $10,000 after separation.  The wife claimed sale of [omitted] for cash by the husband.  The wife continues to live in the matrimonial home and the income of the businesses pays the mortgage and expenses.  The wife has been receiving $400 a week from the income of the business.  There is no evidence of the husband retaining money for himself separately from the business or his normal living expenses.  The final submission for the wife did not propose any add back and there is no basis for making one.
What are the parties’ contributions?
27.	The parties were married for 21 years.  Their assets have accumulated during the marriage.  The wife worked until shortly prior to the birth of the first child.  Since then the husband has been the principal source of income through the family business.  The wife has carried out the role of homemaker and principal carer of the children. She did bookkeeping and administrative work for the business.  The wife’s homemaking and child carer role match the husband’s greater financial contribution.  Contributions until separation are equal.
28.	Since separation the wife has continued to live in the matrimonial home and care for the youngest child. The husband continues operating the business and has taken over book keeping and administrative roles, this without the wife's agreement. Contributions subsequent to separation remain equal.
What are the parties future needs?
29.	The relevant s.75(2) matters are these:
The age and state of health of each of the parties
30.	The wife is a 42 and the husband 46.  Both are in good health.
Income property and capacity for employment
31.	The orders I am proposing to make mean that the assets of the business will be sold. The husband has the ability to operate [omitted] machinery.  He says that one handicap he faces is that he learnt on a [omitted] which is now not the standard.  However, he did not suggest he could not adjust.
32.	The wife has not worked since before the birth of the oldest child.  She worked as a [occupation omitted], but her employment opportunities, particularly in [M] are limited.  The husband has a higher earning capacity than the wife.
Care of children
33.	The wife has the care of the youngest child.  She is fourteen.  This places some limits on her ability to earn income in addition to those already described.
Commitments for support and standard of living
34.	Each party has the normal commitments to maintain their standard of living.  The wife will have to find new premises in which to live.
Child-support
35.	The husband is paying the wife $400 per week from the income of the business.  In future he will have responsibility for paying child support for the youngest child in accordance with his income.
36.	These considerations mean a 15% adjustment in favour of the wife.
Is the order just and equitable?
37.	The issue under this heading is whether the wife's proposal that she keep the matrimonial home and the husband the business is just and equitable.
38.	Using the figure of $610,936 as the value of the non superannuation assets means that with a 65/35 division the wife receives $397,108and the husband $213,828.  Under the wife's proposal distribution is:
Asset	wife	husband
House	  $319,000
Wife's AMP shares	  $    1,936
Wife's motor vehicle	  $  35,000
[Mr & Ms Connors] Pty Ltd		$250,000
Husband’s motor vehicle		$    5,000
Payment	  $  41,172

39.	The parties’ bank manager at the ANZ Bank Sale gave evidence.  He regarded the parties as good customers.  He said that if the matrimonial home is not available the bank would require alternative security.  Therefore, under the wife's proposal, the husband would need to find alternative security for the overdraft $80,000, and the truck loan, $61,000.  In addition, he would need to be able to borrow $41,172to pay the wife.  He would need to find alternative security for $141,000, and a means of securing the borrowing of $41,172, a total of $182,172.
40.	The wife's case is that the husband should be able to obtain finance against the security of the business and its assets.  Mr H said the same.  The bank manager’s evidence shows that this finance would not be available from the bank.  There is no evidence of the terms, such as rate of interest or period of loan, under which alternative financing might be obtained, or who might be prepared to provide it.  I cannot make a positive finding that refinancing is possible.
41.	An expense for the husband is the cost of relocating the business.  The amount is uncertain, but may be tens of thousands of dollars. The husband would need to borrow to raise such an amount of money. Therefore, under the wife's proposal, the husband would need to borrow probably an amount in excess of $200,000 against the security of the business which at best is worth $280,000.  If the husband could not borrow this money he would have to sell the business assets, which in theory are the sum total of the value of the business.  He would have selling expenses and would not receive the money as one lump sum, but over a period of time as each asset was sold.  He would have already paid the wife $41,172, assuming he was able to borrow that amount, and would have to keep up loan repayments and hire purchase repayments unless he could make arrangements with the bank and the finance company.  If he could make arrangements, interest would accumulate, further reducing the amount the husband received.
42.	On the other hand the wife would have the secure asset of the matrimonial home; although that is assuming that the husband had been able to refinance the loans secured against the matrimonial home.  If he could not the wife cannot earn enough to pay the loans herself.  The matrimonial home would then have to be sold, and further litigation might be necessary to determine how the proceeds should be divided.
43.	The wife's proposal is impractical.  It is not fair to the husband.  The uncertainty involved in implementing the proposal means that the orders would not finally determine the financial relationships between the parties and avoid further proceedings between them, and so not meet the requirement of s.81 of the Family Law Act 1975 (Cth).
44.	The only just and equitable way to make orders providing for the division of the parties property is to order that all assets be sold and the net proceeds divided in the proportions 65% to the wife and 35% to the husband.
45.	The parties will each retain their motor vehicles and the wife her AMP shares.  The wife's motor vehicle is valued at $35,000 and the AMP shares at $1,936, a total of $36,936.  The husband’s motor vehicle is valued at $5,000.  The order for distribution of the proceeds of sale of the former matrimonial property will take into account the difference of 31,936.
46.	Neither party raised any issue about any further distribution of the furniture and chattels in the former matrimonial home.  Each will keep furniture and chattels now in their possession and I will treat those in the former matrimonial home as being in the possession of the wife.
Spousal maintenance
47.	The wife applies for spousal maintenance. The husband is only liable to pay maintenance to the wife if the wife is unable to support herself adequately:
a)	by reason of having the care and control of a child of the marriage under the age of 18 years;
b)	by reason of age or physical or mental incapacity for appropriate thankful employment;
c)	for any other adequate reason.  
48.	The wife does not satisfy any of these requirements. In addition, assuming that she did, the adjustment made in her favour under s. 75(2) must be taken into account.  She should be able to purchase a home without borrowing.  The husband will need to borrow.  A re-assessment of the s.75(2) matters in relation to spousal maintenance would result in a conclusion that the wife should not receive any further payment.
Superannuation
49.	The husband’s superannuation, $23,000, is slightly higher than the wife's, $19,000.  The s.75(2) matters do not apply to superannuation.  The slightly different values are immaterial.
I certify that the preceding forty-nine (49) paragraphs are a true copy of the reasons for judgment of Phipps FM

Associate:  Jan Smith

Date:  18 January 2010