ADAMI & ADAMI

FAMILY COURT OF AUSTRALIA

ADAMI & ADAMI

[2020] FamCA 356

FAMILY LAW – PROPERTY SETTLEMENT – Just and equitable – Contributions – Future needs - Where neither party had significant assets at the commencement of the relationship – Long marriage – Where the husband made the greater financial contribution – Where the wife made significant non-financial contributions – Where the husband’s conduct in relation to businesses was detrimental and should be brought to account – Where taxation liabilities may arise but there is a lack of evidence to determine their status – Where there is a significant debt owing to a financial institution but it is yet to crystallise – Where the difference in earning capacity would warrant an adjustment – Appropriate for orders to be made – Orders

FAMILY LAW – PROPERTY SETTLEMENT – Wastage – Add backs – Where the wife seeks various add backs – Where the husband made a significant additional payment to an employee – Where there is no evidence whether the amount paid would have enhanced the valuation of the business – Where the husband entered into a business transaction without commercial foundation but not for an improper purpose – Where the husband engaged in significant expenditure on accounting services – Where the expenditure was not a wanton, negligent or wilful diminution of matrimonial assets.

FAMILY LAW – SPOUSAL MAINTENANCE – Arrears – Where the wife seeks arrears of spousal maintenance – Where consent orders exist requiring the husband to pay spousal maintenance by way of a weekly payment and meeting other expenses– Where the husband ceased making weekly spousal maintenance payments – Where there has been change in the wife’s circumstances – Where the husband has paid other expenses in relation to the children not required of him – Where the wife withdrew monies from the mortgage account – Exercise of Court’s discretion – Orders

Family Law Act 1975 (Cth) ss 75(2), 79, 79(4)(a), 79(4)(b), 79(4)(c)
Income Tax Assessment Act 1936 (Cth) Pt III Div 7A

Bevan & Bevan (2013) FLC 93-545
C & C [1998] FamCA 143
Chorn & Hopkins (2004) FLC 93-204
Kouper & Kouper (No. 3) [2009] FamCA 1080
Kowaliw & Kowaliw (1981) FLC 91-092
Rosati & Rosati (1998) FLC 92-804
Stanford v Stanford (2012) 247 CLR 108
Thurston & Loomis and Ors [2018] FamCA 26

APPLICANT:

Ms Adami

RESPONDENT:

Mr Adami

FILE NUMBER:

DNC

521

2017

DATE DELIVERED:

14 May 2020

PLACE DELIVERED:

Adelaide

PLACE HEARD:

Darwin

JUDGMENT OF:

Berman J

HEARING DATE:

21 August 2019 - 23 August 2019, 20 September 2019, 20 & 21 January 2020

REPRESENTATION

COUNSEL FOR THE APPLICANT:

Mr Looney QC

SOLICITOR FOR THE APPLICANT:

Withnalls Lawyers

COUNSEL FOR THE RESPONDENT:

Ms Picker

SOLICITOR FOR THE RESPONDENT:

Darwin Family Law

Orders

That in full and final settlement of any claim that either party may have against the other or at any time in the future for settlement of property or alteration of interests in property:-
(a)That the wife do within sixty (60) days cause the Commonwealth Bank of Australia (“CBA”) loan …20 secured by mortgage over the property situate at L Street, M Town, Victoria (“the M Town property”) to be discharged, refinanced or varied to the effect that the husband will have no residual liability and that the wife will thereafter indemnify the husband as to any past, present or future liability in respect of the CBA loan;
(b)That contemporaneously with the discharge, refinance or variation of the CBA loan in 1(a) herein, the husband will transfer any right, title or interest in the M Town property to the wife and will thereafter not be entitled to make any further claim in respect of the M Town property;
(c)That in default of the discharge, refinance or variation of the CBA loan secured over the M Town property and should such default extend for a further twenty one (21) days, thereafter the parties will do all acts and things necessary to cause the M Town property to be sold by way of private treaty or auction upon such terms as may be agreed or in default of agreement or ordered and that the net proceeds of sale be disbursed as follows:-
(i)Payment of agent’s commission, advertising expenses and legal expenses of the sale;
(ii)Payment of any mortgage due and owing to the mortgagee to discharge the mortgage secured over the property;
(iii)The balance of the proceeds to be paid to the wife.
(d)That the net proceeds of sale of the property situate at R Street, S Town, New South Wales (“the S Town property”) be disbursed as follows:-
(i)Payment of TWELVE THOUSAND NINE HUNDRED AND EIGHTY DOLLARS ($12,980) to Withnalls Lawyers Trust Account for and on behalf of the wife;
The balance of the net proceeds to be placed into an interest bearing account in the joint names of the parties and/or their separate legal representatives pending the agreement of the parties as to the payment of any money owing to the P Bank pursuant to personal guarantees given by the husband in respect of loans made available to E Ltd (ACN …) and D Pty Ltd (ACN …) or as may be ordered by the Court upon further application PROVIDED that if the parties agree upon the amount to be paid to P Bank the sum agreed shall be met by the wife as to 62.5 percent but in any event not exceeding ONE HUNDRED AND SEVENTY THOUSAND THREE HUNDRED AND SIXTEEN DOLLARS ($170,316) whichever is the lesser sum PROVIDED that the balance (if any) remaining of the net proceeds be distributed to the parties as to 62.5 percent together with the further sum of EIGHT THOUSAND ONE HUNDRED AND TWELVE DOLLARS ($8,112) to the wife and the balance to the husband;
(e)That within twenty one (21) days of these orders the wife shall return Motor Vehicle 1 registration number … to A Pty Ltd;
(f)That within thirty (30) days of production of documents prepared by the husband the wife will transfer to the husband at his sole expense two ordinary beneficially held shares in F Pty Ltd (ACN …).
(g)That the wife retain free of any claim by the husband the following:-
(i)Subject to these orders, the M Town property;
(ii)Household contents currently held in the wife’s possession;
(iii)All funds standing to the wife in any bank account;
(iv)The wife’s member entitlements in Super Fund 1 Member No. …35 and Investment Account Member No. …5-J.
(h)       That the husband retain free of any claim by the wife the following:-
(i)All funds standing to the husband in any bank account;
(ii)All household contents currently held in the husband’s possession;
(iii)Subject to these orders, his shareholding in F Pty Ltd and in its capacity as trustee of the Adami Trust;
(iv)His shareholding in A Pty Ltd;
(v)His shareholding in C Pty Ltd;
(vi)Any interest either directly or via another entity controlled by him in E Pty Ltd and D Pty Ltd;
(i)That within twenty one (21) days the parties do all things necessary to effect the closure of any joint bank accounts save as to any account set up pursuant to paragraph 1(d)(ii).
(j)That the parties indemnify each other in respect of any personal or individual taxation liability;
(k)That the husband indemnify the wife with respect to the following:-
(i)Any taxation liability with respect to the following entities:-
1.   F Pty Ltd as trustee for the Adami Trust;
2.   A Pty Ltd;
3.   C Pty Ltd;
4.   E Pty Ltd;
5.   D Pty Ltd;
6.   F Pty Ltd;
7.   Any amount owing to P Bank in excess of $194,333.
(l)That the parties indemnify the other in respect of any personal taxation liability arising from a Capital Gains Assessment against each of them arising from the sale of O Street, U Town, Northern Territory, B Street, Darwin, Northern Territory and any Div 7A loan for or on behalf of the parties in F Pty Ltd and/or A Pty Ltd;
(m)Each party be solely liable for and indemnify the other against any liability encumbering any item of property to which that party is entitled to retain pursuant to these orders;
(n)That the husband and wife do all things necessary and sign all documents as may be required to give effect to the orders made herein and in the event of any failure by either party within fourteen (14) days of a written request to do so a Registrar of the Family Court of Australia is hereby appointed pursuant to s 106A of the Family Law Act 1975 (Cth) to execute any necessary documents.
That the parties each pay one half of the setting down and trial fees.

Note: The form of the order is subject to the entry of the order in the Court’s records.

IT IS NOTED that publication of this judgment by this Court under the pseudonym Adami & Adami has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).

Note: This copy of the Court’s Reasons for Judgment may be subject to review to remedy minor typographical or grammatical errors (r 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to r 17.02 Family Law Rules 2004 (Cth).

FAMILY COURT OF AUSTRALIA AT ADELAIDE

FILE NUMBER: DNC 521 of 2017

Ms Adami

Applicant

And

Mr Adami

Respondent

REASONS FOR JUDGMENT

INTRODUCTION

By Amended Initiating Application filed 11 December 2018 and Case Outline filed 19 August 2019, Ms Adami (“the wife”) sought orders for settlement of property, summarised as follows:-
(1)That the assets of the parties be divided such that there is a division of 60 percent to the wife and the balance to the husband.
(2)That the property at R Street, S Town, New South Wales (“the S Town Property”) be sold and the amount owing to the Commonwealth Bank of Australia (“CBA”) secured by mortgage over the property to be discharged from the proceeds of sale.
(3)That the wife retain the property at L Street, M Town, Victoria (“the M Town property”).
(4)That the husband retain the following entities:-
(a)F Pty Ltd as trustee for the Adami Trust trading as F Pty Ltd;
(b)A Pty Ltd;
(c)C Pty Ltd.
(5)That the husband indemnify the wife in respect of existing and future tax liabilities in relation to all payments to or on behalf of or for the benefit of the wife to the date of making the final orders.
(6)That the husband pay the wife spousal maintenance in an amount of $500 per week for a period of two years.
(7)That the husband pay all amounts the subject of existing orders which have not been paid.
By his Amended Response filed 19 July 2019 and Case Outline filed 16 August 2019, Mr Adami (“the husband”) seeks orders, summarised as follows:-
(1)That the assets of the parties shall be divided such that there is a division of 55 percent to the wife and the balance to the husband.
(2)That the husband retain the following entities:-
(a)F Pty Ltd;
(b)A Pty Ltd;
(c)C Pty Ltd.
(3)That the S Town property be sold and consequent upon the payment of the husband and the wife’s personal tax liability, estimated to be in the sum of $168,000, and payment to the P Bank for any and all debt owed to the P Bank by the husband pursuant to personal guarantees given by him, the balance of any net proceeds (or loss) are to be apportioned between the parties as to 55 percent to the wife and 45 percent to the husband.
(4)That the M Town property be sold and consequent upon the net proceeds of sale being required to discharge any outstanding personal tax liability of the parties or any liability of the husband to the P Bank, then the balance to be divided as to 55 percent to the wife and 45 percent to the husband.
The husband sought the wife return to A Pty Ltd the Motor Vehicle 1 registration number … . Now, neither party wish to retain the car.
For reasons that will be touched upon, the S Town property raised the possibility of a third party interest being affected by the agreement of the parties that the S Town property should be sold.
The previous owner of the S Town property was Mr AA. The property was sold to the husband in circumstances that may not have been considered as an arms-length transaction but rather, motivated by the husband’s preparedness to assist Mr AA at a time when he was financially embarrassed.
Following the sale and the transfer of interest in the S Town property to the husband, Mr AA remained in occupation. There was little clarity as to his status. The possibility of Mr AA having an equitable interest in the property or at the very least that he might assert a right of ongoing occupancy was raised.
Orders were made on 20 September 2019 that required the husband to do all things necessary to effect the sale of the S Town property, subject to certain terms and conditions, but in particular the appointment of a real estate agent as may be agreed between the parties, with the wife to nominate three preferred agents, and the property to be listed for sale at $500,000 or as may be nominated by the agent.
The orders provided for the husband to provide contact details for Mr AA and for the wife to cause a copy of the orders made on 20 September 2019 to be served on him. There has been no appearance by Mr AA nor any application to join the proceedings or to be heard in respect of the order for the sale of the S Town property.
The trial commenced on 21 August 2019 and on 23 August 2019 was adjourned part-heard to 20 September 2019. Following the resumption of proceedings on 20 January 2020, judgment was reserved on 21 January 2020. As at that date the S Town property remained unsold and on the market.
At the conclusion of submissions on 21 January 2020, the only issue outstanding in respect of the wife’s application for spousal maintenance was her claim for arrears of spousal maintenance totalling $39,530.
The purported arrears arises from an order by consent on 12 February 2018 that the husband pay spousal maintenance both by way of periodic sum and other non-periodic expenses. It appears that the husband ceased paying some aspects of the order on 27 November 2018, and by order made 22 March 2019 the order of 12 February 2018 was varied by the discharge of those expenses relating to fuel and the wife’s mobile telephone.
The wife contends that whilst generally the husband has paid the periodic sum of $500 per week, he has been dilatory in his payment of the non-periodic expenses.
By orders made 21 January 2020, the parties were given leave to file and serve written submissions in respect of the wife’s application for enforcement of the amounts that she considers are outstanding pursuant to the order.
The method by which the wife calculates the arrears of spousal maintenance is set out in her counsel’s Outline of Submission document filed 23 January 2020. The husband’s response is set out in his counsel’s Outline of Submission document filed 5 February 2020.
The gravamen of the husband’s objection is that the wife’s calculation of arrears is incorrect, that there is inadequate evidence to enable the Court to assess the wife’s claim and that enforcement is discretionary. The husband argues that consideration should be given to the wife’s conduct in allegedly removing money from accounts, not providing an advice that she had commenced in paid employment on 11 November 2019 and had re-partnered in early 2019.
The parties are not in full agreement as to the identification of their assets, the value to be attributed to each of the assets and the extent of liabilities that should be brought to account. In particular, the husband’s assertion that there is likely to be a tax liability, pursuant to Pt III Div 7A of the Income Tax Assessment Act 1936 (Cth) (“ITAA”) (‘Div 7A tax liability’), owed by the parties to the Australian Taxation Office (“ATO”) in the sum of $168,000 and a potential liability by the husband to the P Bank (“P Bank”) of $404,000.
Save as to the treatment of money that the husband contends was accessed by the wife after separation and the extent of his post-separation expenditure, the parties agree that their contributions should be considered otherwise as equal.
The husband concedes an adjustment in favour of the wife by five percent pursuant to s 75(2) of the Family Law Act 1975 (Cth) (“the Act”) on the basis that:-
(a)The wife is 10 years older than the husband;
(b)The wife appears to have an inferior earning capacity to that of the husband.
The wife seeks an adjustment of 10 percent based upon her assessment of the pool although her circumstances have now changed in that she has resumed paid employment and has re-partnered since early 2019.
The early adoption of a percentage adjustment to bring to account relevant s 75(2) factors is problematic in circumstances where the parties are significantly apart in terms of their separate view of the asset pool.

Background

The husband is currently 41 years of age and the wife is 50 years of age. The parties commenced a relationship in 1999 and were married on … 2003. Following a period of cohabitation spanning 18 years, the parties separated in February 2017.
There are two children of the relationship. X born … 2005 and Y born … 2008 (“the children”) reside with the wife and spend time with the husband on a regular basis.
The parties agreed parenting arrangements, by consent, on 9 January 2018 which provided for the wife and children to take up residence in the M Town property in Victoria.
The husband acknowledges that he is now in a relationship with Ms FF and they now live in City W. Whilst there remains a question raised by the wife as to whether the husband and Ms FF are financially interrelated, the husband denies the assertion.
As discussed, the wife conceded at trial that she has re-partnered. She has been in a relationship with Mr EE since early 2019.
Little is known of the financial circumstances of each of the parties’ current partners. Ms FF is employed by A Pty Ltd.
At the commencement of the marriage neither party possessed significant assets. The husband was an apprentice and utilised his trade certification as the springboard to set up what was initially a successful business.
In May 2006, the parties purchased the M Town property with the assistance of a CBA loan which was the subject of redraw at various times to assist in the promotion of the business. The parties agree that the outstanding loan is approximately $308,000. The M Town property was utilised as an investment property until the wife and children took up residence in January 2018.
During the course of the relationship the husband and/or the wife set up the following entities:-
(1)F Pty Ltd (a trustee and trust distribution company);
(2)F Pty Ltd as trustee for the Adami Trust, (an investment trust);
(3)A Pty Ltd (which operates a construction services business); and
(4)C Pty Ltd (which operates a maintenance business); (collectively “the valued entities”).
F Pty Ltd also held interest in a number of unrelated franchise operations which are conceded to either have no value or in any event are not to be brought to account.
The parties jointly instructed Mr BB, forensic accountant, as the single expert to undertake a valuation of the interests of the parties in the valued entities.
Prior to the commencement of the trial the parties were the registered proprietors of a former matrimonial home situate at N Street, Q Town (“the Q Town property”). The property was sold in August 2018. The net proceeds of sale of the N Street property were used to reduce joint and several loans. There was not any net balance available for distribution between the parties and the wife contends there remained unpaid rates in the sum of $1,881.98 which the husband was required to pay pursuant to order 1(d)(ii) of orders made 12 February 2018.

The parties were also the registered proprietors of a property at O Street, U Town, Northern Territory (“the O Street property”) which was utilised by the parties as an investment property. At separation the husband took up temporary residence in the O Street property and ultimately the parties agreed that the property would be sold. Following the sale on 7 November 2018, all of the net proceeds of sale was paid to the CBA less an amount of $5,161, being outstanding body corporate fees and maintenance repairs that the wife considers the husband was also ordered to pay.
F Pty Ltd purchased a property at B Street, Darwin, Northern Territory (“the B Street property”).
As at the date of trial the parties were successful in selling the property and it was subject to a contract of sale. The details in respect of the B Street property are not certain, but it was used as collateral security for A Pty Ltd and C Pty Ltd.
The B Street property is relevant to the proceedings because the wife claims that the husband retained equity from the sale of the property in the sum of $14,016.
Similarly, the wife argues that following the sale of the N Street property, $240,822.58 was paid off the mortgage of the B Street property. The valuation report, having been published on 5 November 2018 (Exhibit “2”), does not include the net proceeds of the N Street property at $240,822.58 and the B Street property at $14,016.
The parties agreed that the S Town property would be sold. The issue had some initial complexity by reference to the husband’s trial affidavit wherein he considered that whilst he was the sole registered proprietor, there was an agreement between the wife, the husband and the previous owner of the property Mr AA, that at some point the property would be transferred back to him.
Notwithstanding that assertion, the husband concedes that the S Town property (or the net proceeds of sale) forms part of the property pool and the only issue was the price at which the S Town property would be sold, the costs and charges arising from and incidental to the sale process and the discharge of a CBA loan. The property has now been sold and settlement occurred on 7 April 2020.
A Pty Ltd was originally called JJ Pty Ltd. In June 2016, 558 shares in JJ Pty Ltd were sold to G Pty Ltd which was an entity controlled by a friend of the husband namely, Mr G.
Mr G was then brought into JJ Pty Ltd/A Pty Ltd as a manager and was paid a substantial level of remuneration. The wife considers that the sale price for the 588 shares was $750,000 which was to be paid by Mr G in instalments.
It appears uncontroversial that payments were received into the parties’ joint CBA account totalling about $150,000, leaving an amount outstanding of $600,000. The transaction between the parties, A Pty Ltd, Mr G and G Pty Ltd is a matter of some complexity and contention between the parties. Essentially it is the wife’s position that Mr G owes the parties $600,000 which was a debt forgiven by the husband without any proper basis for doing so. The complexity of the arrangement was further compounded in that on 28 June 2018 the husband repurchased 588 shares from G Pty Ltd for $250,000.
On 24 October 2016 the husband and Mr G caused the incorporation of D Pty Ltd. F Pty Ltd held 60 fully paid ordinary shares as did Mr G’s company G Pty Ltd. D Pty Ltd was incorporated to conduct a food franchise business.
The husband, with the wife’s brother Mr KK, incorporated E Pty Ltd which also owned and operated a second food franchise.
E Pty Ltd incurred significant debt. The husband gave a personal guarantee and at present the P Bank is owed $404,000. The husband considers that he is personally liable for the debt and whilst he is attempting to negotiate a settlement with the P Bank for a lesser amount, the potential for a significant outstanding liability remains unresolved.
The parties do not agree as to the treatment of the potential liability to the P Bank.
Following the separation of the parties and an advice to the wife on 30 November 2017 that her employment with A Pty Ltd was terminated, the wife acknowledges that she withdrew about $9,795 to fund her and the children’s expenses, including holiday expenses.
The wife also withdrew a sum of $20,000 on 27 November 2018 by way of a drawdown on the loan on the M Town property, as did the husband to the sum of $9,522.

Documents relied upon

The wife relies upon the following documents:-
·Amended Initiating Application filed 10 December 2018
·Financial Statement of the wife filed 11 December 2018
·Trial affidavit of the wife filed 10 December 2018
·Affidavit of the wife filed 7 March 2019
The husband relies upon the following documents:-
·Amended Response to Initiating Application filed 19 July 2019
·Amended Financial Statement filed 15 August 2019
·Trial affidavit of the husband filed 27 February 2019
·Affidavit of Mr V filed 18 July 2019
The parties each relied upon the joint valuation report of Mr BB dated 5 November 2018.

The legal costs of the parties

The parties’ schedule of costs statements comprise Exhibit “8” in the proceedings.
As at 21 January 2020, the wife had been billed $281,895.78 of which $49,582.99 has been paid, leaving outstanding costs of $232,313. In addition, as at 21 January 2020 there were further unbilled costs estimated at $10,120 and unbilled disbursement costs (including counsel fees) estimated at $14,000. The costs to be incurred up to the conclusion of trial are estimated to be between $10,000 and $35,000.
The total costs and disbursements for the wife could be as high as $340,000.
Of the sum which has been paid, the wife acknowledges that $35,222 was paid from the proceeds of the sale of the B Street property pursuant to orders made 22 March 2019. The sum of $8,121 paid by the wife came from spousal maintenance and/or tax refunds received by the wife from the husband. I propose to add back $35,222 together with a conceded payment of $13,778 totalling $49,000.
The estimate of the husband’s costs incurred to the end of the proceedings is $28,400. Exhibit “27” reveals that as at 20 January 2020, the husband has paid $150,094 including the cost of the valuation report of $26,400.
The husband’s cost statement dated 14 August 2019 indicates the source of funds includes loans from his partner totalling $65,000 and $46,775 obtained by loan from AB Pty Ltd. The balance was paid from the husband’s own resources.
The husband’s updated Financial Statement filed 15 August 2019 discloses the loan from AB Pty Ltd but does not show any other liabilities other than a CBA credit card liability of $11,979.
Doing the best that I can, I propose to bring to account the sum of $150,094 being the amounts that the husband has paid and deduct the amount outstanding to AB Pty Ltd of $46,775, the valuation disbursement of $26,400, money loaned from his partner of $65,000 and his credit card advance of $11,979 leaving a balance of $Nil.
It is an odious observation that the total fees of the parties are close to $500,000. This sum represents almost the entirety of the asset pool as asserted by the husband and a significant proportion of the pool as considered by the wife.
The extent of fees incurred may well result in a pyrrhic victory for the parties.
The bleak outcome may well be exacerbated by the potential for the proceedings to await the outcome of the P Bank litigation.

Balance sheet

Counsel jointly tendered a balance sheet (Exhibit “24”) which set out the assets and liabilities that each party considered were relevant to the proceedings. The parties were able to agree the following assets:-
(1)The M Town property - $615.000;
(2)The S Town property - $500,000 to $535,000 noting that the property has since sold;
(3)The valued entities (F Pty Ltd, F Pty Ltd, A Pty Ltd and C Pty Ltd) –minus $125,458;
(4)Household contents (husband) - $2,000;
(5)Household contents (wife) - $5,000;
(6)Super Fund 1 entitlement (wife) - $50,836;
(7)Super Fund 2 entitlement (husband) - $92,000.
The parties were not able to agree the following:-
(1)Equity from the N Street property;
(2)Equity from the O Street property.
The parties are able to agree the following liabilities:-
(1)Commonwealth Bank loan secured over the M Town property - $308,000;
(2)Commonwealth Bank loan secured over the S Town property - $191,658;
(3)CBA Master Card (husband) - $3,400.
Liabilities not able to be agreed:-
(1)Debt to the P Bank - $404,000;
(2)Estimate of Div 7A tax liability to the ATO - $168,000.
The wife seeks to add back the following:-
(1)Proceeds of sale of the Motor Vehicle 6 - $23,522;
(2)Proceeds of sale of shares - $7,452;
(3)Net proceeds of sale of the B Street property - $35,222;
(4)Legal fees paid by the wife - $13,778;
(5)Drawdown on CBA loan on the M Town property (husband) - $13,212;
(6)Amounts unpaid by the husband with respect to the N Street property - $1,882;
(7)Amounts unpaid by husband with respect to the O Street property - $5,161;
(8)Wastage – Mr AA - $100,000;
(9)Wastage – A Pty Ltd - $220,073;
(10)Wastage – DD Pty Ltd - $54,029.
The husband seeks to add back the following:-
(1)Cash taken by the wife - $27,400;
(2)Cash taken by the wife at separation - $10,000;
(3)Money payable by the wife’s brother - $27,390.

The evidence

The wife

The wife relied upon her trial affidavits filed 11 December 2018 and 7 March 2019.
The wife supplemented her evidence in respect of the Motor Vehicle 6. Her knowledge of the circumstances by which it was purchased is scant. It is her recollection that the purchase price was approximately $100,000 which included the motor vehicle being converted from left to right hand drive.
The wife also referred to the sale of the B Street property and her concern as to the extent to which the husband may have authorised information to be given to her concerning the sale.
The wife conceded that the husband had told her he intended to sell the B Street property. She agreed that solicitors were involved. The wife conceded that she was made aware of the details of the sale of the property.
The wife was asked as to her current occupation and if relevant, her intentions in respect of future employment. She agreed that she was keen to undertake future employment and that it would most likely be within the beauty therapy industry.
The wife did not undertake a course as she had foreshadowed and agreed that she had not applied for any jobs since leaving her employment in the business.
The relevance of counsel’s inquiry as to the wife’s financial circumstances went to the wife’s application for spousal maintenance and enforcement of arrears.
As matters transpired, the wife gained employment in late 2019 as a sales assistant and had re-partnered. The wife does not pursue her application for spousal maintenance but the enforcement of arrears is still a matter to be determined.
At [140] of her affidavit filed 11 December 2018, the wife agreed that she took sums totalling almost $10,000 and at [37] she agreed that she had redrawn the sum of $20,000 from the M Town property mortgage.
She also agreed that the husband had been paying the sum of $500 per week in spousal maintenance over a period of 94 weeks which totals the sum of $56,000.
The wife was also able to obtain the sum of $35,428.87 by way of partial property settlement from the sale of the B Street property.
In addition, the husband paid for the painting of the M Town property in January 2018 in the sum of $6,000. The husband has paid the mortgage for the entire time that the wife and children had returned to reside in the M Town property.
The husband has also paid Child Support at the rate of about $360 per week and for a significant period of time has paid or caused A Pty Ltd to pay the lease payments on the Motor Vehicle 1 held by the wife of about $1,200 per month. The husband had requested that the wife allow the Motor Vehicle 1 to be sold and that he would provide a cheaper new four cylinder motor vehicle.
Orders were made by consent on 12 February 2018 that the husband pay spousal maintenance to the wife, including all motor vehicle expenses for the Motor Vehicle 1 including but not limited to:-
·All fuel expenses;
·Any loan obligations as and when they fall due;
·Registration and insurances;
·All services and maintenance expenses, including tyres.
The extent of the husband’s liability to pay spousal maintenance was reviewed on 8 March 2019. By orders made 22 March 2019 the husband was relieved of the obligation to pay the wife’s fuel expenses, but not otherwise.
The wife conceded that she did redraw $20,000 from the M Town property loan. The wife sets out the manner in which the redrawn monies were used.
The wife admitted that she had re-partnered with Mr EE. Given the content of a text message that had been sent by Mr EE to the husband on 14 May 2019, it is reasonable to find that certainly by that date and possibly for two months earlier Mr EE could properly be considered as the wife’s partner.
The wife acknowledged that her brother Mr KK had been involved in business with she and the husband. He had borrowed $27,390 from her just before separation.
The wife was aware of correspondence forwarded by her brother to the husband on 15 June 2018 in the following terms:-
On 4 April you directed me to pay all money directly to my sister. This has been arranged with [the wife] therefore all correspondence regarding this matter will be directly with [the wife]. I will not be engaging in any further correspondence with you regarding this matter.[1]
[1] Transcript of proceedings 21 August 2019 page 77 line 30.
The wife considered that her brother owed her the money as opposed to the husband:-[2]
His Honour:   Right. So at some point you would expect that your brother would either pay you in whole or in part or in instalments or in some way?
Wife:Yes.
His Honour:   What this is all going to, and Mr Looney may well stop me if there’s more to this, but is it reasonable for me to assume that your brother will pay you and you accept that he will pay it to you?
Wife:Yes.
His Honour:   Is that unfair, Mr Looney?
Mr Looney:It’s not unfair, your Honour. It has taken me somewhat by surprise in that I don’t recall this ever being asserted as being an asset by the husband and…
[2] Transcript of proceedings 21 August 2019 page 79 line 1.
The wife was aware that the husband had given a personal guarantee secured by a mortgage over the LL Business franchise with the P Bank in the initial sum of $485,000 but now $404,000. The wife was not aware of the precise sum but agreed that she was aware the husband had given a personal guarantee and that he was jointly and severally liable.
The wife also conceded that if the P Bank were to make a call on the loan, the husband is the only person who has any assets and that it is likely he would be pursued for any outstanding liability instead of the other business participants.
At line 24 on page 87 of the transcript the following summary of the wife’s knowledge and involvement in the P Bank liability is set out as follows:-[3]
His Honour: No. She has acknowledged that there is a liability. She has acknowledged that your client is a guarantor. She has acknowledged that she understands the concept of joint and several liability and then the issue for you, or for your client, I guess, is to establish on the balance of probabilities that it is not several liability. It’s now – it’s now – sorry, it’s not joint liability it’s several and he’s the only several otherwise it wouldn’t be…
Ms Picker:Yes, your Honour.
His Honour: …brought to account at $404,000. Now, I may be – I may be oversimplifying it. If I am I appreciate that I’m only hearing it today for the first time as such in the sense of what the issue might be but that’s what I understand from Mr Looney is the wife’s position that there is not agreement that your client will be solely liable. So that’s where, I think, we’ve come to. Anyway, thank you. I’ve interrupted again.
[3] Transcript of proceedings 21 August 2019.
The wife was asked whether she understood that the parties may each have a significant Div 7A tax liability. That is the subject of comment by Mr BB at [1.35] of his report,[4] foreshadowing that in valuing the shares in the valued entities he did not adjust the value to bring to account the possible future income tax that might arise.
[4] Exhibit “2” at page 7.
The husband relies upon Mr V, a chartered accountant, employed by DD Pty Ltd who were responsible for providing “outsourced Chief Financial Officer Services”[5] for A Pty Ltd. At [11] of his affidavit filed 27 February 2019, Mr V refers to the draft 2018 financial statements of F Pty Ltd and highlights that there are related party loans and retained earnings in excess of $650,000. If the retained earnings are paid out as dividends to the parties and taxed at the top marginal rate, there could be additional personal income tax liability of $118,000.
[5] Affidavit of Mr V filed 27 February 2019 at [1].
The wife was aware of the issue but given its inherent complexity, it is reasonable that the wife’s knowledge of the issues involved and therefore her ability to present a settled position is limited.
In an exchange with counsel, I noted that Mr BB does not say that there is a tax liability but rather, that the parties should be on their guard and that there could be. Mr V may have some further knowledge of the matter in terms of the treatment of the potential tax liability in the 2018 and 2019 financial statements.
It is to be understood that as far as Mr BB is concerned he does not know if there is an issue of tax liability, but that there could be. A number of options are available to the parties and the Court if they are not able to agree firstly, that there is a tax liability and then how that should be divided between them. If the parties are not able to agree then it may be that the Court should be unconcerned about the parties’ future tax liability in that they will look to their own ability to manage their affairs appropriately.
In re-examination, Queen’s Counsel revisited with the wife the debt of $27,390 owed by her brother. The wife was asked whether she expected to receive anything from him and her response was unequivocal. The wife’s brother is without significant asset or financial resources and she does not expect that he will ever be in a position to repay her.

The husband

The husband relied upon his trial affidavit filed 27 February 2019.
In examination in chief the husband identified a document, now Exhibit “5” in the proceedings, being a statement from the P Bank pertaining to the account of E Pty Ltd. The statement details the closing balance of $407,775.48 outstanding to the P Bank. The relevance of the exhibit is that the husband and F Pty Ltd are guarantors for the loan.
The husband was asked to consider Exhibit “4” which is a list of the documents disclosed by the husband as prepared by his solicitor.
Whilst having some reservations, the husband considered that the information contained in Exhibit “4” accurately reflected the extent of his discovery.
The husband conceded that other documents may well have been sourced by the wife by way of subpoena or other inquiry. By way of example, the husband’s accountants DD Pty Ltd have provided various documents at the request of Mr BB.
Consistent with the thrust of the wife’s case, the wife’s Queen’s Counsel strongly asserted that the husband had been deliberately recalcitrant in providing documents and in particular, in advising DD Pty Ltd to provide documents both to the wife and Mr BB. The husband was trenchant in his denial that he had been uncooperative. He contended that the wife’s request for documents was unrelenting and if any documents that were properly discoverable were not produced then this was as a result of error or omission rather than any deliberate attempt to obfuscate the obligation for full and frank discovery.

The husband was asked to consider the extent of his business relationship with Mr G. It seems that he was involved with A Pty Ltd from 2016 to 2018 and in addition he held a 20 percent interest in E Pty Ltd and an interest in D Pty Ltd which were the entities owning and operating the food franchise business.
During the period of his involvement, Mr G was being paid $103,000 with an additional sum of $16,500 per quarter.
The husband was asked to consider the role of Mr AA in the business. He agreed that his role was as an estimator and whilst Mr AA was important in the managerial hierarchy of the business, the husband was actively managing the organisation.
The husband advised that there had been a recent appointment of a manager for A Pty Ltd on a salary of about $175,000. Whilst there was some comparison between the role of the manager and Mr AA in terms of the duties performed by each of them, the current manager was more skilled.
The husband was asked whether he was aware that Mr AA had been a director of MM Pty Ltd which had been placed in liquidation and external administration on 1 July 2015. It appears from the liquidator’s report that Mr AA had a judgment debt against him of about $1.3 million.
The husband was aware of the liquidation and the liquidator’s claim against Mr AA.
The importance of Mr AA arises from the purchase of the S Town property from him for $200,000. The husband agreed that the transaction was not arms-length, in that it arose after a discussion which highlighted Mr AA’s financial predicament.
The husband was aware that Mr AA was also a bankrupt. It appears that a wage was paid to Mr AA but within that payment, an amount was withheld to cover the notional rent attributed to Mr AA’s continued residence in the S Town property. Even though the title and interest in the property had transferred to the husband, Mr AA remained in continuing occupation.
Queen’s counsel put to the husband that Mr AA did not pay money to him for his occupation of the property but rather, it was done by Mr AA being paid a notional wage.
The husband admitted that he had taken no steps to obtain rent for the property and attempted to explain the lack of commerciality by his view that Mr AA was unemployed and that it was a kind gesture that enabled him to remain in the S Town property.
The expenses and outgoings in respect of the S Town property were being paid through the company and it was recorded as a business expense. The husband conceded that the business did not derive any benefit.
The following exchange at page 168, line 8 of the transcript highlights the husband’s uncertainty:-[6]
[6] Transcript of proceedings 22 August 2019.
His Honour:   [The husband], just – just – look, Mr Looney is asking questions, and I appreciate sometimes witnesses can be under pressure, but just have a think about it?
Husband:Mmm.
His Honour:   Do you want me to accept – and I will if you want me to. Do you want me to accept that for, what, for the last nearly two years, you have no idea whether Mr AA has paid $1 in relation to his occupancy of the S Town property? Is that what you want me to find?
Husband:It has been coming off his wage, as in regards to his – his deal…
His Honour:   Yes?
Husband:Okay, or his agreement.
His Honour:   But Mr Looney went through that with you, and I – I can’t honestly say that I’m any better advised as to what his wage should have been and what his wage ended up being?
Husband:Sure.
His Honour:   and how that was dealt with through the company?
Husband:Mmm.
His Honour:   and why there’s a – why the loan was being paid as a deduction – treated as a deduction in the company. None of that helps me?
Husband:Yes.
His Honour:   So what – so what is the position then? What did you understand notionally was the rent that Mr AA was effectively paying?
Husband:Well, the company had been paying it as part of his agreement – the mortgage.
His Honour:   Well, I don’t know what the agreement was, and you’re not able to tell me?
Husband:Mmm.
The husband acknowledged that in an affidavit filed 22 October 2018 he denied that he had any beneficial interest in the property. The husband’s position at trial is now to accept that he holds both the legal and beneficial interest in the property and that he concedes it should be included in the property pool available for division.
Whilst not directly involved, the husband agreed that he was aware Mr G and his wife had purchased a property from Mr AA situate in Suburb L, Darwin. It appears that Mr G purchased the Suburb L property in an attempt to assist Mr AA with his financial difficulties. The husband and Mr G were friends and each of them were on friendly terms with Mr AA.
The husband was pressed to accept Queen’s Counsel’s proposition that the husband came up with a proposal to pay Mr AA an amount greater than his reasonable wage for the specific purpose of assisting him financially.
The husband was asked to consider the contents of page 11 of a bundle of annexures that were referred to in the husband’s trial affidavit.
Page 11 comprises an email dated 5 July 2017 from the husband to Mr AA in the following terms:-
Hi Mr AA,
Below is a proposal per year structure:-
·$200k per year ($50k per year can be paid off S Town home (Discussions will need to be had with accountant on the legitimate approach with this), $30k placed on credit cards and $120k as a salary package paid weekly) proposal of 4-5 years with a re-assessment?
·$25k car package (Ute & fuel).
Assistance & support:-
·Purchasing S Town home
·Purchasing Suburb L (whilst you cover most costs, it does impact Mr G’s borrowing capacity).
·Flexibility with working locations between Darwin & S Town.
·Being paid for normal weekly pay while on holidays or sick.
Basically in addition to your wage, we are offering:-
·An additional $500k over 5 years.
·Increase of wage
·S Town house will be paid for
·Flexible working hours & location.
·Spending your money through the business which will be untaxed
Hear from you soon Mr AA.
Kind regards,
Mr Adami
The import of the email was to inflate the amount that Mr AA was to be paid by $100,000 a year from that which he should have received but for the proposal. The husband was not able to say more than what was apparent on the face of the email and confirmed that the email accurately reflects the offer by Mr Adami (and Mr G) and the acceptance by Mr AA.
The issue has relevance given the wife’s assertion that $100,000 should be added back to the balance sheet. Whilst the wife’s argument has a superficial attraction, it is implicit in the husband’s cross-examination that the S Town property was originally intended to be transferred back to Mr AA when there was a lessening of the adverse financial circumstances affecting him. As matters have transpired, the parties have agreed a notional value of the S Town property at between $500,000 and $535,000 and the husband’s concession that the property should be considered as property of the parties for the purpose of property settlement.
There is a further consideration in that, the notional additional sum paid to Mr AA would not necessarily result in the value of A Pty Ltd increasing by $100,000. The evidence is that the company claimed a deduction both in respect of expenses for the property and the wage paid to Mr AA. It would be a tautological process to consider what would be the outcome if the transaction involving the S Town property was reversed. No evidence was presented in that regard and I suspect that the husband’s concession is likely to advantage the wife in any event.
The husband was asked to consider the rationale behind the sale of 588 shares in A Pty Ltd to a company controlled by Mr G for $750,000 in respect of which only $150,000 was paid. 588 shares gave Mr G 49 percent of the 1,200 issued shares in A Pty Ltd.
The wife had identified the sale of the shares to Mr G’s company by the payment of three amounts namely, $150,000 on 15 June 2016, $20,000 on 29 June 2016 and $15,000 on 30 June 2016. The husband did not consider that the last two payments were in any way connected to the sale and purchase of the shares but was not able to identify what the payments may have been for.
In the husband’s affidavit filed 7 February 2018, he referred to the amount that was owing to the parties from Mr G as the sum of $450,000. It appears to have been made up of two amounts namely, $300,000 and $150,000. When pressed, the husband could not explain why it was $450,000 and not $600,000 given the acknowledged purchase price of $750,000 leaving $600,000 outstanding following the payment of $150,000.
The husband was then asked to consider his repurchase of the shares on 28 June 2018 for $250,000. The wife was not involved and the husband conceded that he had made a unilateral agreement with Mr G to repurchase shares. Of the $250,000 purchase price, the husband has paid $221,000.
The Court challenged the husband as to the commercial basis for the transaction commencing at page 199, line 26 of the transcript:-[7]
[7] Transcript of proceedings 22 August 2019.
His Honour:   [The husband], I know you tell me that you’re a man who has had – you know, you get your hands dirty because you were a tradesperson, and that was your trade, and you’re trying to come up to speed with all of this. This is not beyond the wit of anybody. This is just – this is pretty straightforward, is it not? He pays you 150. That’s all out of a figure of 750 without any valuation. And then you decide to repurchase the shares for an amount more than he’s actually given you, again, without any assistance from a valuation, a valuer, your accountant, a document, or anything?
Husband:There was conversations with the accountant, yes.
His Honour:   Why would you give him more than he has actually given you?
Husband:I’ve made the wrong call, your Honour, and obviously overpaid him. He should have just got his money back and that was it.
His Honour:   Are you suggesting – do you want me to understand that this simple concept, as uncommercial as the concept may even be, did not occur to you at the time, sir? Do you really want me to understand that, here we are on the – whatever it was, in 2018, and some discussion about the shares comes about, and you say, “Look, mate, I will buy them back for 250. I know it’s a bit more than you gave me, but there you go.”?
Husband:I – I - I did the best that I could at the time.
His Honour:   Did the best you could?
Husband:Yes.
His Honour:   Do you say that you realised that he had only given you 150 or thereabouts?
Husband:I – I say I overpaid from – yes.
His Honour:   [Husband], looking back now, pretty ordinary… Pretty ordinary transaction, wasn’t it?
Husband:Thousand percent.
The husband conceded that his decision to repurchase the shares was made at a time when the company was experiencing financial difficulties.
The husband was not able to explain why he was prepared to accept $150,000 and forego $600,000 in respect of the original purchase of the shares by Mr G and then why he was prepared to pay $100,000 more than the amount he had received from Mr G when he repurchased the shares from him.
The husband’s evidence was not impressive. I do not find that the husband’s conduct is able to be explained by an assertion of naivety. I consider the husband acted deliberately and whilst the rationale is not readily apparent, it had a direct negative impact on the business either by $600,000 not claimed from Mr G, or more likely, an extra $100,000 that was paid without any justification or benefit.
The husband is a qualified tradesperson. His evidence is that he was hands on or “on the tools” until about February 2018 when he transitioned to the administration and management of the business. At its most successful, the business had a turnover of between $6 million and $7 million. There were about 30 employees including clerical and bookkeeping staff. Until his departure, Mr G undertook the role of business manager receiving a remuneration package of about $170,000 per annum.
From mid-2018 the husband undertook a number of business management and financial courses overseas. The total expenditure for the husband’s attendance to undertake four overseas courses was about $20,000 plus a further $25,000 for travel and accommodation.
It was on one of these courses that the husband met Mr CC of DD Pty Ltd.
DD Pty Ltd provided financial and accounting services to the various entities including F Pty Ltd, A Pty Ltd and C Pty Ltd. The husband discovered invoices covering the period 20 March 2018 to 1 March 2019 totalling approximately $280,000 which did not include the costs incurred in attending overseas courses.
Queen’s counsel identified a bundle of invoices totalling $39,500 plus GST for professional services rendered in the following terms:-
Review and provision of information to the valuation of the marital assets, assistance with the negotiation with your ex-wife, and assistance and advice in relation to the divorce – our fixed fee for the above asset protection offering is $39,500 plus GST.[8]
[8] Transcript of proceedings 22 August 2019 page 227 line 46.
The husband conceded that A Pty Ltd had paid for DD Pty Ltd rendering professional services which in part related to the property settlement proceedings.
In addition to the financial and accounting services provided by DD Pty Ltd, the husband entered into a further agreement for the 2019 financial year for the provision of “growth strategic coaching with Mr CC”[9] at a cost of $7,333.33 per calendar month.
[9] Transcript of proceedings 22 August 2019 page 239 line 13.
The husband conceded that he entered into a further and separate agreement with DD Pty Ltd on 7 August 2018 for the provision of “strategic advice”. The total fee including GST was $132,000.
Queen’s counsel foreshadowed that the cross-examination would support a submission that the husband was not just financially naïve in his expenditure on financial services that were of limited beneficial effect, but rather that his conduct was both wanton and negligent and that the valuation of the valued entities for the year ending 30 June 2018 would have been enhanced but for the husband’s engagement with DD Pty Ltd and the unnecessary expense of overseas courses taken by the husband and his partner.
The husband was taken by Queen’s Counsel to a range of other invoices as between the husband, and A Pty Ltd and DD Pty Ltd. The contention of counsel was that in the period from 7 March 2018 to 12 December 2018, excluding GST, the expenditure committed to DD Pty Ltd was in or about the sum of $390,500.
The issue is not the obvious contention that the amount paid to DD Pty Ltd over a relatively short period of time could be considered as an extraordinary sum but rather, how it should be brought to account in terms of the value of the husband’s interest in A Pty Ltd. There would need to be evidence from Mr BB as to the impact on the valuation of A Pty Ltd dependent upon the particular valuation methodology that was adopted and considering that the expenditure with DD Pty Ltd spans two financial years. Presumably A Pty Ltd has gained some benefit from the expenditure being a permissible tax deduction, assuming that there is corresponding income.
The husband confirmed that he no longer has any agreement or ongoing engagement with DD Pty Ltd and has not since 1 July 2019. There are no ongoing payments being made and DD Pty Ltd is not rendering any services.
Exhibit “2” in the proceedings annexes the report of Mr BB dated 5 November 2018. The valuation report will be the subject of later consideration, however, Queen’s Counsel directed the husband’s attention to page 144 of the report, being the summary of assets and liabilities F Pty Ltd. Line 31 identifies a loan to the CBA in respect of account number ending 3090 in the amount of $469,717.
The proposition put to the husband was that in Mr BB’s summary of the total equity for F Pty Ltd being a deficit of $540,245, the loan to the CBA was brought to account.
It is agreed that the B Street property was an asset of F Pty Ltd. It was put to the husband that post 30 June 2018 the CBA loan was reduced from a payment from an outside source, being part of the net proceeds of the sale of the N Street property which was an asset outside of the business group. The amount that came from the sale of the N Street property on 10 August 2018 was $220,000 which reduced the CBA liability from $469,717 to an amount of $203,463.
If so, and subject to the evidence of Mr BB, this may result in a reduction of the deficit of $540,245 by the sum of $266,254. The proposition of Queen’s Counsel arises from the following extract from the Mr BB report:-[10]
2.16Following the sale of the ‘N Street property’ owned by Mr and Mrs Adami, around $220,000 of the proceeds of sale of $741,000 had been applied against borrowings of the Adami Trust from the Commonwealth Bank which had the effect of reducing the debt owed by the trust to the bank from $470,000 at the end of June 2018 to around $250,000.
[10] Exhibit “2”.
Consideration must be given as to whether the valuation exercise undertaken by Mr BB brought to account a corresponding liability in F Pty Ltd in favour of the parties, being the sum of $220,000 that came from the proceeds of the N Street property.
The husband accepted that in addition to the contribution of $220,000, a further $46,254 had come from the personal assets of the parties.
The husband was asked to identify a deposit into the F Pty Ltd CBA bank account on 23 August 2018 of $20,822.58. The husband considered that this sum represented the net proceeds of the sale of Motor Vehicle 6 which appears on the joint balance sheet represented by the sum of $23,522.
In his valuation report, Mr BB summarised the transaction concerning the sale and purchase of 588 shares (49 percent) in A Pty Ltd involving Mr G:-[11]
2.14In relation to the transaction connected with the purchase by G Pty Ltd of a 49 % interest in A Pty Ltd and the more recent buying back of that interest by the Adami Trust, Mr Adami stated:-
2.14.1Mr G, through G Pty Ltd, undertook to purchase a 49% interest in A Pty Ltd for $750,000 in respect of which only $150,000 was paid, leaving $600,000 unpaid;
2.14.2because A Pty Ltd’s performance had not met expectations, the unpaid debt of $600,000 is not payable by G Pty Ltd;
2.14.3arrangements have been agreed with Mr G whereby the shares held by G Pty Ltd were purchased for $250,000 in respect of which $221,000 has been paid to date [the information provided to me indicated that to the end of June 2018, $52,000 had been paid];
2.14.4as a result of deteriorating business conditions, if Mr Adami was entering into the same arrangement now, Mr Adami stated that he would offer ‘a lot less’.
[11] Exhibit “2”.
As discussed, the husband’s evidence on the transaction to repurchase the A Pty Ltd shares from Mr G was unsatisfactory. It cannot be said that the husband had any real grasp on the details of the transaction, nor could he provide a credible explanation for paying Mr G an amount significantly greater than Mr G had actually paid for the selfsame shares, given that A Pty Ltd was being asked to write off the sum of $600,000 being the outstanding amount owed by Mr G.
The husband contends that there may be a combined Div 7A tax liability to the ATO of $168,000. The figure is not agreed by the wife. The contention of a Div 7A tax liability arises from the Mr BB report which records an inquiry to the husband’s accountant as to whether “the loans to the Adami Trust and Mr & Mrs Adami comply in div 7A loans. If so, are loan agreements in place?”[12].
[12] Transcript of proceedings 23 August 2019 page 304 line 13.
As at the date of the response, loan documents had not yet been signed but were likely to be.

The husband has little or no effective understanding of the detail, but is aware that he considers the joint tax liability of the parties should be brought to account.
E Pty Ltd was incorporated in February 2015. The following persons were the shareholders and most, if not all, had given guarantees to the P Bank:-
·Mr NN;
·Mr G and Ms PP
·Mr QQ
·Mr RR
·Mr KK
The husband understands that Mr G had obtained a release from the P Bank consequent upon the payment of a release fee or amount.
The husband has legal representation in respect of the negotiations with the P Bank as to the status of the husband’s guarantee.
Queen’s Counsel put to the husband that the negotiations with the P Bank involved the provision of statements of assets and liabilities for the guarantors, but in particular the husband, Mr G and Mr QQ. The husband agreed that he had not disclosed the correspondence.
The husband and his partner Ms FF utilized their separate superannuation entitlements by loaning money to A Pty Ltd for other personal expenditure.
On 1 July 2019, the account records a withdrawal of $45,000 in favour of “S Company” which was apparently an education course for Ms FF over four days.
Notwithstanding Ms FF’s commitment across the four days, she was also paid by A Pty Ltd for the work she was required to undertake.
The husband conceded that because of his poor and deteriorating financial position, he accessed his superannuation entitlements to pay a range of personal expenses including the mortgage over the M Town property in which the wife and children reside.
A significant issue might arise should a determination be made that the superannuation fund is non-compliant with the resultant penalty taxation impost.
There is however agreement between the parties that the value of the husband’s superannuation entitlement in the Super Fund 2 should be reflected in the balance sheet as $92,000. The husband acknowledged there were non-complaint transactions comprising withdrawals from the Super Fund in the following exchange at page 320, line 39:-[13]
[13] Transcript of Proceedings 23 August 2019.
Mr Looney:Okay. So at the moment, on this bank statement as at 1 August 2019, the amount in the super fund is – bank account - $112,463.03. That’s significantly less than the combined total of the two amounts rolled into the fund by you and your partner back in late 2018?
Husband:That’s very correct.
Mr Looney:What’s the state of the superannuation fund as to who owes it money at the moment?
Husband:It would – it’s Ms FF and myself.
Mr Looney:So you and Ms FF owe the super fund money?
Husband:Correct.
Mr Looney:To make it up to the balance of what had originally gone in there?
Husband:Correct.
Mr Looney:Okay. How much do you owe versus how much does Ms FF owe?
Husband:I – I don’t have that breakdown. Sorry.
Mr Looney:You keep records. You would have that?
Husband:Look, there’s – there’s obviously transactions and, you know…
Exhibit “22” is the general ledger (summary) for A Pty Ltd. It provides a summary of debits and credits in respect of a range of activities of A Pty Ltd and attributes to each item or transaction an account number.
The wife’s solicitors have been seeking the production of the general ledger for a significant period of time. Complaint has been made that the general ledger has not been discovered and produced with the assertion that the husband has been deliberately recalcitrant in providing the document.
The husband agreed that a full ledger existed. It is assumed that the production of the full ledger would enable each individual account to be opened and presumably this would display all relevant transactions pertaining to that particular account for the period 1 July 2018 to 17 September 2019.
The husband’s attention was drawn to account number 1-290 which recorded, that as at 17 September 2019, there was a retention held of $240,407.64 representative of total debits of $387,496.08 and total credits of $147,088.44.
The husband explained that because A Pty Ltd no longer had the ability to provide security for its borrowings and day to day activities, the practice of retentions was introduced in the 2019 financial year.
Doing the best that the husband could, he was generally aware of the issue but did not have a clear grasp of the underlying accounting methodology. The husband was prepared to accept the accuracy of the general ledger summary and whilst the thrust of Queen’s Counsel was to highlight that the production of a general ledger summary as opposed to the full general ledger was indicative of the husband’s refusal to make full and frank disclosure, on this particular issue I find that the husband considered the document produced satisfied the request made.
Account number 2-2017 refers to two Motor Vehicle 3’s with a credit of $40,831.80 and a debit of $6,592.95, leaving a net credit of $34,238.85.
The husband agreed that the two Motor Vehicle 3’s are currently held and used by his parents. There is some connection between the husband’s mother selling her car for $7,000 and contributing the net proceeds into the main A Pty Ltd account. The husband considered that at the time, the business was in financial difficulties and he needed the money. The explanation given by the husband inadequately explained why the two motor vehicles were needed for the continuing operation of the business. The husband did not give evidence as to the manner in which his parents utilised the motor vehicles within the operation of the business nor to the submission of Queen’s Counsel that the vehicles have no business related purpose has some force.
Exhibit “23” annexes the balance sheet for the period 1 July 2018 to 30 June 2019 for the months July to January inclusive.
By reference to the line item entitled “Current Year Earnings” the figure represented a liability of $390,781.31. By reference to the retained earnings as at the end of the period the figure has reduced to $114,818.45. This represents an improvement of about $250,000. Queen’s Counsel sought an acknowledgement from the husband that this reduction in the indebtedness of retained earnings could be attributed to an improved financial performance of A Pty Ltd. The husband was not able to agree.
I am not satisfied that the limited period under consideration is of assistance in determining that the business has an enhanced level of profitability. Other documents may well show whether the reduction in the retention of earnings is as a result of increased turnover and/or reduced expenditure. It is a matter properly to be considered in terms of the valuation of A Pty Ltd and the value to be attributed to the husband’s interest.
The husband confirmed that his partner Ms FF continues to remain employed with A Pty Ltd upon similar terms and conditions. There is no formal employment contract but it is to be reasonably assumed that Ms FF will continue to provide work related duties for which she receives a significant level of remuneration.
Paragraphs 41 and 42 of the husband’s trial affidavit, filed 27 February 2019, sets out a summary of the weekly expenditure that he had paid and continues to pay as at 26 February 2019.
The husband has made a further payment of $8,000 towards the M Town property mortgage from money coming from his superannuation fund.
In re-examination the husband was asked to provide better detail of the hours worked by Ms FF. The husband considered that she is employed and paid to work 45 hours a week and that she does so. Implicit in the husband’s evidence is that he considers the remuneration paid to Ms FF is commensurate with the service that she renders to A Pty Ltd.
The husband was also able to expand upon his rationale for paying Mr G a premium to repurchase the 588 shares in A Pty Ltd. The husband considered that it was important to get back control of the business and following a discussion with Mr CC, he was prepared to pay a premium.
I do not consider that the husband’s further explanation is of assistance.
The husband was generally frank in giving his evidence, but was unimpressive in his explanation as to his relationship with DD Pty Ltd and Mr CC.
Similarly, I did not find the husband’s evidence of assistance in respect to his dealings with Mr G and Mr AA.
The husband’s further evidence as to the necessity for A Pty Ltd to purchase motor vehicles for his parents so that they could run errands for him when requested did not constitute a reasonable explanation. It is likely that the value of the vehicles will offset the liability.

Mr V

Mr V is a chartered financial analysist employed by DD Pty Ltd. He has been responsible for providing Chief Financial Officer services for A Pty Ltd up to June 2019. A summary of his evidence is that as at 30 June 2019 the cash position of A Pty Ltd was $263,000 and the trade debtors were $693,000. The business was owed $462,000 by related party entities and individuals.
The business also had liabilities in relation to Business Activity Statements, to employees, to the ATO, to creditors and in relation to finance in respect of plant and equipment.
In evidence, Mr V considered that the business was in a difficult financial position given there was limited cash flow and an absence of valuable assets that could be utilised to secure borrowings. Mr V referred to an amount that the business was owed by a related party as at 31 December 2018 in the sum of $382,000. This figure included an asset, being monies owed by E Pty Ltd of $221,077 to A Pty Ltd. It is not now controversial that E Pty Ltd is a company in liquidation and that the debt owed to A Pty Ltd is not able to be collected.
Similarly, the amount outstanding by the wife’s brother Mr KK was also considered to be unrecoverable.
A further $59,033 owed by D Pty Ltd (now in liquidation) to A Pty Ltd should also be considered as unrecoverable.
At [17] of his affidavit filed 18 July 2019, Mr V refers to the 2018 financial statements of F Pty Ltd as having related party loans and retained earnings in excess of $656,000. He considered that if the retained earnings were paid out as dividends to the husband and the wife as fully franked dividends and taxed at the top marginal rate, the additional personal income tax would be approximately $168,000.
The calculation of the potential Div 7A tax liability is arrived at by, adding the retained earnings to the franking credits of the business (in the sum of $270,000) and then to apply tax at the top marginal rate of 49 cents in the dollar (including the Medicare levy) on the combined total of $926,000, less the value of the franking credits.

Mr BB

Mr BB was jointly instructed by the solicitors for the parties to provide an opinion of the value of the parties’ interest in the following entities:-
Valued Entities:-
(a)F Pty Ltd;
(b)F Pty Ltd as trustee for the Adami Trust;
(c)A Pty Ltd;
(d)C Pty Ltd.
F Pty Ltd has interests in D Pty Ltd and E Pty Ltd which are to be considered as “excluded entities”. No valuation of the excluded entities was required because the underlying franchises have either been sold, wound up or effectively are of no value.
Mr BB considered that the appropriate valuation methodology for the valued entities would be an asset based valuation. A Pty Ltd should be valued on an income based valuation or a consideration of the capitalisation of future maintainable earnings.
The valuation date for Mr BB’s report of 5 November 2018 (Exhibit “2”) is as at 30 June 2018. The report should be read in conjunction with an email from Mr BB dated 15 January 2020 (Exhibit “25”) advising of adjustments and/or corrections to his report. Mr BB highlights that any adjustments or corrections are in the form of typographical errors and do not affect his overall opinion. The summary of Mr BB is set out at [1.23] of his report:-
On the basis of the assumed facts in section two of this report, the financial data set out in section three of this report and applying the method described in section four of this report, it is my opinion that, as at the end of June 2018, the value to Mr and Mrs Adami of their interest in the entities listed in paragraph 1.1 above was a deficiency of $125,458…
Mr BB’s report is qualified by an assumption that the debt of $600,000 due by G Pty Ltd is not recoverable by A Pty Ltd, that the operations of C Pty Ltd have been subsumed by A Pty Ltd and that A Pty Ltd does not hold its own building and trade licenses.
Mr BB brings to account amounts that have been advanced to the parties totalling $673,884 which comprises a loan from F Pty Ltd of $345,287 and Mr & Ms Adami of $328,597. The loans have been brought to account by Mr BB and he has assumed that the loans are compliant for the purposes of Pt III Div 7A of the ITAA.
In valuing the shares in A Pty Ltd, no account has been taken of possible future income tax that may arise in respect of the loans to the parties.
In evidence, Mr BB confirmed that notwithstanding A Pty Ltd was a trading entity, it was valued on a net asset approach as there was determined to be no component for goodwill.
Mr BB’s attention was directed to Appendix “8” of his report which is a summary of assets and liabilities of F Pty Ltd. Line 31 records the agreed amount of $469,717 which has been included as a liability for the group.
As considered, [2.16] of Mr BB’s report refers to the sale of the N Street property of which $220,000 of the proceeds of sale reduced the debt owing to the bank from $470,000 to $250,000.
Mr BB agreed that there had been an application of money from an asset (the N Street property) from outside of the valued entities to effect a reduction of the overall group debt.
The significance of the observation of Mr BB and the proposition put by Queen’s Counsel, is that the agreed liability of $469,717 to the Commonwealth Bank, as at 30 June 2018, does not reflect the injection of $220,000 being the net proceeds of sale of the N Street property. Therefore, either the underlying liability is reduced by $220,000 or the equity from the N Street property is brought back as a notional asset.
Another way of bringing the proceeds of the N Street property to account is that it would have the effect of altering the negative value, as determined by Mr BB, to one that is positive.
A similar consideration applies to the application of the net proceeds of sale of the B Street property, resulting in equity of $14,016 or a reduction in the underlying liability by a similar sum.
Mr BB was asked to consider whether the significant expense incurred with DD Pty Ltd had been brought to account. As is apparent from the evidence, the A Pty Ltd invoices in favour of DD Pty Ltd were predominantly incurred in the 2019 financial year and have had little significant effect on the valuation exercise undertaken as at 30 June 2018.

Is it just and equitable to alter the property interest of the parties?

In Stanford & Stanford (2012) 247 CLR 108 the majority held:-
35.It will be recalled that s 79(2) provides that “[t]he court shall not make an order under this section unless it is satisfied that, in all the circumstances, it is just and equitable to make the order”. Section 79(4) prescribes matters that must be taken into account in considering what order (if any) should be made under the section. The requirements of the two sub-sections are not to be conflated. In every case in which a property settlement order under s 79 is sought, it is necessary to satisfy the court that, in all the circumstances, it is just and equitable to make the order.
36.The expression “just and equitable” is a qualitative description of a conclusion reached after examination of a range of potentially competing considerations. It does not admit of exhaustive definition. It is not possible to chart its metes and bounds. …
(Footnotes omitted)
In Bevan & Bevan (2013) FLC 93-545 the Full Court considered at [73] that the decision of Stanford v Stanford (supra) could be reduced to three fundamental propositions:-
(1)The Court needs to consider the existing property interests of the parties and to identify those interests (by reference to common law and equity); and
(2)The discretion must be exercised in accordance with legal principles and not in respect of any assumption that the parties interests should be different from those determined by common law and equity; and
(3)Section 79(2) cannot be conflated by reference to matters in s 79(4).
I consider that it is just and equitable for an order pursuant to s 79 to be made.

L Street, M Town

Following separation, the wife and children took up residence in the M Town property which had been the subject of tenancy. The parties are agreed that subject to other orders being met, the husband will transfer his interest in the M Town property to the wife. The parties agree that the property retains a value of $615,000 and is the subject of a CBA loan secured by a mortgage over the property in the sum of $308,000.

R STREET, S TOWN

The status of the S Town property was resolved by the husband’s concession that the property should be considered as the property of the parties. Orders were made for the S Town property to be placed on the market for sale and it is now the position that the property has been sold on 7 April 2020 for the net sum of $493,295. There was a CBA loan secured by mortgage over the S Town property which was discharged at settlement together with other costs of sale, leaving a net balance of $299,626.

Valued entities

The parties have had regard to the report of Mr BB dated 5 November 2018 and his subsequent evidence that as at 30 June 2018 there is a net deficiency of $125,458. Despite the modest discrepancy between the husband’s value and the wife’s value by reference to the agreed joint balance sheet (Exhibit “24”), I propose to bring to account the slightly higher figure as promoted by the wife.
As at the date of Mr BB’s evidence on 20 January 2020, he did not consider that there was any reason to alter his opinion as to the value to be attributed to the valued entities. Neither Mr BB or the Court had the advantage of financial statements for the valued entities for the financial year ending 2019, however, he did have a general ledger summary created on 17 September 2019 and the A Pty Ltd balance sheet for the financial year ending 2019.
The submission by Queen’s Counsel is that the valuation opinion determined by Mr BB did not reflect the contribution from the net proceeds of the sale of the N Street property and the B Street property which reduced the liabilities of the valued entities in the 2019 financial year.

Equity from N Street and B street

As discussed, the net proceeds of the N Street property and the B Street property were used to reduce outstanding liability, in particular to the CBA.
If the Mr BB valuation had been undertaken as at 30 June 2019, the injection of funds from the sale of the properties would have been brought to account.
It is difficult to speculate on what else may have occurred in subsequent years and as such, the proceeds contributed from the sale of the properties should be brought to account as a separate transaction but with a recognition that they have been to the benefit of the husband.

Household contents and personal adornment

The parties are agreed that they each hold household contents, as to the husband $2,000 and as to the wife $5,000. The wife asserts that the husband holds jewellery and/or furniture to the sum of $10,000. There is no valuation in that regard and I propose to ignore the item.

Parties’ superannuation

The wife holds an entitlement with Super Fund 1 in the sum of $50,836. The husband holds superannuation entitlement in the Super Fund 2 of $92,000. The parties are agreed as to the value of their respective superannuation entitlements.
Consideration should be given as to the treatment of the parties’ superannuation.

The wife argues that $220,073 should be added back into the pool. This arises from a consideration of the transaction entered into by the husband with Mr G for his purchase of 49 percent of the shareholding of A Pty Ltd for $750,000 which resulted in only $150,000 being paid. The wife does not pursue the amount outstanding by Mr G of $600,000.
At a later time, the husband entered into negotiations with Mr G to purchase back his shareholding in A Pty Ltd. The husband sought some advice from Mr CC of DD Pty Ltd and put forward as the basis for the buy-back that he wished to regain effective control of the company so that he could put it on a better financial footing.
The husband paid Mr G $250,000 for the shares. Perhaps somewhat superficially the husband was challenged as to why in 2016 he was prepared to accept $150,000 as the final payment for 49 percent of the shareholding in A Pty Ltd, but in 2018 he was prepared to pay $100,00 more namely, $250,000.
The husband conceded that the transaction lacked any real commercial basis and that whilst he considered he did the best that he could at the time, he agreed that he had overpaid Mr G for the shares. His evidence was that he effectively threw away $100,000.
The wife’s claim is more nuanced. By reference to the Mr BB valuation of the shares in A Pty Ltd at 30 June 2018, the value at the time was $61,076. The amount that was agreed to be paid was $250,000 for 49 percent. This equated to $29,927 of the Mr BB valuation amount.
Accordingly, the effect was that the value of the assets had diminished by $198,000.
The issue therefore is not that the husband paid Mr G $100,000 more than he received from Mr G in 2016, but that at the time of the purchase of the shares from Mr G in 2018 their value was about $30,000 and so the overpayment was more than $200,000.
I am not left in any doubt that the various transactions between the husband and Mr G did not bring to account any consideration of actual value, or that they reflected commercial reality.
The husband concedes that at least to some extent he overpaid Mr G.
I am satisfied that whilst the money paid was without any commercial foundation, I am not able to find that it was for an improper purpose.
The husband’s evidence is that he took advice from Mr CC and his prime focus was to regain full control of A Pty Ltd.
It is overly simplistic to consider the consequences of the transaction that occurred in 2018 and extrapolate that to an effect on the value of A Pty Ltd.
Mr BB was not asked to comment on the possible effect of his valuation if the Court were to find that the husband had paid either $100,000, or as the wife would assert $200,000 more to Mr G than was represented by the value of 49 percent of the shares of A Pty Ltd.
Simply put, the money does not any longer exist and I do not have enough evidence that would enable me to step into the shoes of the valuer in order to undertake a re-calculation.
It is reasonable that the husband’s conduct in the payment to Mr G for the purchase of the shares should be brought to account as a contribution rather than as an add-back.
It is difficult to notionally add back money on the basis that the husband has acted recklessly, negligently or wantonly with matrimonial assets where there is no evidence as to how that could be brought to account. Again, the issue should be reflected in a value of the valued entities rather than simply the adding back into the pool of $200,000.

Wastage – DD Pty Ltd

The husband’s engagement with DD Pty Ltd is difficult to justify in terms of the extraordinary charges rendered to the husband and A Pty Ltd for the 2018 and 2019 financial years.
The wife’s claim is limited to $54,029, being the total of the invoices rendered by DD Pty Ltd for services prior to 30 June 2018.
It is assumed that the expenditure on accounting services was considered as a deductible expense and has, to some extent, been brought to account.
The level of expenditure by the husband and A Pty Ltd in favour of DD Pty Ltd has little to recommend it, but I cannot say that it falls into the category of wanton, negligent or wilful diminution of matrimonial assets. The husband contracted for the provision of accounting and other professional services which were rendered by DD Pty Ltd and quantified by invoice.
I do not propose to add back into the pool the amount claimed by the wife.

Adjusted property pool

Assets

Owned by

Value

$

L Street, M Town

Wife

615,000

R Street, S Town

Joint

299,626

Valued entities

Husband

-125,458

Equity from N Street

Husband

240,823

Equity from O Street

Husband

14,016

Household contents

Husband

2,000

Household contents

Wife

5,000

Super Fund 1 entitlement

Wife

50,836

Super Fund 2

Husband

92,000

Legal fees added back

Wife

49,000

Legal fees added back

Husband

Nil

Total Assets

$1,242,843

Liabilities

Commonwealth Bank Loan over M Town

Joint

308,000

CBA Mastercard

Husband

3,400

Total Liabilities

$311,400

Net Pool

$931,443

Contributions of the parties

The Court is required to make such orders in adjusting the interests of the parties in property as is just and equitable.
I am required to consider the direct and indirect financial contributions made by the parties to the acquisition, conservation or improvement of property (s 79(4)(a) of the Act), the contribution other than a financial contribution made directly or indirectly by the parties to the acquisition, conservation or improvement of property (s 79(4)(b) of the Act) and the contribution made by the parties to the welfare of the family in their capacity as parent or homemaker (s 79(4)(c) of the Act).
The parties were in employment during the period of cohabitation, with the wife’s involvement in the valued entities being subservient to her role as homemaker.
The wife submits that having regard to the evidence, the length of the marriage, the duties and roles undertaken by each of the parties during cohabitation and that each party entered the relationship with modest assets, the contributions of the parties should be considered as equal.
The wife accepts that there were significant financial contributions by the husband, however, weight must also be given to the significant non-financial contributions of the wife.
The husband argues that the contribution should be as to 55/45 in favour of the husband in order to give weight to his superior financial contribution throughout the marriage, but in particular post-separation.
It is difficult to draw a distinction between the contributions of the parties during the course of their long marriage. It is likely that the husband was the driving force behind the business enterprise, but that is not to diminish the wife’s involvement in the business and her care of the children.
The parties are agreed that at the commencement of the relationship neither had assets of significance.
During the course of the relationship the parties each made a valuable contribution consistent and commensurate with their capacity and abilities. They had a clear and mutual purpose namely, to provide financial security for their family.
Subject to the consideration of the wife’s application for arrears of spousal maintenance, it is conceded that the husband met the loan repayments in respect of the M Town property, occupied by the wife and the children, and also a raft of other expenses pursuant to orders made.
Each of the parties drew upon the financial resources to support the business but also their separate personal expenditure. The wife acknowledges that she withdrew substantial sums of money, conceded by the wife to be $20,000 initially and then a further amount of $10,000. The issue is not that the wife in this instance drew down on money that was available but rather, how it was utilised.
I am satisfied that monies obtained by each of the parties was spent more or less wisely on household and other living expenses.
I bring to account the husband’s conduct in relation to the employment arrangements for Mr AA, the husband’s dealings with Mr G to the potential detriment of the valued entities and their value, and the money spent on what was ultimately to be futile financial and management advice from DD Pty Ltd. Whilst it may have been capable of consideration pursuant to s 75(2(o), on balance it is better reflected in the parties contribution.
For those reasons I consider that the contributions of the parties should be considered as to 52.5/47.5 in favour of the wife.

Section 75(2) factors

The wife seeks an adjustment sought by her at 10 percent. That is based upon an assessment by the wife that the pool of assets is about $1,500,000 and that 10 percent represents a differential between the parties of about $300,000.
The husband concedes an adjustment of between 5 and 10 percent.
The husband’s concession is based upon a recognition that the wife is nearly 10 years older than the husband and is therefore closer to a retirement age. The husband intrinsically accepts that the wife’s occupation historically has been that of home duties and then providing some clerical and administrative assistance in the business.
The husband considers that whilst his income is currently linked to the financial success or otherwise of the business, nonetheless, his skill set as a qualified tradesperson together with some of the not inconsiderable management skills that he may have developed over the period since A Pty Ltd commenced its business operations, is such that would justify a minimum of 5 percent but possibly an adjustment as high as 10 percent.
The wife continues to have the care of the children, but it could not be said that the husband has been ungenerous in the provision of child support. That is not to suggest that the husband should get credit for complying with a court order or a child support assessment in respect of the payment of child support or maintenance, but it does mean that there is not a significant financial impost remaining with the wife in respect of the children’s care.
Nearing the end of the proceedings it was revealed that the wife has now gained employment and has re-partnered. Her income is nonetheless modest and it is still a reasonable argument that the difference in their earning capacity would in and of itself warrant an adjustment in favour of the wife.
It must be remembered that an adjustment in favour of one party or the other is not an exercise in a vacuum but rather, must be considered against the asset pool and a determination that the adjustment is meaningful in terms of a dollar value.[18]
[18] See Waters & Jurek (1995) FLC 92-635.
Taking into account that the net asset pool has a value of $931,443 (not including any residual liability for the P Bank debt), I find that a 10 percent adjustment for factors pursuant to s 75(2) of the Act is justified. This results in a differential of $186,288.

P BANK debt

The husband asserts that the P Bank debt is $404,000. The wife contends that the Court should ignore the P Bank debt in circumstances where the non-disclosure by the husband of relevant documents does not enable a proper consideration of the likelihood that the entirety of the debt would be levied against the husband and not the other co-guarantors.
As discussed, I consider that there is sufficient evidence to find that there may well be an amount that the husband will ultimately be liable to pay the P Bank. I do not consider that the potential loss arising out of the husband’s investment in D Pty Ltd and E Pty Ltd has any flavour of a deliberate attempt by the husband to waste the assets of the parties. The purchase of the franchise businesses was a commercial endeavour and the fact that the businesses failed in spectacular fashion does not mean that the outcome is something other than in the ordinary ebb and flow of a commercial enterprise. Some businesses are more or less successful. It is the conduct of the participants that is relevant and not the magnitude of profit or loss occasioned by one or other of the parties. The P Bank debt should be brought to account.

Conclusion

The net pool is $931,443. At 62.5 percent the wife is to retain property (including her superannuation) totalling $582,152. The wife retains the following:-

The M Town property

615,000

House contents

5,000

Superannuation

50,836

Legal fees added back

49,000

Total

719,836

Less M Town mortgage

-308,000

Balance

$411,836

The wife is entitled to retain property to the value of $582,152 leaving an amount to be received by the wife in the sum of $170,316.
The settlement sum is to be paid from the proceeds of sale of the S Town property.
The remaining consideration is the manner in which any liability to the P Bank should be dealt with as between the parties. It is in the interests of the husband and the wife to do all things necessary as may be required to bring about a resolution of the amount outstanding to the P Bank, if any.
The net asset pool (including superannuation and legal fees added back) is less than $1 million. The potential liability to the P Bank represents about 40 percent of the net pool. It is an overwhelming consideration and not one that can be ignored.
I do not propose to make final orders, but rather to put in place orders by way of partial settlement of property which will have the effect of resolving some of the substantive issues between the parties.
Save as to spousal maintenance, the proceeds from the sale of the S Town property will be preserved pending the resolution or determination of the P Bank liability.
I propose to adjourn further consideration of the status of the P Bank loan for a period of six calendar months from the date of these orders, to enable the parties to crystallise the P Bank liability and for the S Town property proceeds to be utilised to discharge in whole or in part, any outstanding liability to the P Bank, noting that the wife is entitled to $170,316 plus any interest that accrues from the sale proceeds, less any amount that the parties agree should properly represent the wife’s contribution to the P Bank debt.
Once the P Bank debt has been determined either by agreement between the parties with the P Bank or by judgment, the wife’s proportion of the debt would be 62.5 percent.
Given that the husband has had control over the negotiations with the P Bank in circumstances where I accept that reasonable requests for information have not been met, it is just and equitable that the wife’s liability be capped at a maximum of $170,316 plus accrued interest, being her settlement from the S Town property settlement proceeds and that thereafter the husband shall indemnify her in respect of any debt remaining.

Arrears of spousal maintenance

The wife seeks arrears of spousal maintenance in the total sum of $39,530. Orders were made by consent on 12 February 2018 which required the husband to pay a significant raft of payments by way of spousal maintenance.
At [43] of the husband’s trial affidavit filed 27 February 2019, he acknowledges that following the wife’s withdrawal of $20,000 from the M Town property home loan account, he instructed his solicitor to forward correspondence to the wife seeking that the $20,000 be restored to the loan account. The money was not repaid and the husband ceased the spousal maintenance payments of $500 per week and also a range of other expenses detailed at [41] of his affidavit. The wife also retained savings at separation.
It is not the subject of challenge that the husband incurred significant expenditure both by way of spousal maintenance and child support.
Orders made on 22 March 2019 varied the earlier orders for spousal maintenance by discharging the obligation on the husband to pay the wife’s fuel and mobile telephone expenses.
The husband does not agree that the wife’s assessment of the arrears of spousal maintenance is supported by the evidence.
It is accepted that the husband has not paid spousal maintenance but in circumstances where it is claimed that the husband has paid significant items of expenditure to preserve the pool of assets, the Court should consider exercising its discretion in respect of any order that it may choose to make regarding arrears of spousal maintenance.
The husband concedes that in relation to items at [41] of the husband’s trial affidavit, he has not paid items 2, 3, 4 and 6 being gas, electricity and rates for the M Town property together with the internet. He has paid items 1 and 5 being the M Town property mortgage and home insurance. The husband has paid items 1 through to 5 as set out at [42] of his trial affidavit, but has not paid the periodic spousal maintenance sum save as to one payment made on 29 November 2018.
The husband considers the Court should take into account the withdrawal of monies by the wife from the M Town property mortgage account, but more particularly, her changed circumstance in that she commenced work on 11 November 2019 and had re-partnered since early 2019, if not before.
The change in the wife’s circumstances is a significant issue.
I consider that it is a relevant factor that the husband has paid significant additional expenses with respect of the children which were not required of him.
The wife’s Queen’s Counsel conceded that the quantification of the total amount of arrears, as asserted, is less than satisfactory as indicated by the following exchange at page 540, line 39 of the transcript:-
Mr Looney:And the husband confirmed that he stopped paying spousal maintenance from 4 December 2018 at paragraph 41 of his affidavit. However, I’m instructed that spousal maintenance has been being collected by the child support agency and notwithstanding the state of the evidence would not be appropriate to proceed on the basis that the $500 spousal maintenance hasn’t been paid through that other process. I don’t – I can’t tell you why.
His Honour:   Is that the amount we’re talking about? $500?
Mr Looney:Now, that was – that was the cash amount to the wife. The total amount…
His Honour:   Yes.
Mr Looney:Your Honour may recall that there was…
His Honour:   Maybe.
Mr Looney: …a list of amounts..
His Honour:   Yes.
Mr Looney:…identified in that evidence. We say that the amount unpaid on the evidence, firstly, is for the period of the 11 weeks from 4 December 2018 when he stopped paying maintenance calculated including that $500 on the basis of the table showing $1310 less $760 that…
His Honour:   $760. Less $760.
Mr Looney:Less 760 plus 630 from that table. It’s – it’s an amount of $1180 for 11 weeks. That included the $500 up to the point when my instructions are that the obligation to pay that $500 was registered with the CSA and they started collection. So from that period for a further four weeks it should be a weekly amount of $1180 less $500. That is $680 for four weeks being a total of $2720. And then from the date of the order – 22 March 2019 – when your Honour removed several items from the obligation to be paid the relevant amount then to be paid from then on should have been $550 up to the date of trial – up to the date of hearing as – sorry, up to the date of submissions today is 44 weeks – a further $24,200. The total of the amount that we say are unpaid on the evidence – and it does require calculation to get there – is 39,900. That is not – it’s an amount that doesn’t find its way into the balance sheet because it’s an order that’s unpaid and we say your Honour should make it as a separate order to specify the amount to be paid. Now, I can – if it assists your Honour I can arrange for a table to be prepared that makes specific cross-reference to the various amounts.
I am not satisfied that the evidence would support a finding in terms of the wife’s application for arrears. Equally, I accept the husband’s concession that he did not make maintenance payments specifically because of the sum that the wife took from the draw down from the M Town property mortgage and the extra expenses that the husband paid over and above his child support and spousal maintenance obligations.

I propose to exercise my discretion and bring to account the sum of $20,000 that the wife utilised, following the draw down on the mortgage together with the other expenses paid by the husband and conclude that the arrears should be set at $12,980 calculated by a reference to an amount of $1,180 for 11 weeks, being the time that spousal maintenance was not being paid up to the point of registration with the Child Support Agency.
I consider that the arrears of spousal maintenance should be dealt with by a separate amount to be paid by the husband to the wife from his share of the S Town property proceeds.
The settlement sum to be paid to the wife is $170,316, which sum is to be quarantined pending further consideration of the P Bank debt as provided for in these reasons and the further sum of $12,980 from the S Town property proceeds to be paid forthwith to the Trust Account of Withnalls Lawyers for and on behalf of the wife. Given that the wife is to receive the sum of $12,980 from the net proceeds of sale and not from the husband’s share she should get a further sum of $8,112 being 62.5 percent of $12,980.

I certify that the preceding three hundred and fifty two paragraphs (352) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Berman delivered on 14 May 2020.

Associate:

Date: 14 May 2020

[2020] FamCA 356

14 May 2020

Key Legal Topics

Areas of Law

Family Law

Equity & Trusts

Legal Concepts

Remedies

Costs

Assets	Owned by	Value $
L Street, M Town	Wife	615,000
R Street, S Town	Joint	299,626
Valued entities	Husband	-125,458
Equity from N Street	Husband	240,823
Equity from O Street	Husband	14,016
Household contents	Husband	2,000
Household contents	Wife	5,000
Super Fund 1 entitlement	Wife	50,836
Super Fund 2	Husband	92,000
Legal fees added back	Wife	49,000
Legal fees added back	Husband	Nil
Total Assets	$1,242,843
Liabilities
Commonwealth Bank Loan over M Town	Joint	308,000
CBA Mastercard	Husband	3,400
Total Liabilities	$311,400
Net Pool	$931,443

The M Town property	615,000
House contents	5,000
Superannuation	50,836
Legal fees added back	49,000
Total	719,836
Less M Town mortgage	-308,000
Balance	$411,836