ARTINOS & ARTINOS
[2020] FamCA 1077
FAMILY COURT OF AUSTRALIA
| ARTINOS & ARTINOS | [2020] FamCA 1077 |
| FAMILY LAW – PROPERTY – Where it is just and equitable to make orders for property division – Where the contributions are assessed as 55 per cent to the husband and 45 per cent to the wife – Where it is appropriate for an adjustment to be made under section 75(2) of the Family Law Act 1975 (Cth) – Where the wife has the primary care of the children and has spent 12 years out of the workforce – Orders for an adjustment of 20 per cent. |
| Child Support (Assessment) Act 1989 (Cth) s 117(2)(c) Family Law Act 1975 (Cth) ss 72, 75, 79 |
| Weir and Weir (1993) FLC 92-338 Black and Kellner (1992) FLC 92-287 Stanford v Stanford (2012) 247 CLR 108 |
| APPLICANT: | Ms Artinos |
| RESPONDENT: | Mr Artinos |
| FILE NUMBER: | SYC | 1547 | of | 2019 |
| DATE DELIVERED: | 14 December 2020 |
| PLACE DELIVERED: | Sydney |
| PLACE HEARD: | Sydney |
| JUDGMENT OF: | Stevenson J |
| HEARING DATE: | 14-16 September 2020 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr Sansom SC |
| SOLICITOR FOR THE APPLICANT: | Southern Waters Legal |
| COUNSEL FOR THE RESPONDENT: | Mr Alexander |
| SOLICITOR FOR THE RESPONDENT: | Crowther Sim Lawyers |
Orders
Both parties forthwith do all things and execute all documents necessary to effect the sale, for the best price reasonably obtainable of the property situate at and known as B Street, Suburb C in the State of New South Wales and to distribute the proceeds thereof as follows:
1.1 in discharge of the mortgage to the National Australia Bank
1.2 in payment of agent's commission and expenses
1.3 in payment of legal costs and expenses incidental to such sale
1.4 in payment of 95 per cent of the balance then remaining to the wife
1.5 in payment of the balance to the husband.
Upon the sale of the sale of the businesses known as "Business 1" and "Business 2" in accordance with interim orders made by consent on 13 January 2020, the parties do all things and execute all documents necessary to effect the distribution of the net proceeds thereof as to 65 per cent thereof to the wife and the balance to the husband.
Otherwise, each of the parties is declared to be solely entitled to all assets of whatever nature which are presently in his or her respective possession or control.
Orders 1 and 2 made by consent on 27 May 2019 will stand discharged upon receipt by the wife of her share of the proceeds of sale of the property B Street, Suburb C in accordance with Order 1 hereof.
The wife's application for spouse maintenance is dismissed, subject to Order 4 hereof.
The wife's application for child support departure orders is dismissed.
The Application in a Case of the husband filed on 18 June 2020 is dismissed, subject to Order 4 hereof.
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 Artinos & Artinos 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 SYDNEY |
FILE NUMBER: SYC 1547 of 2019
| Ms Artinos |
Applicant
And
| Mr Artinos |
Respondent
REASONS FOR JUDGMENT
The proceedings
Ms Artinos and Mr Artinos are parties to litigation in relation to alteration of property interests, spouse maintenance and child support departure orders. The husband's Application in a Case filed on 18 June 2020 was also listed for hearing on the trial dates of 14, 15 and 16 September 2020.
The applicant wife sought orders which may be summarised as follows:
1.the parties forthwith effect the sale of the former matrimonial home at B Street, Suburb C ("the Suburb C property") and cause payment to the wife of the whole of the net proceeds thereof
2.the husband pay to the wife an amount equal to the difference between the net proceeds of sale of the Suburb C property and $2,000,000, less $49,903 plus half of any increase in the gross sale price above $2,800,000
3.the parties effect the sale of Business 1 and Business 2, in accordance with consent interim orders made on 13 January 2020, and distribute the net proceeds thereof as to 75 per cent to the wife and the balance to the husband
4.the wife have exclusive occupation of the Suburb C property pending its sale, with the husband to pay all outgoings
5.the husband pay to the wife by way of spouse maintenance accommodation rental to a maximum amount of $1,050 per week together with a sum of $300 per week, with such payments to continue until the earlier of the wife's obtaining full-time employment or a period of two years
6.by way of child support departure order, the husband pay $700 per week; private school fees and costs of all extracurricular activities of the children.
The respondent husband sought orders which may be summarised as follows:
1. the husband pay to the wife a sum of $750,000 within 42 days
2.simultaneously with such payment, both parties do all things necessary to transfer to the husband the whole of the wife's interest in the Suburb C property
3.the interim orders of 13 January 2020 be discharged and that there be alternate orders for the sale of Business 1 and Business 2, with a distribution of the net proceeds as to 55 per cent to the husband and the balance to the wife.
Although the Minute of Orders dated 15 September 2020 was silent as to the proposed spouse maintenance and Child Support departure orders, the tenor of final submissions on behalf of the husband left no doubt that he sought a dismissal of those applications. His Application in a Case filed on 18 June 2020 sought a variation of interim orders for spousal maintenance made by consent on 27 May 2019.
Background
This background material is not a fulsome financial history of the parties' relationship. It became clear during the oral evidence of the husband that his affidavit omitted reference to substantial dealings with real estate and business enterprises both before and after the marriage. Senior counsel for the wife submitted that the husband failed to make full and frank disclosure and, as such, adverse consequences flow to his case, on the basis of authorities such as Weir and Weir (1993) FLC 92-338 and Black and Kellner (1992) FLC 92-287.
The husband and the wife, who are aged 46 and 40 respectively, married and began to live together on 30 June 2007. They are the parents of four children:
● W born on … 2008 (12)
● X born on … 2010 (10)
● Y born on … 2012 (8) and
● Z born on … 2015 (5).
Since the separation the children have lived with the wife and spent regular time with the husband, by agreement between the parties.
In late March 2017 the parties separated under the one roof and the wife moved into rental accommodation with the children in May 2017. The parties were divorced by order which became final in July 2019.
The husband purchased a restaurant in 1996 and has since been involved in the hospitality industry in a number of different ventures. Prior to the marriage the husband acquired a business known as Business 3 and a business known as Business 4. The husband deposed that he sold these businesses in about 2006 for $395,000 and $255,000 respectively.
In 2003 the husband purchased the property D Street, Suburb E for $585,000. He borrowed $468,000 from the Commonwealth Bank and paid the balance from funds available to him at the time. The husband's mother gifted to him a sum of $100,000, of which $22,000 was used to pay stamp duty and the balance deposited into the mortgage account.
The husband deposed that he purchased a business known as Business 5 in 2007 for $100,000. The registered owner of this business was a company known as Artinos Trading Group Pty Ltd, which the husband caused to be incorporated in 2007. In his oral evidence the husband said that he sold this business in December 2009 for $400,000. He said that he had a partner in this business, who received approximately 30-40 per cent of the proceeds and that his (the husband's share) amounted to approximately $275,000.
At the date of the marriage the husband owned the following assets:
● Business 5
●Motor vehicle 1 or a cash sum of $101,000 cash from its sale
● D Street, Suburb E.
The wife received a gift of $70,000 from her mother at the time of the marriage. The parties applied these funds to the purchase of a home unit at Suburb H in the name of the wife. The purchase price was $318,000 and the property was subject to a mortgage of $220,000.
The wife worked as an administrative assistant until April 2008, which was shortly prior to the birth of the parties' first child W in 2008. It was common ground that the parties agreed that they wanted a large family, with the wife to leave the paid workforce and take on the role of primary homemaker and carer for the children. Consequently, the wife has not engaged in paid employment for some twelve years.
In 2008 the parties purchased the property FF Street, Suburb GG for $800,000. They borrowed $600,000 from the Commonwealth Bank and applied the proceeds of sale of the Suburb H apartment and the Suburb E property to the purchase price.
When the husband sold Business 5 in 2009 he established Business 1, which operates via a company known as Artinos Trading Group Pty Ltd. There was no evidence as to the details of purchase and/or establishment costs in relation to this business.
In 2010 the Artinos property trust was established, with the husband and his brother Mr U as appointors and nominated beneficiaries. The trustee is a company known as J Pty Ltd, of which the husband and his brother are directors and equal shareholders.
The company J Pty Ltd is the registered proprietor of the following real properties:
● K Street, Suburb L ("the Suburb L property")
● M Street, Suburb N ("the Suburb N property")
● O Street, Suburb P ("the Suburb P property").
Prior to 2010, these properties were owned by the husband's parents.
In October 2010 the husband's parents entered into a deed of loan with J Pty Ltd, in a principal sum of $1,550,666 for a term of thirty years at a 7 per cent rate of interest. The Suburb L, Suburb N and Suburb P properties were transferred to the company J Pty Ltd and now constitute the principal assets of the Artinos Property Trust. The Suburb L property is leased to Artinos Trading Group Pty Ltd and houses Business 1.
The company Q Pty Ltd was registered in October 2011, with the husband and the wife as directors and shareholders. This company is the trustee of the Q Family Trust, of which the husband is the appointor and sole nominated beneficiary.
In December 2012 the wife's mother made a loan of $100,000 to the husband at her request. These funds were repaid without interest over a period of approximately three years.
In 2014 the husband established a take-away business known as Business 2, which operates across the road from Business 1. The take-away business has continued to operate on a restricted basis during the COVID-19 pandemic but Business 1 closed in March 2020. The husband operates Business 2 via a company known as R Pty Ltd, of which he is the sole director and shareholder.
On 25 March 2019 interim orders were made by the Senior Registrar, which included the following:
1.The husband pay to S Group, Suburb T sufficient monies to discharge arrears of rental with respect to the wife's home and that the husband thereafter pay promptly all lease payments for the wife's accommodation
2.Pursuant to section 77 [of the Family Law Act 1975 (Cth)] the husband cause to be paid directly to the wife within 72 hours a sum of $8,000.
On 27 May 2019 the parties consented to the following interim orders:
1.the husband pay the wife's periodical rental payments and ongoing costs of health insurance
2.the husband pay a sum of $8,000 to the wife as lump sum maintenance by no later than 22 May 2019
3.from 17 July 2019 the husband pay spouse maintenance to the wife in the sum of $1,000 per week.
On 26 September 2019 Baumann J made orders by consent, which included the following:
1.the husband cause to be paid to the solicitors for the wife a sum of $100,000 in respect of her legal fees “by way of interim property order (s 79 of the Family Law Act 1975) within 42 days.”
2.both parties are restrained from selling disposing or further encumbering any assets without providing to the other 28 days' notice in writing.
The husband has failed to pay $100,000 to the wife, although it would seem that he made unsuccessful efforts to borrow this sum.
In September 2019 the husband and his brother Mr U caused the sale of a commercial property located at V Street, Suburb P. The registered proprietor of this property was a company known as BB Pty Ltd, of which the shareholders were J Pty Ltd and Q Pty Ltd. The whole of the net proceeds of sale were paid to Mr U, by direction of himself and the husband.
On 13 January 2020 the Senior Registrar made the following orders by consent:
1.That within 7 days of the date of these Orders the Respondent Husband will do all things and sign all documents necessary to sell the businesses known as “Business 1” and “Business 2” for the best price reasonably obtainable and for the purpose of this Order:
(a)The Respondent Husband will provide to the Applicant Wife by no later than 4.00pm on 16 January 2020 a list of three business brokers to act in relation to the sale of the businesses of which the Applicant Wife will elect one;
(b)The Applicant Wife will notify the Respondent Husband of her election no later than 4.00pm on 17 January 2020;
(c)The husband as sole director of R Pty Limited will sign all documents necessary to implement the sale of “Business 2”;
(d)The husband and wife as joint directors of Q Pty Ltd atf Q Family Trust will sign all documents necessary to implement the sale of “Business 1” (noting that Q Family Trust holds a 51% share in the business);
(e)The husband will do all things necessary to authorise the business broker appointed pursuant to these Orders to liaise with the Applicant Wife in relation to the sale including copying the Applicant Wife into all correspondence and negotiations in relation to the sale and provision of the settlement sheet;
(f)The sale price of the businesses is to be agreed between the parties in writing and no offer is to be accepted or contract for sale executed in relation to the sale of the businesses without the written agreement of both parties;
(g)The Respondent Husband as a director of J Pty Ltd will do all things and sign all documents necessary to procure a lease of the premises known as and located at K Street, Suburb L (being the premises from which the business “Business 1” operates) with the new owner.
2.That at the date of settlement of the sale of “Business 1” the proceeds of sale be disbursed in the following priority:
(a)All costs associated with the sale of the business including brokerage fees;
(b)In payment of the sum of $100,000 (or whatever amount remains outstanding at the date of settlement), to be paid to the solicitors for the wife in compliance of Order 1 of the Orders made by the Court on 26 September 2019 (unless the wife is paid from the sale of “Business 2” pursuant to Order 3(b));
(c)In payment to the solicitors for the wife of the sum equivalent to interest calculated in accordance with the rate prescribed in the Family Law Rules accumulating from 7 November 2019 (being the date payment pursuant to Order 1 of the Orders made by the Court on 26 September 2019 was due) until date of payment (unless the wife is paid from the sale of “Business 2” pursuant to Order 3(c));
(d)The balance to be held in a controlled monies account pending further Order or written agreement between the parties.
3.That at the date of settlement of the sale of “Business 2” the proceeds of sale be disbursed in the following priority:
(a)All costs associated with the sale of the business including brokerage fees;
(b)In payment of the sum of $100,000 (or whatever amount remains outstanding at the date of settlement) to be paid to the solicitors for the wife in compliance of Order 1 of the Orders made by the Court of 26 September 2019 (unless the wife is paid from the sale of “Business 1” pursuant to Order 2(b));
(c)In payment to the solicitors for the wife of the sum equivalent to interest calculated in accordance with the rate prescribed in the Family Law Rules accumulating from 7 November 2019 (being the date payment pursuant to Order 1 of the Orders made by the Court on 26 September 2019 was due) until date of payment (unless the wife is paid from the sale of “Business 1” pursuant to Order 2(c));
(d)The balance to be held in a controlled monies account pending further Order or written agreement between the parties.
4.That pending the sale of the businesses the husband be restrained from encumbering the businesses, on-selling the assets of the businesses (unless such sale is part of the usual conduct of the business) or running the business in a manner so as to reduce their value.
5.That the husband continue to operate the businesses pending their sale.
6.These Orders are not intended to interfere with previous Orders made by the Court on 27 May 2019.
7.That the Application in a Case filed by the Applicant Wife on 6 December 2019 and 7 January 2020 otherwise be dismissed.
8.That each of the parties pay their own costs associated with the Application in a Case filed on 6 December 2019 and 7 January 2020.
9.That the Respondent Husband pay for the costs of the mediation on 31 January 2020 (not including the wife’s own legal expenses) in the first instance.
10.That within 7 days of receipt of Notices of Assessment or notices setting out monies due to the Australian Taxation Office owing by the businesses and arising from the operation or sale of the businesses, the wife will do all things and sign all documents to authorise payment of the amount due from the sale proceeds held on trust pursuant to Order 2(d) and 3(d).
11.The Wife will not make any application for the sale of the property known as and located at B Street, Suburb C until a date after 1 April 2020 except for any application that she may make during the course of the final hearing due to commence on 30 March 2020.
12.That in reaching agreement as to the sale price of the businesses the parties will be guided by the broker and the valuation prepared by Mr DD in these proceedings.
NOTATION
AThat, provided the Wife agrees to the proposed price reasonably obtainable for the businesses (“the agreed price”) and is satisfied that the Husband is able to make immediate payment to the Wife in the amount of $100,000 and interest, nothing in these Orders precludes the Husband retaining the businesses with the value ascribed to them in the Balance Sheet being the agreed price.
Approach to these proceedings
In Stanford v Stanford (2012) 247 CLR 108 the majority of the High Court of Australia held as follows:
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 this 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.
Their Honours further observed as follows:
In many cases where an application is made for a property settlement order, the just and equitable requirement is readily satisfied by observing that, as the result of a choice made by one or both of the parties, the husband and wife are no longer living in a marital relationship. It will be just and equitable to make a property settlement order in such a case because there is not and will not thereafter be the common use of property by the husband and wife. No less importantly, the express and implicit assumptions that underpinned the existing property arrangements have been brought to an end by the voluntary severance of the mutuality of the marital relationship. That is, any express or implicit assumption that the parties may have made to the effect that existing arrangements of marital property interests were sufficient or appropriate during the continuance of their marital relationship is brought to an end with the ending of the marital relationship. And the assumption that any adjustment to those interests could be effected consensually as needed or desired is also brought to an end. Hence it will be just and equitable that the court make a property settlement order. What order, if any, should then be made is determined by applying s 79(4).
I am comfortably satisfied that it is just and equitable that there be orders for alteration of property interests between the parties to these proceedings. They have lived separately for approximately three and-a-half years and have intermingled their funds only to the extent required by interim court orders for spouse maintenance.
It is first necessary to determine the nature, value and ownership of the assets and superannuation interests of the parties and the quantum of their liabilities. There was no suggestion that either party holds a financial resource. All relevant contributions of each of the parties, within the meaning of paragraphs (a) to (c) of section 79(4) must be identified and weighed against each other. The matters set out in paragraphs (d) to (g) of section 79(4), particularly paragraph (e) which takes up by reference the provisions of section 75(2), must be considered and a determination made as to what if any alteration should be made to the entitlements of the parties as earlier assessed on account of contribution.
The evidence and witnesses
The applicant wife relied upon the following affidavits:
1. Ms Artinos (the wife) sworn on 18 March 2020
2. Ms CC (the mother of the wife) sworn 18 March 2020
3. Financial Statement of the wife sworn on 13 March 2019.
The wife's mother was not required for cross-examination.
The respondent husband relied upon the following affidavits:
1. Mr Artinos (the husband) sworn 18 March 2020
2. Mr Artinos (the husband) sworn 15 June 2020
3. Financial Statement of Mr Artinos sworn 15 June 2020.
The affidavit of the husband sworn on 15 June 2020 was sworn in support of his Application in a Case filed on 18 June 2020.
A single expert forensic accountant, Mr DD, carried out valuations of the following corporate entities as at 30 June 2018:
ARTINOS AND ARTINOS
Summary of valuations
As at 30 June 2018
Entity
Value of entity
Value of interest held by the Husband
Refer paragraph
Business 1
582,061
296,851
107
Business 2
191,953
191,953
151
Family Trust
(131,738)
0
168
Property Trust
1,035,992
517,996
195
Investment Trust
0
0
213
1,006,800
Loan balances due to and (from) the Parties:
Due to Business 1 (Husband)
(28,772)
110
Due to Business 2 (Husband)
(239,135)
153
Due from the Family Trust (Husband)
55,065
171
Due from the Family Trust (Husband and Wife)
681,551
171
Due from the Property Trust (Husband)
78,668
186
Due from the Investment Trust (Husband)
14,952
214
562,329
These valuations were not updated and Mr DD was not required for cross-examination. The orders for sale of Business 1 and Business 2 mean that the marketplace will determine that value.
The assets, superannuation, liabilities and financial resources of the parties.
On the final day of the trial, the parties submitted a Balance Sheet in the following terms:
| ASSETS | |||||||
| Ownership | Description | Wife/de facto partner's value | Husband/de facto partner's value | ||||
| Real estate | |||||||
| 1 | Joint | B Street, Suburb C | 2,800,000 | 2,800,000 | |||
| Trusts | |||||||
| 2 | Husband | Interest in Artinos Trading Group ATF Artinos Investment Trust No 1 (trades as Business 1) | To be sold | To be sold | |||
| 3 | Husband | Interest in Q Pty Ltd ATF Q Family Trust (“the Family Trust”) | NIL | NIL | |||
| 4 | Husband | Interest in J Pty Ltd ATF Artinos Property Trust, noting the following properties owned: · K Street, Suburb L (agreed value of $1,837,500) · 8/21-23 O Street, Suburb P (agreed value of $590,000 with no encumbrance) · M Street, Suburb N (agreed value of $490,000 with no encumbrance) · (the “Property Trust”) | 517,996 | 433,692 | |||
| 5 | Husband &Wife | Interest in BB Group Pty Ltd ATF BB Unit Trust, noting the following property owned: · V Street, Suburb P (sold for $1,625,000) (“the Investment Trust”) | NIL | NIL | |||
| Companies | |||||||
| 6 | Husband | R Pty Ltd (trades as Business 2) | To be sold | To be sold | |||
| 7 | Husband | Business 1 Pty Ltd | NIL | NIL | |||
| Vehicles | |||||||
| 8 | Husband | Historic vehicle | 95,000 | 95,000 | |||
| | | | | | |||
| | | | | | |||
| 11 | Husband | Jetski | 10,000 | 10,000 | |||
| 12 | Husband | Various motorcycles | 1,000 | 1,000 | |||
| 13 | Wife | Motor vehicle 2 | 10,500 | 10,500 | |||
| | | | | | |||
| Bank accounts | |||||||
| 15 | Joint | NAB Classic banking offset account #..59 (balance as at 25/8/20) | DISREGARD | DISREGARD | |||
| 16 | Husband | CBA Netbank saver account #...04 (as at 26/8/20) | DISREGARD | DISREGARD | |||
| 17 | Husband | CBA Smart Access account #...47 (as at 26/8/20) | DISREGARD | DISREGARD | |||
| 18 | Wife | CBA account #...24 (balance as at 9/9/20) | DISREGARD | DISREGARD | |||
| 19 | Wife | CBA account #...53 (balance as at 9/9/20) | DISREGARD | DISREGARD | |||
| 20 | Wife | CBA account #...64 (balance as at 9/9/20) | DISREGARD | DISREGARD | |||
| 21 | Wife | CBA account #...15 held on trust for X Artinos ($11 as at 9/9/20) & #...52 ($0 as at 9/9/20) | DISREGARD | DISREGARD | |||
| 22 | Wife | CBA account #...45 held on trust for Z Artinos ($1 as at 9/9/20) | DISREGARD | DISREGARD | |||
| 23 | Wife | CBA account #...94 held on trust for Y Artinos ($19 as at 9/9/20) & #...08 ($20 as at 9/9/20) | DISREGARD | DISREGARD | |||
| 24 | Wife | CBA account #...89 held on trust for W Artinos ($9 as at 9/9/20) & #...44 ($1 as at 9/9/20) | DISREGARD | DISREGARD | |||
| 25 | Wife | NAB Account #...92 (now closed) | DISREGARD | DISREGARD | |||
| 26 | Wife | NAB Account #..87 (now closed) | DISREGARD | DISREGARD | |||
| 27 | Husband | Funds in trust (Philip Sim) | DISREGARD | DISREGARD | |||
| 28 | Wife | Funds in trust (Southern Waters Legal)(see Note) | DISREGARD | DISREGARD | |||
| Loans | |||||||
| 29 | Husband | Loan from the Family Trust | DISREGARD | DISREGARD | |||
| 30 | Joint | Loan from the Family Trust | DISREGARD | DISREGARD | |||
| 31 | Husband | Loan from the Property Trust | DISREGARD | DISREGARD | |||
| 32 | Husband | Loan from the Investment Trust | DISREGARD | DISREGARD | |||
| Total | 3,434,496 plus sale proceeds of two businesses | 3,350,192 plus sale proceeds of two businesses | |||||
| ADDBACKS | |||||||
| Ownership | Description | Wife/de facto partner’s value | Husband/de facto partner’s value | ||||
| 33 | Husband | Drawdown from mortgage account (#...99 – 1/8/17) | TO BE DEALT WITH IN SUBMISSIONS AS TO CONTENDED FAILURE TO PROVIDE F& F DSICLOSURE OR S75(2)(0) | NIL | |||
| 34 | Husband | Net proceeds of sale from V Street, Suburb P distributed to Mr U | TO BE DEALT WITH IN SUBMISSIONS AS TO CONTENDED FAILURE TO PROVIDE F& F DSICLOSURE OR S75(2)(0) | NIL | |||
| 35 | Husband | Share of rental bond owing to BB Pty Ltd re sale of V Street, Suburb P distributed to Mr U | TO BE DEALT WITH IN SUBMISSIONS AS TO CONTENDED FAILURE TO PROVIDE F& F DSICLOSURE OR S75(2)(0) | NIL | |||
| 36 | Husband | Sale of Boat 3 (December 2018) | TO BE DEALT WITH IN SUBMISSIONS AS TO CONTENDED FAILURE TO PROVIDE F& F DSICLOSURE OR S75(2)(0) | NIL | |||
| 37 | Husband | Paid legal | DISREGARD | DISREGARD | |||
| 38 | Wife | Paid legal fees (including disbursements) | DISREGARD | DISREGARD | |||
| Total | SEE ABOVE | $ NIL | |||||
| LIABILITIES | |||||||
| Ownership | Description | Wife/de facto partner’s value | Husband/de facto partner’s value | ||||
| 39 | Joint | Mortgage over B Street, Suburb C (as at 9/9/20) | 1,521,388 | 1,521,388 | |||
| 40 | Wife | CBA Credit card account #...79 (balance as at 9/9/20) | DISREGARD | DISREGARD | |||
| 41 | Wife | Loan owing to mother (payment of legal fees and funds in SWL trust) | DISREGARD | DISREGARD | |||
| 42 | Husband | Car loan over Historic vehicle | NIL | 50,000 | |||
| 43 | Husband | Liability for the 2017 & 2018 tax year | DISREGARD | DISREGARD | |||
| 44 | Husband | Amounts borrowed for legal fees | DISREGARD | DISREGARD | |||
| 45 | Husband | Loan from Husband to Business 1 | DISREGARD | DISREGARD | |||
| 46 | Husband | Loan from Husband to Business 2 | DISREGARD | DISREGARD | |||
| 47 | Joint | Outstanding school fees – EE School | 22,445 | 21,445 | |||
| 48 | Joint | Rental arrears – wife’s rental accommodation (as at 9/9/20) | 9,360 | 9,360 | |||
| 49 | Joint | Arrears of mortgage payments | NIL | E 27,696 | |||
| Total | $ 1,553,193 | $ 1,629,889 | |||||
| SUPERANNUATION | ||||||||
| Member | Name of Fund | Type of Interest | Wife/de facto partner’s value | Husband/de facto partner’s value | ||||
| 50 | Husband | Super Fund 1 (balance as at 31/12/18) | 38,560 | 38,560 | ||||
| 51 | Wife | Super Fund 2 (balance as at 18/8/20) | 39,403 | 39,403 | ||||
| Total | $ 77,963 | $ 77,963 | ||||||
| FINANCIAL RESOURCES | |||||||
| Ownership | Description | Wife/de facto partner’s value | Husband/de facto partner’s value | ||||
| 52 | |||||||
| Total | $ | $ 0 | |||||
| NET TOTAL ASSETS (including Superannuation) | $1,959,266 plus sale proceeds of two businesses | $ 1,798,266 plus sale proceeds of two businesses |
In final submissions, senior counsel for the wife indicated that her case was that Items 33, 34, 35 and 36 in the Balance Sheet should be taken into account in her favour pursuant to section 75(2)(o) rather than treated as "add backs" to the list of assets. These items were as follows:
33. Draw down from mortgage account by the husband
34.Net proceeds of sale of property V Street, Suburb P distributed to Mr U
35.Share of rental bond owing to BB Pty Ltd from sale of V Street, Suburb P distributed to Mr U
36. Proceeds of sale of Boat 3.
Senior counsel for the wife submitted that the Joint Balance Sheet should be considered to be "a reflection of known assets" and that "something in the order of $500,000 ought to be added back to the known asset pool reflecting what we know to be the extent of the failure [of the husband] to full and frankly disclose significant transactions." As noted, senior counsel for the wife indicated specifically that he sought that the effect of these transactions be taken into account in her favour pursuant to section 75(2)(o) of the Act.
The husband said that he drew down a sum of $250,000 from the mortgage account in August 2017, being some six months after the separation. The husband indicated that he did not inform the wife of this drawdown, in accordance with the parties' usual practice during the marriage. It appeared to be common ground that the husband controlled the parties' finances, without input from the wife, throughout the relationship. The husband said words to this effect in relation to his use of these funds:
I paid her rent, got her a car, filled the house up with furniture. I knew I was going to need money, I was a bit behind in taxes and the businesses started dipping in 2015.
Items 34 and 35 related to the proceeds of sale of a commercial property at V Street, Suburb P by the husband and his brother, without the knowledge of the wife. The trial affidavit of the husband was silent as to his acquisition and disposal of an interest in this property. All of the evidence in relation to these transactions came from documents subpoenaed by the wife and the cross-examination of the husband.
This combination of subpoenaed documents and the husband's oral evidence indicated that this property was purchased in 2017 by the company BB Pty Ltd. The husband and his brother obtained two loans from the ANZ Bank for $1,072,500 and $224,115 for a term of three years.
The property was sold in September 2019 for $1,625,000 and a sum of $1,077,000 was paid to the ANZ Bank. The net proceeds of sale amounted effectively to $376,547 plus a rental bond of $20,265. The husband and his brother caused all of these funds to be paid to Mr U. The parties are the sole shareholders of the company Q Pty Ltd and the husband holds one of two issued shares in the entity J Pty Ltd. Accordingly, on the basis of shareholding the parties and Mr U had entitlements to 75 per cent and 25 per cent respectively to the net sale proceeds of this property.
The husband claimed that his brother received all of these funds because the rental income generated by this property fell short of the mortgage repayments and that Mr U met whole of the difference. The husband agreed in cross-examination that, in accordance with relative shareholdings, he and the wife were entitled to 75 per cent of the net proceeds of sale of this property.
A document included in the wife's tender bundle (page 1308) suggested that Mr U may have used these funds to re-finance the liabilities of Business 1 with the National Australia Bank. It appears that there was a proposal for a refinance of NAB loans by a new facility with the ANZ Bank. There was no definitive evidence as to the fate of this money, however, after its payment to Mr U. The husband said in cross-examination "the bank held this money until March 2020."
Item number 36 in the agreed Balance Sheet referred to the proceeds of sale of Boat 3 by the husband in 2018. This matter was mentioned only briefly in final submissions on behalf of the wife and, to my recollection, not raised with the husband in cross-examination. I was taken to no evidence as to the sale of this asset and this issue can be taken no further.
There was a dispute in relation to the value of the husband's interest in the Artinos Property Trust. The wife adopted the valuation of the single expert, Mr DD, of $517,996 and the husband contended that his interest in this trust was worth $433,692.
The Artinos Property Trusts owns three parcels of real estate, with an agreed value of $2,917,500. From this amount Mr DD deducted beneficiary loans in a total amount of $1,730,116 and arrived at a net value of $1,035,992, of which 50 per cent equals $517,996. The largest beneficiary loan is that of the husband's parents, which amounted to $1,363,928 as at 30 June 2018. At this same date, the beneficiary loans of Mr U and the husband respectively amounted to $223,209 and $79,688.
The husband sought to deduct also an alleged additional loan of $320,000, solely on the strength of this evidence contained in his affidavit:
34.In June 2010, my parents entered into a deed of loan with J Pty Ltd in the amount of $1,759,000.00. The property has a current value of approximately $2,900,000.00 with a loan outstanding in the sum of $320,000.00.
Counsel for the husband made these submissions in support of his contention that his interest in the Artinos Property Trust has a value of $433,692:
The husband says that there is concurrent with that a loan which is currently at $320,000. He says that at paragraph 34 of his affidavit. Mr DD in paragraph 192 of his report indicated that the loan amount in relation to my client's parents was $1,730,116. Deducting those two amounts, namely, $1,730,116 and $320,000 from $2,917,500 produces a net – an amount in effect net of the income of $860,384. As my friend has explained, the evidence is that both [Mr U] and Mr Artinos have an equal share in J Pty Ltd and in those circumstances, the amount that is attributed at item 4 to the value of that interest on the part of the husband is $433,692.
These submissions rely on the premise that the loan account of the husband's parents was $1,730,116, together with the vague and uncorroborated evidence in the husband's affidavit. According to the unchallenged evidence of Mr DD, the beneficiary loan of the husband's parents was $1,363,928 and not $1,730,116. In my view, there was no satisfactory evidence of an additional loan of $320,000 as alleged by the husband. For these reasons I accept the evidence of Mr DD and find that the interest of the husband in the Artinos Property Trust has a value of $517,996.
Liabilities
There was an issue in relation to alleged arrears of mortgage repayments in relation to the Suburb C property. The husband contended that there are mortgage arrears of $27,696 but adduced no supporting evidence. The husband said that he has arranged for the mortgage repayments "to be on hold for six months", with an option for a further extension for six months. I do not accept that the parties have a liability on account of arrears of mortgage payments.
The husband alleged that he has a liability to Mr U of $50,000 in relation to the Historic motor vehicle. There was simply nothing to corroborate that contention, nor any explanation why Mr U was not called to provide this evidence.
It was common ground that there are arrears of private school fees, with the husband and the wife contending for figures of $21,445 and $22,445 respectively. I accept as evidence the document contained in the wife's tender bundle and will find that the arrears of fees owing to EE School amount to $22,445.
Accordingly, I find the assets, superannuation and liabilities of the parties to be as follows:
Ownership
Description
Value ($)
ASSETS
1.
J
B Street, Suburb C
2,800,000
2.
H
Interest in Artinos Trading Group atf Artinos Investment Trust No. 1 (trades as Business 1)
To be sold3.
H
Interest in J Pty Ltd atf Artinos Property Trust
517,996
4.
H
R Pty Ltd (trades as Business 2)
To be sold
5.
H
Historic vehicle
95,000
6.
H
Jetski
10,000
7.
H
Various motorcycles
1,000
8.
W
Motor vehicle 2
10,500
Total
$3,434,496
LIABILITIES
9.
J
Mortgage on title to B Street, Suburb C
1,521,388
10.
J
Outstanding fees owed to EE School
22,445
11.
J
Rental arrears in relation to wife's accommodation
9,360Total
$1,553,193
SUPERANNUATION
Member
Name of Fund
Type of interest
12.
H
Super Fund 1
38,560
13.
W
Super Fund 2
39,403
Total
$77,963
The designations "J", "H" and "W" in the above table denote ownership of assets and superannuation or liability for debts by the parties jointly, the husband or the wife respectively.
The contributions of the parties
There is no doubt that the husband held assets at the date of the marriage but there was no evidence as to their net value. The husband's evidence in relation to his assets and liabilities at the date of marriage lacked particularity and he produced no relevant documentation.
At one point in his oral evidence, the husband said that he held equity of approximately $140,000 in the Suburb E property at the date of marriage. He said also, however, that he did not have a valuation of the property as at the date of marriage and that he was unaware of the mortgage payout figure upon its sale in 2008. The husband said words to the effect:
I lost money on the property. I bought it for $585,000 and sold it for $565,000.
The husband's evidence in relation to the sale of Business 5 was similarly unsatisfactory and lacking in particularity. It emerged only in cross-examination that he had "a partner" in this business, who was said to have held "a 30-40 per cent share" and who took a portion of the sale proceeds in December 2009.
In his affidavit the husband deposed that, at the date of marriage, he held cash of approximately $118,000 from the sale proceeds of a Historic motor vehicle. In his oral evidence, however, the husband said that he owned this car at the date of marriage and received $101,000 upon its sale in October 2007. The husband said in cross-examination that he "found a receipt for $101,000".
Upon the marriage the wife received from her mother a gift of $70,000. The parties applied these funds to the purchase of an apartment at Suburb H. This property was sold in September 2008 and the net proceeds were applied to reduce the mortgage in respect of the Suburb GG home. Otherwise, the wife held no significant assets or liabilities as at the date of marriage.
The wife acknowledged readily that the husband "worked incredibly hard" in the restaurant businesses during the marriage and provided a high level of financial support for their family unit. While the husband did so, the wife devoted herself to the role of primary homemaker and carer for the parties' four children.
The parties had assistance from paid workers with ironing and the cleaning of their home, swimming pool, fish tank and windows. I do not consider that this paid assistance derogates from the wife's contribution as homemaker and parent, as seemed to be suggested by counsel for the husband. He stated in a Case Outline document that "The Wife was assisted in her domestic function by a small army of assistants paid by the husband". I accept that the wife was primarily responsible for the organisation and running of the parties' household, together with the medical care, educational needs and extracurricular activities of the children.
Since the separation the wife has been responsible for the majority of the care of the children. The husband said in his oral evidence that, in 2020, the children have spent two to three nights per week and a one-week holiday in his care. The wife's evidence was that the parties have flexible arrangements in relation to the children's time with the husband. She said that they usually spend two nights per week and a one-week holiday period each year in the care of the husband.
For a considerable period after the separation the husband paid the mortgage and other outgoings in respect of the Suburb C property, of which he had exclusive occupation. The husband paid the rental and most of the outgoings in respect of the wife's premises. He also paid spouse maintenance of $1,000 and child support of $1,000 per week and maintained private health insurance for the wife and the children.
The husband reduced payments of spouse maintenance to $800 per week in July 2018 and then to $700 in August 2018. In March 2019 spouse maintenance payments were reduced to $300 per week. On 27 May 2019 interim orders were made by consent, which provided that the husband pay the wife's rental and spouse maintenance of $1,000 per week. The wife gave uncontradicted evidence that the husband's payments of spouse maintenance were in arrears in an amount of $2,000 as at the date of trial. The Joint Balance Sheet submitted at the end of the trial included a liability of $9,360 on account of rental for the home occupied by the wife.
It appears that the husband used part of the sum of $250,000 drawdown on the mortgage account in August 2017 to meet some of these payments. He has derived no income from Business 1 since March 2020 due to the COVID pandemic. The level of his income from Business 2 in 2020 remained unclear at the conclusion of the trial.
Senior counsel for the wife submitted that the appropriate finding is equality of contribution as at the date of trial. Counsel for the husband contended that contributions should be assessed at 65 per cent to 70 per cent in his favour.
It seems to me that there are a number of difficulties with the contribution submissions made on behalf of the husband. Firstly he gave vague, inaccurate and/or changeable evidence in relation to his net asset position at the date of the marriage. Secondly, he retained the Suburb E property and Business 5 for approximately two years following the marriage, during which time both parties made contributions of various kinds to their relationship and family unit. Thirdly the husband has retained his interest in the Artinos Property Trust since its establishment in 2010, again during a period when both parties made contributions of various types.
I am not inclined, in effect, to isolate or quarantine the pre-marriage assets of the husband, nor his interest in the Artinos Property Trust, for the purpose of assessment of contributions. In my view, the submission of counsel for the husband undervalues the contributions of the wife. On the other hand, it seems to me that the initial contributions of the husband and his interest in the Artinos Property Trust must carry some weight. Effectively, the husband's interest in the Artinos Property Trust was gifted to him by his parents. I assess and I find that contribution should be assessed at 55 per cent to the husband and 45 per cent to the wife as at the date of trial.
Section 75(2) factors
I will refer only to those factors set out in section 75(2) which are relevant to the present proceedings. Some such factors, for example subsections 75(2)(ha) and (m) have no role to play in the outcome of this litigation.
(a) the age and state of health of each of the parties
and
(b) the income, property and financial resources of each of the parties and the physical and mental capacity of each of them for appropriate gainful employment
The husband and the wife are aged 46 and 40 respectively and they each enjoy good health. The wife has held no paid employment since 2008 but intends to re-enter the workforce when the parties' youngest child commences primary school. At present Z is five years of age and the wife has immediate plans to update her employment skills. She deposed that she wishes to complete a TAFE course which will qualify her as an educator (wife tender bundle PP1364-1371). This employment would dovetail with the wife's responsibilities as primary carer for the children.
It is common ground that the husband is to sell the two businesses, which have been his source of income for a number of years. The husband gave no evidence as to his plans for future employment or establishment of a new business.
In my view, the available evidence left considerable room for doubt as to the true financial position of the husband. For example, when he was asked about the source of funds for a trip to Europe for seven weeks in 2018 the husband said:
I paid a couple of thousand
and:
my friend paid for 80 per cent - he is a very generous person.
Additionally, there was no clear evidence as to the level of income which the husband has received from Business 2 in recent times. I accept that, almost certainly, there has been a downturn in profits due to the COVID-19 pandemic but cross-examination of the husband left concerns as to his business operating methods. For example the husband said inter alia:
I write down what my business takes each day. I keep the pieces of paper for a week and then throw them. I have a bookkeeper and an accountant. I have never been involved in that side of it.
The husband has demonstrated an ability to generate substantial levels of income over many years. Although his evidence was silent as to future plans, I am prepared to assume that he is likely to re-establish himself financially within a short period after the completion of these proceedings.
(c) whether either party has the care or control of a child of the marriage who has not attained the age of 18 years
The wife will continue her role as primary carer for the children for the next 13 years. The husband's future work commitments are unknown but, historically, the parties have been able to make their own arrangements for the children to spend time in his care.
(h) the extent to which the payment of maintenance to the party whose maintenance is under consideration would increase the earning capacity of that party by enabling that party to undertake a course of education or training or to establish himself or herself in a business or otherwise to obtain an adequate income
and
(k) the duration of the marriage and the extent to which it has affected the earning capacity of the party whose maintenance is under consideration
By agreement between the parties, the wife adopted a role of full-time homemaker and parent for ten years prior to the parties' separation. In my view, it is self-evident that her agreed role within the marriage has impacted adversely upon her earning capacity.
As noted, the wife has concrete plans to obtain a qualification for employment which will accommodate her primary child care responsibilities. She seeks an order for spouse maintenance for two years for that purpose.
(na) any child support under the Child Support (Assessment) Act 1989 (Cth)that a party to the marriage has provided, is to provide, or might be liable to provide in the future, for a child of the marriage
Currently the husband is assessed to pay child support in an amount of $554.67 per month. In my view, it is difficult to reconcile this assessment with the husband's apparent taxable income in 2019 of $131,617. The wife deposed that she has seen, by way of disclosure, the husband's 2019 Tax Return in such terms but she understands that this document has not been filed with the ATO. This document was tendered in evidence (Exhibit W24) and indicated that the husband received a sum of $64,570 from the Artinos Investment Trust No. 1.
(o) any fact or circumstance which, in the opinion of the court, the justice of the case requires to be taken into account
As noted, the wife contended that the husband has had and/or currently has access to matrimonial funds which he has diverted to his sole use. I have referred above to the $250,000 mortgage drawdown in 2017. It appears likely that some part of those funds was applied by the husband to payment of the wife's rental and spouse maintenance. An accounting of the husband's precise application of these funds is impossible on the available evidence.
To some extent the wife's case relied upon identification of significant funds held in bank accounts at various times and the husband's failure to explain the fate of these monies. This exercise focussed, inter alia, on funds held in bank accounts in 2014, 2016 and 2017. In my view, the husband's failure or inability to trace the fate of those funds does not necessarily indicate that he has diverted matrimonial money for his own use.
There is no doubt that the husband saw fit to divert to his brother the entirety of the interest of parties in the sale proceeds of the property at V Street, Suburb P. In my view, the husband gave no satisfactory evidence as to the reasons for this decision. As noted above, Mr U received the whole of the net proceeds of sale of $376,547 plus the rental bond of $20,265. Prima facie the parties were entitled to 75 per cent thereof, which equates to about $297,600.
Counsel for the husband properly conceded that section 75(2) factors favour the wife and contended for an adjustment of 15 per cent, presumably of the net pool of assets. Senior counsel for the wife submitted that there should be an adjustment in her favour of 20 per cent to 25 per cent.
In my view, the wife's ongoing primary child care responsibilities and her absence from the paid workforce for twelve years weigh significantly in her favour in terms of an adjustment pursuant to section 75(2). Additionally, I accept that the husband has been less than transparent in relation to his access to funds since the parties' separation. I am conscious that the husband has a history of generating quite substantial sums by operation of business ventures.
In all of the circumstances, I assess and I find that there should be an adjustment of 20 per cent of the net pool of assets in favour of the wife. Accordingly, there will be orders which have the effect of a division of the net pool of assets as to 65 per cent to the wife and 35 per cent to the husband. The superannuation benefits of the parties will remain in their respective beneficial ownership and be subject to no splitting orders. There were no submissions in relation to the superannuation benefits of the parties, which are modest and of approximately equal value.
The net pool of assets has a value of $1,881,303, of which 65 per cent and 35 per cent equate to $1,222,847 and $658,456 respectively. The husband holds the following assets:
($)
1. Interest in Artinos Property Trust
517,996
2. Historic Motor Vehicle
95,000
3. Jetski
10,000
4. Motorcycles
1,000
$623,996
In accordance with existing interim orders, the husband will take the following liabilities:
($)
1. Fees outstanding to EE School
22,445
2. Arrears of Wife's Rental
9,360
$31,805
Accordingly, the husband requires some $66,265 from the net proceeds of sale of the Suburb C property to constitute his entitlement of 35 per cent of the net pool of assets.
The wife will retain her motor vehicle with a value of $10,500 and will be free of liabilities. Accordingly, she requires some $1,212,347 to constitute her entitlement of 65 per cent of the net pool of assets.
Obviously, these calculations do not include the two hospitality businesses, which are to be sold by agreement between the parties. I will make orders to the effect that the net proceeds of sale of these two businesses are divided in the proportions of 65 per cent and 35 per cent thereof to the wife and the husband respectively.
It seems to me that the most expedient course is to frame orders in terms of an immediate sale of the Suburb C property and a division of the net proceeds in percentage terms, so as to reflect the proportions required to constitute the respective entitlements of each of the parties as calculated above. In approximate terms, these proportions amount to 95 per cent to the wife and 5 per cent to the husband.
I will not make fresh orders for the sale of the two hospitality businesses. I see no good reason now to depart from arrangements to which the parties consented on 13 January 2020.
I note that counsel for the husband submitted ultimately that the net assets should be divided as to 55 per cent to the husband and 45 per cent to the wife. A payment of $750,000 to the wife, together with her motor vehicle with a value of $10,500, represents approximately 40 per cent of the value of the net pool.
Spouse maintenance and the application in a case of the husband
I am sympathetic to the wife's position and commend her for her plans to return to the paid workforce. It seems to me, however, that there are two obstacles to her obtaining an order for spouse maintenance. Firstly, the orders which I will make for alteration of property interests will see her in receipt of a substantial lump sum from the proceeds of sale of the Suburb C property. In these circumstances I am of the view that from the time of her receipt of these funds, she would be hard-pressed to establish that she is unable to support herself adequately for the purposes of section 72 of the Act.
The second difficulty is the problem of ascertaining the financial position of the husband. I do not suggest that obfuscation is a defence to an application for spouse maintenance. The difficulty lies with a finding that the husband has a capacity to pay spouse maintenance.
It seems to me that a solution would be to allow the current orders for spouse maintenance to continue in operation until the wife receives her entitlement to the proceeds of sale of the Suburb C property. The husband consented to those Orders on 27 May 2019. I appreciate that he now contends that he is unable to afford to continue to make these payments. The reality, however, is that the wife will need financial assistance until she receives funds from the sale of the Suburb C property and the husband's evidence left doubt as to his current position.
Child support departure
In my view, similar difficulties exist in relation to the wife's application for child support departure orders. I struggle to make the necessary findings on the basis of the available evidence.
In my view, the only ground for departure which potentially is applicable to these proceedings is subsection 117(2)(c) of the Child Support (Assessment) Act 1989 (Cth), which provides as follows:
(c)that, in the special circumstances of the case, application in relation to the child of the provisions of this Act relating to administrative assessment of child support would result in an unjust and inequitable determination of the level of financial support to be provided by the liable parent for the child:
(i)because of the income, earning capacity, property and financial resources of the child; or
(ia)because of the income, property and financial resources of either parent; or
(ib)because of the earning capacity of either parent; or
(ii)because of any payments, and any transfer or settlement of property, made or to be made (whether under this Act, the Family Law Act 1975 or otherwise) by the liable parent to the child, to the carer entitled to child support or to any other person for the benefit of the child.
The difficulty in making the findings necessary to establish this ground are similar to those which lie in the way of the spouse maintenance orders sought by the wife.
The wife is at liberty at any time to make an application for review to the Child Support Agency. It is probably appropriate that she do so rather than seek to depart from the usual processes, as prescribed by legislation, in relation to assessment of child support.
I certify that the preceding ninety-three (93) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Stevenson delivered on 14 December 2020.
Associate:
Date: 14 December 2020
Key Legal Topics
Areas of Law
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Family Law
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Civil Procedure
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Equity & Trusts
Legal Concepts
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Consent
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Costs
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Remedies
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Fiduciary Duty
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Procedural Fairness
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Statutory Construction
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