Acosta and Acosta
[2018] FCCA 1643
•26 June 2018
FEDERAL CIRCUIT COURT OF AUSTRALIA
ACOSTA & ACOSTA [2018] FCCA 1643
Catchwords:
FAMILY LAW – Property Adjustment Orders – Consideration of whether a shareholding in the family company is held beneficially for the husband.
Legislation:
Family Law Act 1975, ss.75, 79
Cases cited:
Stanford & Stanford [2012] HCA 52
Hickey & Hickey & Commonwealth (2003) FLC 93-143, 30 FamLR 355
Applicant: MS ACOSTA
Respondent: MR ACOSTA
File Number: BRC 8637 of 2014
Judgment of: Judge Lapthorn
Hearing dates: 26 and 27 April 2017
Date of Last Submission: 26 June 2018
Delivered at: Brisbane
Delivered on: 26 June 2018 REPRESENTATION
Counsel for the Applicant: Dr Brasch QC
Solicitors for the Applicant: Phillips Family Law
Counsel for the Respondent: Mr Jordan
Solicitors for the Respondent: Best Wilson Buckley ORDERS
(1)That within 45 days of the date of these Orders, the husband and wife sign all documents and do all things reasonably necessary to transfer the former family home at Property A, in the State of Queensland, more particularly described as ("Family Home") from joint names into the husband's sole name.
(2)That, contemporaneously with Order 1, the husband will re-finance the loan with Bank 1 that is secured against the family home into his sole name and otherwise cause registered mortgage number to be discharged.
(3)That contemporaneously with Order 1, the husband and wife sign all documents and do all things reasonably necessary to transfer the real property at Property B in the State of Queensland ("Property B"), more particularly described as (omitted) from joint names into the husband’s sole name.
(4)That, contemporaneously with Order 3, the husband will re-finance the loan with Bank 1 that is secured against the Property B into his sole name and otherwise cause Bank 1 Investment Loan account number to be discharged.
(5)That the wife retain, and the husband abandon any claim to the following real properties:
(a)The real property at Property C in the State of Queensland ("Property C"), more particularly described as Local Government: (omitted), with the wife to indemnify the husband against any liability for any debts owing on this property or secured against this property, including but not limited to the loan owing from the wife to Mr D; and
(b)The real property at Property D in the State of New South Wales ("Property D"), more particularly described as with the wife to indemnify the husband against any liability for any debts owing on this property or secured against this property.
Business A Pty Ltd
(6)That the husband retain and the wife abandon any claim to any shareholding in Business A Pty Ltd ("Business A").
(7)That the husband be responsible for, and indemnify the wife against, any director's loan owed to Business A.
(8)That the husband retain and the wife abandon any claim to:
(a)his cash savings in Bank 1 Account No; and
(b)his cash savings in Bank 1 Account No.
(c)The furniture and contents in his possession.
(9)That the wife retain and the husband abandon any claim to:
(a)Her cash savings in Bank 1 account No. and
(b)Her cash savings in Bank 1 account No:
(c)Her jewellery;
(d)The furniture and contents in her possession; and
(e)The Motor Vehicle D motor vehicle, subject to the debt owing on that vehicle.
(10)That the parties do all acts and things to transfer into the husband’s sole name any monies held in:
(a)the joint Bank 1 Account No.; and
(b)the joint Bank 1 Account No.
(11)That the husband be responsible for, and indemnify the wife against, any debt held in his name.
(12)That the wife be responsible for, and indemnify the husband against, any debt held in her name, including without limitation:
(a)The Motor Vehicle D Finance debt, secured over the Motor Vehicle D motor vehicle registered in her name; and
(b)The Bank 1 Credit Card, held in her name.
Superannuation
(13)That the husband retain, and the wife abandon any claim to the husband's superannuation entitlements with Bank 1.
(14)That subject to orders 15 to 20, the wife retain, and the husband abandon any claim to the wife's superannuation entitlements with Super Fund K.
(15)In accordance with Section 90MT(4) of the Family Law Act 1975, a base amount of $148,730 is allocated to the husband out of the wife's interest in Super Fund K ("Fund").
(16)In accordance with Section 90MT(1)(a) of the Family Law Act 1975:
(a)The husband (or such other person to whom a splittable payment is payable) is entitled to be paid, using the base amount allocated in the immediately preceding clause, the amount calculated in accordance with Part 6 of the Family Law (Superannuation) Regulations 2001; and
(b)the entitlement of the wife in the Fund (or the entitlement of such other person who becomes entitled to receive a payment out of the wife's superannuation interest) is correspondingly reduced by force of this order.
(17)The trustee of the Fund ("Trustee") shall do all such acts and things and sign all such documents as may be necessary to:
(a)calculate, in accordance with the requirements of the Family Law Act 1975 the entitlement awarded to the husband in the immediately preceding order; and
(b)pay the entitlement whenever the Trustee makes a splittable payment from the wife's interest in the Fund.
(18)Orders 15 to 17 have effect from the operative time and the operative time is four business days after service of this Agreement on the Trustee.
(19)That, after service of the payment split notice in accordance with the Superannuation Industry (Supervision) Regulations 1994 ("SIS Regulations"), the husband shall do all such things and sign all such documents as may be necessary, including but not limited to exercising the husband's request in accordance with the SIS Regulations, for the rollover or transfer of the non-member spouse interest to a complying superannuation fund of the husband's choosing in accordance with the SIS Regulations.
(20)It is noted that:
(a)the value of the non-member spouse interest is calculated in accordance with the SIS Regulations; and
(b)any payments from the wife's superannuation interest in the Fund made after the trustee has created a new interest in the husband's name in the Fund are not splittable payments in accordance with the requirements of the Family Law (Superannuation) Regulations 2001.
(21)The operation of orders 15, 16, 17, 18, 19 and 20 be stayed until such time as the solicitor for the applicant files an affidavit deposing to:
(a)service of a copy of these orders on the trustee of Super Fund K; and
(b)the response, if any, received from the trustee.
(22)In the event that the affidavit deposes that no response was received from the trustee within twenty-eight (28) days of service of the proposed orders, or that the trustee consents to the terms of the orders, the stay imposed by order 21 hereof is automatically discharged upon the filing of the affidavit, without further order.
(23)That the parties have liberty to apply in respect of the superannuation splitting orders.
(24)That unless otherwise specified in these orders, it is declared that:
(a)Each party be solely entitled to the exclusion of the other to all other property and chattels of whatsoever nature and kind in the possession of such party as at the date of these orders and for this purpose:
(i)bank accounts are deemed to be in the possession of the person whose name appears on the bank records thereof;
(ii)insurance policies (if any) are deemed to be in the possession of the beneficiary thereof; and
(iii)superannuation entitlements are deemed to be in the possession of the person who is named as the worker or whose age or working future provides the conditions for payment out of such entitlements; and
(b)Each party be solely liable for and indemnify the other against any liability in their own name or encumbering any item of property to which that party is entitled to pursuant to these orders.
(25)That the parties shall comply promptly with all requisitions issued by the Office of State Revenue, Land Titles, Main Roads Department and any other government department in relation to any document executed or transacted pursuant to or put into effect the terms and conditions of these orders.
(26)That in respect of any property being transferred pursuant to these Orders, the transferee spouse shall make payment of stamp duty (if any) arising from the operation of these orders.
(27)That the Applicant and Respondent shall sign, execute and deliver all such documents, instruments and writings and shall do all such other acts and things as may be necessary or desirable to give full force and effect to these Orders. Should either party default in signing or executing such documents required to give effect to any provision of these Orders, then a Registrar of the Federal Circuit Court of Australia shall be empowered and is hereby empowered to sign and execute documents in lieu of the defaulting party pursuant to 106A of the Family Law Act 1975 (Cth).
Child Support Departure Orders
(28)That the Applicant's application for child support departure orders filed on 24 March 2017 be dismissed.
IT IS NOTED that publication of this judgment under the pseudonym Acosta & Acosta is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
FEDERAL CIRCUIT COURT
OF AUSTRALIA
AT BRISBANEBRC 8637 of 2014
MS ACOSTA Applicant
And
MR ACOSTA Respondent
REASONS FOR JUDGMENT
Introduction
1.The applicant wife, Ms Acosta and respondent husband, Mr Acosta, have been unable to reach agreement as to their property settlement following the breakdown of their marriage. The court has been asked to make a property adjustment order. In these reasons for judgment I will refer to the parties as the wife and the husband even though they are divorced. I mean no disrespect in doing so.
2.The wife commenced proceedings on 24 September 2014 in which she sought parenting orders in relation to their son, [X] who is 13 years of age. She introduced property proceedings by her Amended Initiating Application filed 21 November 2014. The parties reached agreement for [X] to live with them on an equal shared care basis and I made final orders by consent confirming that agreement on 21 March 2017.
3.At the final hearing the parties were in dispute as to the make-up of the property pool and the extent to which that pool should be divided. A significant issue was the nature of the husband’s interest in a company, Business A Pty Ltd. The wife argued that he effectively held a 100% interest in this company whereas the husband said his interest was only a 50% share with the other 50% being owned by his mother, Ms S. This accords with the records at ASIC. It was the wife’s case that Ms S’s 50% share is beneficially held by her for the husband and sought a declaration to that effect.
4.The parties own a number of pieces of real estate. The former matrimonial home in Property A is held in both names and each party sought orders for the husband to retain this property. The wife has a house in Property C and an investment unit at Property D. There was no dispute that the wife should retain these properties but there was a dispute as to the value to be ascribed to the Property C property and whether the Property D property should be included in the pool of assets. The fourth piece of real estate is a property on Property B. The mortgage on this property is greater than its current value. Neither party sought to keep it preferring the other to retain it along with its corresponding debt.
5.The wife has a much higher balance in her superannuation fund than the husband. He sought a splitting order in his favour to the sum of $100,000.
6.Not long after they separated the parties reached an agreement in relation to their financial affairs but did not enter into a binding financial agreement. Although this agreement included the husband retaining the former matrimonial home and the Property B property the parties did not attend to the legal transfer of the ownership.
7.The effect of the wife’s application was that she should receive 70% of the pool if the husband is found to have a beneficial interest in his mother’s share of the company but 80% if not. Further to the property adjustment orders sought by the wife, she sought a child support departure order. The husband argued that the departure application should be dismissed and the property adjustment order should achieve around a 60/40 settlement in the wife’s favour, although that submission was on the basis of the wife’s Property D property being included in the asset pool. His counsel submitted that if it were not for the wife’s inheritance the distribution between the parties would be equal.
Material relied on
8.At hearing the wife relied on the following documents:
a)Her Second Amended Initiating Application filed 24 March 2017;
b)Her Affidavit filed 24 March 2017; and
c)Her Financial Statement filed 24 March 2017.
9.The husband relied on the following documents:
a)Third Amened Response filed 19 April 2017;
b)His Affidavits:
i)filed 24 March 2017; and
ii)filed by leave 26 April 2017.
c)Affidavits of:
i)Ms S filed 24 March 2017; and
ii)Mr J filed 24 March 2017.
d)His Financial Statement filed 24 March 2017.
10.Both parties relied on the Affidavits of the following expert witnesses:
a)Mr L (Valuer) filed 24 March 2017;
b)Mr C (Valuer) filed 24 March 2017;
c)Ms N (Accountant) filed 24 March 2017.
d)Mr P (Valuer) filed 24 March 2017;
e)Mr N (Valuer) filed 24 March 2017; and
f)Mr K (Gemmologist) filed 24 April 2017;
11.A number of documents were tendered into evidence and an aide memoir was also provided.[1]
[1] W1 Bank 1 Account Bank Statement (Period 2 June 2001 – 1 September 2001)
12.In determining this matter I have had regard to all of the written and oral evidence along with the submissions made by each party’s counsel. In order to avoid repetition and limit the length of this judgment, apart from setting out a background chronology, I will not repeat the evidence of the parties or their witnesses but refer to the evidence when necessary to determine disputed issues and carry out my assessments in accordance with the legislative framework. Accordingly, throughout these reasons I will refer to a number of facts. Any such reference should be regarded as a finding of fact unless a contrary intention is clear from the context.
Background
13.The wife is 46 years of age having been born on 1971. She is a (occupation omitted) by occupation and works on a part time basis for the (employer omitted). She has been with the same employer for over 22 years.
14.The husband was born on 1970 and is therefore 47. He is a (occupation omitted) by occupation and the operator of two businesses. These businesses are conducted through an entity known as Business A Pty Ltd (“Business A”).
15.The parties commenced living together in a de facto relationship in 1998 and were married on 2000. There is one child of the relationship, [X] who was born 2004, currently aged 13. They separated in November 2012, although they remained living under the same roof until January the following year. A divorce order was made on 29 April 2015. The husband commenced a new relationship with Ms A in 2014 and they have two children together. At the date of the hearing the wife had not re-partnered.
16.Business A was purchased by the husband’s parents, Ms S and Mr M at the point of its incorporation on 1990. They each held a 50% shareholding and were directors in the company. In 1992 Mr M’s shareholding was transferred to the husband and he became a director of the company at that point. Ms S maintained her 50% shareholding and directorship in the company.
17.When the parties commenced their relationship they initially lived with Ms S for about four months before moving to a unit in Property E they purchased together in 1999. This unit was purchased for $272,500 using a bank loan of $212,500. The wife contributed $29,000 and the balance was contributed by the husband.
18.Ms S sold her own property in 1999 and moved in with the parties. Although Ms S purchased her own unit in the (omitted) that same month it was tenanted and she stayed with the parties for about six months. The purchase of the unit in the (omitted) was made using $155,000 from the proceeds of sale of her previous unit and a bank mortgage of $90,000. The husband paid the mortgage repayments from early 2000 until October 2001 when the parties paid out the loan in full. The balance of the loan was $77,325.40. The wife contributed $33,038.25 from her savings and $44,287.15 was obtained by the husband taking drawings from Business A.
19.The parties sold their Property E unit in January 2002 for $362,000 and purchased a home at Property A (“the former matrimonial home”) for $515,000 using the proceeds of sale of the Property E unit and a loan of $376,000.
20.In 2005, when [X] was about four months old, the parties separated for about seven months.
21.In late 2008 the parties purchased an investment property at Property F for $890,000. They borrowed all of the funds necessary to purchase the property. This property was used by the parties for holidays but it was also rented out as part of the resort’s rental pool.
22.On 2012, about a fortnight after the parties separated, the wife’s mother gave her $280,886. Her brother also received the same amount. The wife’s mother died three days later.
23.In 2013 the wife and [X] moved to a rental property in Property A.
24.In 2014 the wife received the remainder of her share of her mother’s estate being a cash sum of $148,105 and a property at Property D valued at $260,000. The Property D property has been rented out by the wife since her inheritance.
25.In 2014 the parties agreed for the wife to receive $700,000. This was achieved by a refinancing of the mortgage over the former matrimonial home to the sum of $400,000 and by way of the husband taking out a director’s loan from Business A for $300,000. That same month, the wife purchased a property at Property C for $1,010,000. To fund this purchase she used the money given by the husband, $148,105 from the inheritance she received from her mother, and a loan of $240,000 from her brother.
Legal Approach
26.In determining property proceedings the court is firstly required to identify according to ordinary common law and equitable principles the existing legal and equitable interests of the parties in the property that is available for distribution between them. It is then necessary to determine whether it is just and equitable to make an order altering the parties’ interests in the property. If so satisfied the court must then consider the contributions made by each of them under the various s.79(4) considerations before looking at their future needs by reference to the s.75(2) factors. [2]
[2] S79(2) & (4), Stanford [2012] HCA 52. See Hickey & Hickey & Commonwealth (2003) FLC 93-143, 30 FamLR 355 for approach prior to the High Court decision in Stanford
The property of the parties
27.Although by the conclusion of the hearing the parties were able to reach agreement as to the value to be ascribed to the majority of the assets and liabilities comprising the pool, they remained in dispute in relation to a number of items. Exhibit C1 was a document tendered by Mr Jordan on behalf of the husband but accepted by Dr Brasch on behalf of the wife, as accurately representing the different positions of the parties. I reproduce that document for ease of reference:
| Assets | Owner | Husband’s Estimated value | Wife’s Estimated value | Comments |
| Property A | Joint | $1,475,000 | $1,475,000 | Agreed. Joint valuation by Real Estate Agent dated 2 February 2017. |
| Property B | Joint | $500,000 | $500,000 | Agreed. Joint valuation by Valuer M dated 10 February 2017. |
| Property C | Wife | $1,075,000 | $926,895 | Not agreed. Husband adopts value of joint valuation by Real Estate Agent dated 2 February 2017. |
| Property D | Wife | $375,000 | Excluded | Not agreed. Husband adopts Joint valuation by Real Estate Agent dated 1 February 2017. Wife agrees to value but proposes to exclude as post separation inheritance. |
| Husband’s interest in Business A Pty Ltd | Husband | $244,908 | $515,596 | Values agreed pursuant to joint valuation by Valuer N dated Parties dispute whether the Husband owns 50% of the shares or 100% of the shares in the company. |
| Addback – Jewellery purchased by Husband post separation | Husband | Nil |
[excluded] | |
| Addback – Husband’s legal fees | Husband | Nil |
[excluded] | |
| Addback – expenditure by Husband on credit card held by Business A | Husband | Nil |
[excluded] | |
| Addback – refunds received at time of purchase of Motor Vehicle E | Husband | Nil |
[excluded] | |
| Addback – sale of shares by Wife post separation | Wife | $15,212 | $15,212 | Agreed. |
| Motor Vehicle D | Wife | $23,500 | $19,250 | Not agreed. |
| Jet Skis x2 | Husband | Nil | $25,000 | Not agreed. The Husband says these were purchased by his current partner using her own funds. |
| Bank 1 Sub Account – Interest Bearing Personal | Joint | Nominal | Nominal | Agreed. |
| Bank 1 Sub Account – | Joint | Nominal | This account is dormant. | |
| Bank 1 Credit Card | Joint | $234 | $234 | Agreed. As at |
| Bank 1 Account | Wife | $6,940 | $6,940 | Agreed. As at |
| Bank 1 Account – Wages | Wife | $4,248 | $4,194 | Husband’s value as at Wife’s value as at |
| Bank 1 Account – (Property B offset account) | Joint | $8,684 | $8,684 | Agreed. As at |
| Bank 1 Account – | Mr Acosta | $359 | $17,649.73 | Husband’s value as at 21 March 2017. Wife’s value as at 8 November 2016. |
| Bank 1 Account | Husband | $176 | $497.17 | Husband’s value as at 21 March 2017. Wife’s value as at |
| Husband’s Bank 2 Travel Credit Card | Husband | Nil | Nil | Agreed. |
| Jewellery | Wife | $26,300 | $26,300 | Joint Valuation of Mr E dated 22 April 2017 |
| Total | $3,755,561 | $3,541,451.90 | ||
| Liabilities | Owner | Value | ||
| Bank 1 Investment Loan – account number | Joint | $884,968 | $883,843 | Husband’s value as at 21 March 2017. Wife’s value as at |
| Investment loan – account number (interest only) | Husband | $400,000 | $400,000 | Agreed. |
| Loan – Mr D (to facilitate purchase of Property C property) | Wife | $226,152 | $240,000 | Not agreed. Husband’s value takes into account repayments made by Wife since loan obtained on 3 November 2014. |
| Loan – Mr D (to meet legal fees) | Wife | Nil |
[excluded] | Agreed. Loan asserted by Wife but excluded from calculations in Wife’s orders sought. |
| Motor Vehicle D Finance – secured over Motor Vehicle D | Wife | $13,965 | $13,965 | Agreed. Payout figure. |
| Directors Loan owed to Business A Pty Ltd (Personal liability of Mr Acosta) | Husband | $584,967 | $300,000 | Not Agreed. Husband’s value per valuation report of Valuer N dated 8 March 2017. Wife’s adjusted value. |
| Bank 1 Credit Card | Wife | $1,866 | $1,866 | Agreed. As at |
| Total | $2,111,918 | $1,839,674 | ||
| Superannuation | Owner | Value | ||
| Super Fund K | Wife | $425,102 | $425,102 | Agreed. As at 10 January 2017. |
| Bank 1 | Husband | $1,188 | $1,188 | Agreed. As at 10 March 2017. |
| Total | $426,290 | $426,290 | ||
| Net pool (excl. superannuation) | $1,643,643 | $1,701,777.90 | ||
| Net pool (incl. superannuation) | $2,069,933 | $2,128,067.90 | ||
28.The significant issue in dispute is the nature of the husband’s interest in Business A. Although he and his mother each hold one ordinary share in the company the wife contended that Ms S’s share is beneficially held for him. The husband argued otherwise. It will be necessary to determine this dispute so as to ascertain the extent of the pool. The wife also argued that the inheritance she received from her mother’s estate, valued at $523,105, should be excluded from the pool as it was acquired after the parties separated. In the following paragraphs I will address the issues that remained outstanding between the parties in relation to the make-up of the pool of assets and liabilities.
Business A Pty Ltd
29.Since incorporation, Business A purchased, operated and sold a number of businesses. As I have detailed earlier the company was initially owned by the husband’s parents. The husband became a 50% shareholder and director of the company in 1992 when his father’s share was transferred to him for no consideration. The husband and his mother continued to run the business that was being operated at the time. Ms S remained the company secretary. In 1996, Ms S retired from the daily Business A work and took a part-time position in a (employer omitted).
30.It is the wife’s case that although Ms S remains a 50% shareholder in the company, she is really holding that shareholding on trust for the husband. The wife gave evidence of a conversation with the husband wherein he said that he had told his mother that when she ceased working in the Business A, he would provide her with a mortgage free home in exchange for her interest in Business A. There is no dispute that husband paid his mother’s mortgage from early 2000 to 2001 and then the mortgage was paid out in full using drawdowns from Business A of $44,287.15 and $33,038.25 from an account in joint names. The wife asserted that this latter sum came from her personal savings kept in that account. The husband disputed the money was from the wife’s personal savings. The wife asserted it was her understanding that from that point in time she and the husband beneficially owned 100% of Business A. She gave evidence of a conversation with the husband in or around late 2001 whilst travelling to the Region A where he said to her words to the effect of: “If we use our money to pay out mum’s mortgage, she will be sorted out and I will just be working for us. We can go ahead faster”. It was her evidence that upon meeting with the company’s accountant, Mr J, and being made aware that stamp duty would be payable on the share transfer, the husband, his mother and the wife all agreed that Ms S would not make any claim to Business A and remain a ‘silent’ director and shareholder of the company nor would she receive any income or director’s fees or dividends from the company. Mr J could not recall this meeting. Whilst I accept Mr J could not recall the meeting, I found the wife to be a good historian and preferred her evidence in relation to this meeting and the conversations to the husband’s evidence.
31.Ms S in cross-examination agreed that she was to be a silent director; that she left all business decisions to the husband; and would not receive any income or director’s fees. She did however receive a director’s fee in 2015 but her evidence was that she returned it to the business. The husband had no recollection of why this fee was paid to Ms S. Mr J’s evidence was somewhat vague and he conceded that he surmised that the husband had directed him to allocate a director’s fee to Ms S.
32.Ms Acosta said that she was unaware of the wife providing any of her personal funds towards the payout of her mortgage, believing the funds came from the company. She had no recollection of a celebratory drink and thanking the wife for any personal contribution to her mortgage.
33.A number of documents were tendered by the wife and annexed to her affidavit. It would seem from a consideration of these documents that the roles of Ms S and the wife have been blurred over the years. There can be little doubt that apart from signing some documents when requested by the husband, Ms S has not to any significant extent taken part in the business since around 2000 if not before. Apart from the director’s fee in 2015 there is no evidence of her receiving any ongoing benefit from the company. The documents show that the wife has been involved in director’s meetings and had been involved with decision making. Since their separation the husband has been the one to carry on the business and benefit from its success. I am satisfied that although the company register continues to note Ms S as a director and shareholder the business is in reality the husband’s. I accept the wife’s argument that Ms S’s shareholding is held by her beneficially for the husband.
Wife’s Inheritance
34.Soon after the parties separated the wife’s mother died. In the brief background above I have set out the wife’s inheritance. The husband has sought to include in the pool the property at Property D purchased by the wife using this inheritance. The wife seeks to exclude it as a post separation acquired item to which the husband did not make any contribution. I accept her submission.
35.The wife also sought to deduct $148,105 from the value of her home at Property C. She purchased this home for $1,010,000 in 2014. In order to finance the purchase she used $148,105 from her inheritance, $240,000 she borrowed from her brother and the remainder from funds given to her by the husband. The husband had refinanced the mortgage over the former matrimonial home to the sum of $400,000 and took out a director’s loan from Business A for $300,000 to make the $700,000 he gave her. The property was, at the time of the hearing, worth $1,075,000. The wife submitted that I should deduct $148,105 from this value so as to exclude her inheritance. I am not persuaded to do so. Unlike the purchase of the Property D property, these funds were intermingled with monies given by the husband to enable her to purchase the home. I accept the argument put forward by counsel for the husband that the property should come into the pool at its full value but I should give weight to the wife’s contribution from her inheritance.
Wife’s Motor Vehicle D
36.The parties were at odds in relation to the value to be ascribed to the wife’s Motor Vehicle D motor vehicle. They both relied on the Redbook valuations but the husband took the value attributed by Redbook for a good quality vehicle at a private sale ($23,500) while the wife took the value ascribed to a good vehicle on trade-in ($19,250). In my view the appropriate figure should be the value for a private sale rather than a trade-in value. I will therefore ascribe a value of $23,500.
Jet Skis
37.The wife argued that the purchase price of a set of jetskis should be included in the pool as the funds for purchase came from Business A. The husband argued that these items were purchased by his partner. He did not provide any corroborative evidence and Ms A did not give evidence. He was aware that the inclusion of this item was in issue. I am satisfied that as the husband has not provided corroborative evidence of the ownership of the item and that the source of funds the purchase can be traced through the company it is appropriate to include this item in the pool.
Director’s Loans with Business A
38.The husband, as a director of Business A, has been able to draw funds from the company and have such drawings recorded as loans. At the hearing he sought those loans be recorded as a liability falling to him in the amount of $584,967. The wife however argued that the appropriate amount should be $300,000. In particular her counsel argued that she should not be disadvantaged in relation to the husband’s drawings for legal fees at $120,807 and the purchase of jewellery for his partner and some further legal fees totalling $32,814. The wife had initially sought these items be notionally added back into the pool but conceded the better option was to reduce the loan. Although I challenged Dr Brasch QC on this issue, I was ultimately persuaded to exercise my discretion and reduce the amount of the loan by $153,621 as I am satisfied that it would not be just and equitable to the wife to leave the figure as sought by the husband. To do so would mean the wife would be in effect subsidising his legal fees and lifestyle. I was not however persuaded to reduce the amount by the $284,967 as argued for by the wife. The figure to be ascribed to the director’s loan will therefore be $431,346.
Bank 1 Account and Debt Figures
39.In exhibit C1 the parties had ascribed different figures for some bank accounts and debts. During submissions however most of these figures were settled and appear in the table below. The remaining differences related to the amount to be ascribed to the debt owed by the wife to Mr D and the figure owed on the mortgage over the former matrimonial home. In relation to the former the evidence was that this loan was an interest only loan and I accept the wife’s submissions that the principle has not been paid down. I will ascribe the figure of $240,000 for this item. The husband’s mortgage figure was more up to date at the time of the hearing and I will use the figure provided by him.
Conclusion as to Property Pool
40.Given the findings above I find the property of the parties to be as follows:
Assets
Possession
Husband’s value
Wife’s value
Finding of Court
Matrimonial home
Joint
$1,475,000
$1,475,000
$1,475,000
Property F unit
Joint
$500,000
$500,000
$500,000
Property C home
Wife
$1,075,000
$926,895
$1,075,000
Property D unit
Wife
$375,000
Excluded
Excluded
Husband’s interest in Business A Pty Ltd
Husband
(50%) $244,908
(100%) $515,596
$515,596
Sale of Wife’s shares post separation
Wife
$15,212
$15,212
$15,212
Motor Vehicle D
Wife
$23,500
$19,250
$23,500
Jet Skis x 2
Husband
Excluded
$25,000
$25,000
Bank 1 account
Joint
Nominal
Nominal
Nominal
Bank 1 account
Joint
Nominal
Nominal
Nominal
Bank 1 card
Joint
$234
$234
$234
Bank 1 account
Wife
$6,940
$6,940
$6,940
Bank 1 account
Wife
$4,248
$4,194
$4,194
Bank 1 account
Joint
$8,684
$8,684
$8,684
Bank 1 account
Husband
$359
$359
$359
Bank 1 account
Husband
$176
$176
$176
Bank travel money card
Husband
Nil
Nil
Nil
Jewellery
Wife
$26,300
$26,300
$26,300
Total assets
$3,755,561
$3,523,840
$3,676,195
Liabilities
Possession
Husband’s value
Wife’s value
Finding of Court
Bank 1 loan
Joint
$884,968
$883,843
$884,968
Bank 1 loan
Husband
$400,000
$400,000
$400,000
Mr D for Property C loan
Wife
$226,152
$240,000
$240,000
Mr D legal fees loan
Wife
Nil
Excluded
Excluded
Motor Vehicle D Finance
Wife
$13,965
$13,965
$13,965
Director’s Loans owed to Business A Pty Ltd
Husband
$584,967
$300,000
$431,346
Bank 1 credit card
Wife
$1,866
$1,866
$1,866
Total liabilities
$2,111,918
$1,839,674
$1,972,145
Superannuation
Possession
Husband’s value
Wife’s value
Finding of Court
Super Fund K
Wife
$425,102
$425,102
$425,102
Bank 1
Husband
$1,188
$1,188
$1,188
Total superannuation
$426,290
$426,290
$426,290
TOTAL POOL
$2,069,933
$2,110,456
$2,130,340
Is it just and equitable to alter the property interests?
41.In Stanford[3] the majority held:
In many cases where an application is made for a property settlement order, the just and equitable requirement is readily satisfied by observing that, as the result of a choice made by one or both of the parties, the husband and wife are no longer living in a marital relationship. It will be just and equitable to make a property settlement order in such a case because there is not and will not thereafter be the common use of property by the husband and wife. No less importantly, the express and implicit assumptions that underpinned the existing property arrangements have been brought to an end by the voluntary severance of the mutuality of the marital relationship. That is, any express or implicit assumption that the parties may have made to the effect that existing arrangements of marital property interests were sufficient or appropriate during the continuance of their marital relationship is brought to an end with the ending of the marital relationship. And the assumption that any adjustment to those interests could be effected consensually as needed or desired is also brought to an end. Hence it will be just and equitable that the court make a property settlement order. What order, if any, should then be made is determined by applying s 79(4).
[3] [2012] HCA 52
42.I am satisfied that it is appropriate in this case to alter the property interests of the parties in light of the demise of their marriage and the fact that the maintenance of the current legal ownership of their property would not afford them justice and equity.
Contributions
43.I now turn to the assessment of the parties’ contributions. The parties were together for 14 years. The evidence would suggest that at the commencement of their relationship neither party made any significantly greater contribution than the other. Both counsel argued and I am satisfied that during the relationship the parties’ contributions were equal. They both worked hard, the husband in his business and the wife in her paid employment and they contributed their income for their joint benefit and the benefit of their son. The wife also assisted in the husband’s business and was the primary carer of their child whilst he was young. They both made contributions as homemaker and parent. They both enjoyed the benefits that came with the husband’s business.
44.The parties were not in agreement in relation to post separation contributions. Counsel for the husband argued that they remained equal taking into account the wife’s inheritance and the husband’s payment to the wife soon after separation which required him to draw further on the mortgage over the former matrimonial home and his payment of the mortgage on the Property B property whilst both parties received tax benefits for the loss on this property.
45.The wife however argued that she had made greater post-separation contributions primarily in relation to her superannuation balance. Queen’s Counsel for the wife was in error, with respect, when she argued that the balance had almost double post-separation. However it still increased by a significant sum, approximately $128,000.
46.In assessing the post-separation contributions, I have come to a different view to each of the parties. I am satisfied that the parties have made an equal post-separation contribution to the role of homemaker and parent given the equal shared care arrangement for [X] but overall I find that husband has made a greater contribution after separation. In coming to this view, I have taken into account that I have excluded the Property D property from the pool of assets given its purchase was funded entirely through the wife’s inheritance. I have taken into account the wife made the post separation contributions to her superannuation fund and $148,105 from her inheritance towards the Property C property. The wife was able to purchase this property because the husband provided to her a cash sum of $700,000 which he funded in part by refinancing the mortgage over the former matrimonial home increasing the interest burden on it. He has continued to meet the mortgage payments on this. He has also met the mortgage payments on the Property B property and the wife has received tax benefits from the loss on this property. When I take these factors into account, I find that the husband has made greater post-separation contributions which I would assess at 5%. The wife argued the husband and his partner received lifestyle benefits such as motor vehicles, jewellery, holidays and other perceived luxury goods from the business which were no longer available to her. I propose however to have regard to that argument when I consider the s.75(2) factors.
47.In the context of my findings in relation to the pool of assets and liabilities, weighing up the various contributions of the parties I assess the contributions at 55% to the husband and 45% to the wife.
Section 75(2) factors
48.Having determined the contribution elements, the court is required to have regard to the provisions of s.75(2).
49.The parties are of similar ages, both in their forties. Neither gave any evidence of health issues and they share the care of their son equally. They both have capacity for gainful employment.
50.The wife argued that if all of Business A is to be included in the pool, which is what I have found, there should be an adjustment in her favour of 20%. She based this submission primarily upon the significant financial resource that is Business A. The court is required to have regard to the income, property and financial resources of each of the parties. Business A is certainly a financial resource for the husband. Whilst on the one hand it is his source of income, he is able, through the business, to structure his wage and loan arrangements and make purchases that enable him to fund a lifestyle not available to the wife. I do not accept the husband’s argument that in reality the parties have a similar income. The wife has an income of around $90,000 a year although she was, at the time of the hearing, working a reduced week by choice. The evidence suggested that she could earn around another $30,000 a year should she choose to work full-time. The wife also has the investment property at Property D, mortgage free earning a rental income of around $405 a week. Even taking these factors into account, I am satisfied there is a financial disparity favouring the husband warranting an adjustment in the wife’s favour. I would not however assess the adjustment as generously as argued for by the wife given her own resources. I would assess the adjustment at 10%.
51.The wife has far greater funds in her superannuation account than the husband but as I propose to make a superannuation splitting order I do not propose to give significant weight to this factor.
52.The wife was very critical of the husband’s decision to invest in a second business in close proximity to his main business. He did not consult her before doing so. It was said that this was a very poor business decision given the modest revenue compared to the associated expenses which has impacted the value of the overall business. It was argued that the husband’s ‘conduct’ in making this decision should not be borne by the wife. I do not accept that submission. There was no evidence the husband’s decision was motivated in any way to reduce the value of the business. If this part of the business had made a profit the wife would have shared in the benefit. There is no reason why there should be an adjustment in the wife’s favour because at the hearing this part of the business was not as profitable as the other.
53.Taking into account these factors I am satisfied there should be an adjustment in the wife’s favour of 10%.
Are the orders proposed just and equitable
54.Having made an assessment of the contributions and future needs which would see the wife receive 55% and the husband 45% of the available pool, the next stage of the process is to step back and assess whether in all of the circumstances it is just and equitable to make the orders to be proposed. With a net pool (including superannuation) of $2,130,340, the wife should receive a net position of around $1,171,687 and the husband $958,653.
55.Neither party sought to retain the Property B property although they each sought its transfer to the other party. I am satisfied that the husband should retain this property as the finance taken to purchase the property is intertwined with Business A and the former matrimonial home. He has been making the mortgage payments on it. It would not be just and equitable to transfer the property to the wife in those circumstances, nor would it be to order its sale.
56.In light of that finding, I am satisfied that a just and equitable outcome can be achieved between the parties by having the husband receive all of the bank funds that were held in joint names and a superannuation splitting order using a base amount of $148,730. He did not seek such a figure at the hearing, preferring to receive a $100,000 spitting order. This higher sum was not canvassed at the hearing. In fairness to the parties I will call for submissions before formally making the orders set out at the beginning of this judgment in case one or both parties would prefer to see a cash adjustment in the sum of $48,730 rather than as a splitting order.
57.If the proposed superannuation order is ultimately ordered, the wife’s superannuation would be reduced by $148,730 leaving her with a net figure of $1,171,687. The husband would have a net figure of $958,653.
58.The effect of the orders I propose to make would see the wife retain the following from those items I found to be included in the pool of assets and liabilities:
Item
Ascribed Value
Property C Property
$1,075,000
Sale of Wife’s shares post separation
$15,212
Motor Vehicle D
$23,500
Bank 1 Account
$6,940
Bank 1 Account
$4,194
Jewellery
$26,300
Super K Superannuation (after splitting order to husband of $148,730)
$276,372
Total Assets (Including Superannuation)
$1,427,518
Loan to Mr D for Property C property
240,000
Motor Vehicle D Finance
$13,965
Bank 1 Credit Card
$1,866
Total Liabilities
$255,831
Net Total
$1,171,687
59.The husband would retain and receive the following:
Item
Ascribed Value
Former Matrimonial Home
$1,475,000
Property B Property
$500,000
Business A Pty Ltd
$515,596
Jet Skis x 2
$25,000
Bank 1 Account (to be transferred into his sole name)
$234
Bank 1 Account (to be transferred into his sole name)
$8,684
Bank 1 Account
$359
Bank 1 Account
$176
Bank 1 Superannuation
$1,188
Superannuation splitting order
$148,730
Total Assets (Including superannuation)
$2,674,967
Bank 1 Loan (to be transferred into his sole name)
$884,968
Bank 1 Loan
$400,000
Directors Loan owed to Business A Pty Ltd
$431,346
Total Liabilities
$1,716,314
Net Total
$958,653
Child Support
60.As part of her case, the wife sought a child support departure order. Mr Jordon, for the husband argued that I could not make that order as there was no evidence before the court of any child support assessment. The wife had failed to lead that evidence. Her case proceeded primarily on the property adjustment orders and it was not until her case was closed and Queen’s Counsel was making her submissions that an attempt was made to tender a child support assessment. I did not allow the tender at that late stage. I am satisfied the wife had not properly prosecuted a case for a departure order and it is appropriate to dismiss that part of her application.
Conclusion
61.Subject to any submissions in relation to the proposed superannuation splitting order, for the reasons I have set out in this judgment I propose to make the orders set out in the beginning of this judgment.
I certify that the preceding sixty-one (61) paragraphs are a true copy of the reasons for judgment of Judge Lapthorn
Date: 26 June 2018
W2 Redbook Valuation
W3 Schedule of addbacks being amended exhibit A-26
W4 Bundle of documents referencing the Wife’s affidavit pages
W5 Business A Pty Ltd Financial Statements and Income Returns ending 30 June 2002
H1 Bank 1 Account Statement – Account No.
H2 Business A Pty Ltd General Ledger
W6 Bundle of documents from 10 May 2006 to 3 August 2011
W7 Emailed trial 22 July 2010
C1 Schedule of assets and liabilities with competing positions
Aid Memoir 1 Response to schedule of addbacks asserts by the Applicant Wife.
Key Legal Topics
Areas of Law
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Family Law
Legal Concepts
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Remedies
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Jurisdiction
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Statutory Construction
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