ASHLEY & ASHLEY
[2017] FamCA 997
•8 December 2017
FAMILY COURT OF AUSTRALIA
| ASHLEY & ASHLEY | [2017] FamCA 997 |
| FAMILY LAW – PROPERTY – Settlement in relation to marriage – Where the parties were married for approximately 26 years – Where it is just and equitable that the parties have relief under s 79 of the Family Law Act 1975 (Cth) – Where the wife argues for property to be added back to the matrimonial pool – Where it is found that the proposed add-backs cannot be sufficiently established – Where the husband asserts the parties have not fully repaid a debt to his parents – Where the Court is not satisfied that this loan should be included in the balance sheet – Where it is agreed that contributions during the marriage were equal – Consideration of adjustments under s79(4)(d) – (g) of the Family Law Act 1975 (Cth) – Where the wife has been diagnosed with cancer, the husband has a greatly superior earning capacity and the husband’s partner owns a valuable home – Where an adjustment of 10 per cent is made to the wife – Where the wife is afforded the opportunity to retain the former matrimonial home. |
| Family Law Act 1975 (Cth) ss 75(2), 79, 81 |
| Commissioner of Taxation & Worsnop and Anor (2009) FLC 93-392 |
| APPLICANT: | Ms Ashley |
| RESPONDENT: | Mr Ashley |
| FILE NUMBER: | SYC | 6854 | of | 2012 |
| DATE DELIVERED: | 8 December 2017 |
| PLACE DELIVERED: | Sydney |
| PLACE HEARD: | Sydney |
| JUDGMENT OF: | Loughnan J |
| HEARING DATE: | 15, 16, 17 & 24 November 2017 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr Watkins |
| SOLICITOR FOR THE APPLICANT: | GA Lawyers |
| COUNSEL FOR THE RESPONDENT: | Mr Jackson |
| SOLICITOR FOR THE RESPONDENT: | Antonenas Legal Pty Ltd |
Orders
By consent, the parties shall forthwith do all things and sign all documents to cause a payment from the net proceeds of sale of B Street, Suburb C (“the B Street property”) held in a controlled monies account in the names of the parties (“the controlled monies account”) in the sum of $11,663 to the D Bank in respect of the loan secured over the property at E Street, Suburb F (“the Suburb F mortgage”).
Within three months from the date of these orders or within such further time as the parties may agree in writing, the husband shall do all acts and things and sign all documents to transfer to the wife his share in the property situated at E Street, Suburb F (“the Suburb F property”).
Forthwith upon that transfer specified in order (2) herein, the wife shall pay the husband $329,706.40 and shall discharge the Suburb F mortgage.
In the event that the Suburb F property is transferred in accordance with orders (2) and (3) herein the parties shall forthwith do all acts and things and sign all documents to cause:
(a)A payment from the controlled monies account to the Australian Taxation Office for the Goods and Services Tax (“GST”) referable to the sale of the B Street property (currently estimated to be appropriately $170,000); and
(b)The payment of the remaining balance in the controlled monies account together will the balance of funds held in the Ashley Investment Trust to be paid to the husband and to cause the controlled monies account and the trust to be closed.
In the event that the wife is unable to meet her obligations under order (3), forthwith upon her default, in lieu of orders (2), (3) and (4) the parties shall do all acts and things and sign all documents to cause the Suburb F property to be sold and:
(a) For the purposes of effecting that sale:
(i)The parties shall list the Suburb F property for sale by private treaty within 28 days;
(ii)In the event that within 14 days of the wife’s default, there is no agreement relating to a listing price, the listing price shall be determined by a valuer nominated by the President of the Real Estate Institute of New South Wales;
(iii)The parties shall list the Suburb F property for sale by private treaty with such real estate agent or agents as agreed upon between the parties; and
(iv)In the event that within 14 days of the wife’s default there is no agreement relating to a real estate agent, a real estate agent shall be appointed by a nominee of the President of the Real Estate Institute of New South Wales.
(b)In the event that the Suburb F property has not been sold within three months after being listed for sale in accordance with order (5)(a)(i) then the parties shall procure a sale by public auction upon the following terms:
(i)The auctioneer shall be as agreed between the parties;
(ii)In the event that there is no agreement as to the auctioneer within 14 days of order (5)(b) having effect, the auctioneer shall be as appointed by a nominee of the President of the Real Estate Institute of New South Wales;
(iii)The auction shall take place within five weeks after the deadline for the sale by private treaty; and
(iv)The reserve price shall, unless otherwise agreed upon between the parties, be as proposed by the auctioneer.
Upon the sale of the Suburb F property, the net proceeds of the sale after adjustments for council and water rates, and maintenance levies associated with the property are to be applied in order of priority:
(a)All real estate agent’s and auctioneers’ commissions and fees relating to the sale, together with the legal costs on the sale;
(b)A payment to secure the discharge of the Suburb F mortgage;
(c) 60.57 per cent of the balance thereof to the wife; and
(d)The remaining balance to the husband.
Pending the transfer or sale of the Suburb F property, the parties are jointly to be responsible for the payment of:
(a)The mortgage repayments charged to the Suburb F property as and when they become due for payment on a periodic basis; and
(b)Any rates, charges, maintenance costs and any other outgoings in relation to that property.
In the event that the Suburb F property is not transferred in accordance with orders (2) and (3) but is sold pursuant to order (5) herein, forthwith upon the settlement of that sale or at such other time as they may agree upon in writing, the parties shall forthwith do all acts and things and sign all documents to cause:
(a)A payment from the controlled monies account to the Australian Taxation Office for the (GST) referable to the sale of the B Street property (currently estimated to be appropriately $170,000);
(b)The remaining balance in the controlled monies account together with the balance of funds held in the Ashley Investment Trust to be each disbursed as to 60.57 per cent to the wife and as to the balance to the husband; and
(c)Thereafter the parties are to cause the controlled monies account and the trust to be closed.
Subject to these orders, as between the parties the wife be declared to have the sole right, title and interest in:
(a)Any chattels, goods, furnishings and other property which are at the date hereof in her possession;
(b)Any monies or other investments which stand alone in her name;
(c)Any motor vehicle, or motor cycle registered in her name; and
(d)Any superannuation entitlement and/or contribution in her name, including G Super.
Subject to these orders, as between the parties the husband be declared to have the sole right, title and interest in:
(a)Any chattels, goods, furnishings and other property which are at the date hereof in his possession;
(b)Any monies or other investments which stand alone in his name;
(c)Any motor vehicle, or motor cycle registered in his name; and
(d)Any superannuation entitlement and/or contribution in his name, including H Super and J Super.
The parties shall as soon as practicable do all acts and things and sign all documents to realise their interest (one third shareholding) in the company K Pty Ltd, and shall disburse the net proceeds of that realisation as to 60.57 per cent to the wife and the balance to the husband.
If either party refuses to or neglects to execute a Deed or instrument (“the document”) necessary to give full force and effect to the terms of these Orders within seven days of notice in writing being given by the other party or his or her solicitor, then the Registrar of the Sydney Registry of the Family Court of Australia is hereby appointed pursuant to the provisions of s 106A of the Family Law Act1975 (Cth) to execute the document and do all acts and things necessary to give validity and operation to the document.
Leave is granted to the parties to apply to restore the proceedings within 14 days of the date of these orders in respect of the wording or machinery provisions of the orders.
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 Ashley & Ashley 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 6854 of 2012
| Ms Ashley |
Applicant
And
| Mr Ashley |
Respondent
REASONS FOR JUDGMENT
Introduction
Mr Ashley (“the husband”) and Ms Ashley (“the wife”) were married for about 25 years. They each seek orders for settlement of property. For convenience I will refer to them as the husband and wife.
Applications
The wife sought orders as set out in a document tendered on 17 November 2017 as follows:
1.That the Husband do all acts and things, and sign all necessary documents to transfer to the Wife his share in the property situated at E Street, Suburb F.
2.That the Parties do all acts and things to cause the net proceeds of sale of B Street, Suburb C held in the Controlled Monies Account in the names of the Parties to be paid as follows:
2.1$170,000 to the ATO in respect of GST levied on the sale of the property; and
2.2to the [D Bank] in respect of the loan secured over the property at [E Street, Suburb F] (the “[D Bank] Loan”).
3.In the event, that there are insufficient funds to discharge the [D Bank] Loan pursuant to order 2 hereof, the Husband to do all acts and things and sign all documents to cause to be paid from the monies held in trust by his solicitor pursuant to orders of 14 July 2017 to pay off the balance of the [D Bank] Loan.
4.That the Husband pay the Wife’s legal costs.
5.That the Wife thereafter be declared to be the sole legal and beneficial owner of her right title and interest in and to:
5.1.all cash at banks and monies held in the Wife’s sole name;
5.2.any superannuation entitlements to the Wife and received by the Wife;
5.3.any personal property including but not limited to motor vehicles, furniture and jewellery in her possession at the time of these orders; and
5.4.any other property whatsoever held in the possession, custody or control of the Wife as at the time of these Orders.
6.That the Husband thereafter be declared to be the sole legal and beneficial owner of his right, title and interest in and to:
6.1.all cash at banks and monies held in the Husband’s sole name;
6.2.any superannuation entitlements to the Husband and received by the Husband;
6.3.any personal property including but not limited to motor vehicles, furniture and jewellery in his possession at the time of these orders; and
6.4.any other property whatsoever held in the possession, custody or control of the Husband as at the time of these Orders.
7.That the Husband and the Wife remain liable for any debts in their personal names and indemnify the other against all claims, costs, demands, suits, actions and proceedings which may be made against the other in respect of the said debts.
8.That in the event that either party fails to sign any document or instrument or to do any acts required or contemplated by these Orders to be done with such failure continuing for fourteen days, then the Registrar or Deputy Registrar of the Family Court of Australia in pursuance of the Orders conferred on him or her under s106A of the Act, as amended, shall have the power to execute any document or instrument in the name of the person who has refused or neglected to sign any necessary document or instrument or to do any act required or contemplated by these Orders.
9.Any other orders that this Honourable Court deems fit.
The husband sought property settlement orders in accordance with a minute of orders tendered on the second day of the trial, as amended on 17 November 2017 as follows:
1.That within 28 days of these orders, that the parties join in and do all acts and things necessary, (including the signing all the necessary documents, so as to cause the property described as [E Street, Suburb F] in the state of New South Wales, (the “former matrimonial home“), be sold.
1.1.For the purposes of effecting that sale: -
1.1.1. The parties shall list the former matrimonial home for sale by private treaty within 28 days.
1.1.2. The parties shall agree to a listing price for former matrimonial home.
1.1.3. In the event that within 49 days from the date of these orders, there is no agreement relating to a listing price, the listing price shall be determined by valuer as nominated by the President of the Real Estate Institute of New South Wales.
1.2.The parties shall list the former matrimonial home for sale by private treaty with such real estate agent or agents as the agreed upon between the parties.
1.2.1. In the event that within 49 days from the date of these orders there is no agreement relating to a real estate agent, a real estate agent shall be appointed by a nominee of the President of the Real Estate Institute of New South Wales.
1.3.In the event that former matrimonial home is not been sold on or before a date 3 months before the date of the orders, then the parties shall procure a sale by public auction upon the following terms:
1.3.1. The Auctioneer shall be as agreed between the parties, and
1.3.2. In the event that there is no agreement within 3 months from the date of these orders as to the name of an auctioneer, the auctioneer shall be as appointed by a nominee of the President of the Real Estate Institute of New South Wales
1.3.3. The auction shall take place within 5 weeks after the deadline for the sale by private treaty; and
1.3.4. The reserve price shall, unless otherwise agreed upon between the parties, be as proposed by the Auctioneer.
2.That upon the sale of former matrimonial home, the proceeds of each sale are to be applied in order of priority: -
2.1.All outstanding legal costs owed by the parties, including legal costs on the sale.
2.2.All Real Estate Agent commissions relating to the sale.
2.3.Outstanding council and water rates, and maintenance levies associated with the former matrimonial home.
2.4.The implementation of a discharge of the mortgage currently charged to the former matrimonial home, and currently estimated to be $907,716
2.5.52.7% of the balance thereof to the Wife
2.6.The balance thereof to the Husband.
3.Pending the sale of former matrimonial home, the parties are jointly to be responsible for the payment of:-
3.1.The mortgage repayments charged to the former matrimonial home as and when they become due for payment on a periodic basis, and;
3.2.Any rates, charges, maintenance costs and any other outgoings in relation to the former matrimonial home.
4.That the net proceeds of sale of the property located at [B Street, Suburb C] be distributed between the parties as follows:
4.1.Any liabilities owned by the parties to the Australian Tax Office (ATO) including in order of priority of payment:
4.1.1. Goods and Services Tax (GST) related to the sale (“[B Street]”), currently estimated to be appropriately $170,000; and
4.1.2. Any Capital Gains Tax (CGT) otherwise owed by the parties
4.1.3. The Husband’s parents for a debt of $50,000
4.2.Thereafter 52.7% in favour of the Wife
4.3.the balance to the Husband
5.That the assets held in the [Ashley] Investment Trust (“the Trust”) be divided as follows:
5.1.52.7% in favour of the Wife
5.2.the balance to the Husband.
6.That the Husband shall thereafter do all things necessary under the power held by him in the Deed of the Trust as the Trustee of the [Ashley] Investment Trust to close the Trust
7.That the Husband indemnify and keep indemnified the Wife from all or any claims including any claims for payment of liabilities and or debts or any nature whatsoever and howsoever existing or arising in the past or present other than the liabilities as set out in para (2) and sub para (4.1) above
8.That the Wife indemnify and keep indemnified the Husband from all or any claims including any claims for payment of liabilities and or debts or any nature whatsoever and howsoever existing or arising in the past or present other than the liabilities as set out in para (2) and sub para (4.1) above.
9.Subject to these Orders that as between the parties the husband be declared to have the sole right, title and interest in:
a.Any chattels, goods, furnishings and other property which are at the date hereof in his possession and wish the exception of those items marked Annexure 1;
b.Any monies, shares, or other investments which stand alone in his name;
c.Any motor vehicle, or motor cycle registered in his name; and
a.Any superannuation entitlement and/or contribution in his name including, including [H Super] P/L and [J Super].
10.Subject to these Orders that as between the parties the Wife be declared to have the sole right, title and interest in:
a.Any chattels, goods, furnishings and other property which are at the date hereof in her possession and those items listed in Annexure 1;
b.Any monies or other investments which stand alone in her name;
c.Any motor vehicle, or motor cycle registered in her name; and
d.Any superannuation entitlement and/or contribution in her name, including [G Super].
11.That if either party refuses to or neglects to execute a Deed or instrument (“the document”) necessary to give full force and effect to the terms of these Orders within five (5) days of notice in writing been given by the other party or his/her Solicitor, then the Registrar of Sydney Registry of the Family Court of Australia is hereby appointed pursuant to the Provisions of Section 106A of the Family Law Act to execute such documents and do all acts and things necessary to give validity and operation to the documents.
12.That pursuant to section 78 of the Family Law Act, the Court declares that the parties jointly and equally hold a one third shareholding interest in the company [K] Pty Limited, whereupon, either or both parties (sic) it may make consequential orders to give effect to the declaration, including orders as to sale of their respective shareholding interest.
In addition, the parties agree that an order be made to the effect that prior to any further distribution pursuant to these orders, a payment be made from the account holding the proceeds of sale of the B Street property to the mortgage on the former matrimonial home at Suburb F, in the sum of $11,663.
Documents Read
The parties relied on the following documents:
Documents relied on by the wife:
·Case Outline document dated 8 November 2017;
·Affidavit of the wife filed 29 September 2017;
·Affidavit of Dr L filed 28 September 2017; and
·Valuation by Deloitte dated 5 July 2016.
Documents relied on by the husband:
·Case Outline document dated 9 November 2017;
·Affidavit of the husband filed 23 October 2017;
·Financial Statement of the husband filed 25 October 2017; and
·Amended Financial Statement of the husband filed 13 November 2017.
The Hearing
The case was listed for final hearing over three days commencing on 15 November 2017.
On 17 November 2017 judgment was reserved.
In the week following the conclusion of the trial there was communication from the husband’s lawyers to the Court and to the wife’s solicitors foreshadowing an application on behalf of the husband for leave to re-open his case to update the balances of two bank accounts. Leave was opposed and no formal application was made to re-open. However, a further email was received from the husband’s lawyers later in the week seeking leave to re-open to adduce evidence about an error in the balance sheet. It was to be asserted that the wife withdrew from the bank account of the Ashley Investment Trust (item 4 on the balance sheet) $13,400 which was included in the balance sheet as joint funds that were available for distribution. As a result of that request and by arrangement with the parties, the matter was re-listed on 24 November 2017. On that date the parties were represented. It was agreed that the balance sheet be amended to delete $13,400 from the balance of the trust bank account and to include it as a notional asset in the hands of the wife. I indicated that given that the evidence was re-opened, the husband could update his evidence about the balances of the accounts at items 11 and 12 of the balance sheet to $4,667 and $2,175 respectively. The wife consented to the adjustment of the item 11 balance but continued to submit that the item 12 figure should be “not known”. Leave was granted for those changes to the evidence. It was submitted on behalf of the husband that the wife’s conduct in allowing the trial to conclude on the basis that $13,400 (that she had withdrawn from the trust account) was still in that account, should result in an adverse finding about her credit. There were no further submissions made and judgment was again reserved.
Short History
The wife was born in 1961 and at the conclusion of the hearing she was 56 years of age. The husband was born in 1962 and as at the date of the hearing he was 55 years of age. The parties married in 1985, separated on 31 July 2011 and were divorced with effect from 19 January 2013.
Children
There are two adult children of the marriage:
(a)Ms M, who is 25 years of age; and
(b)Mr N, who is 23 years of age.
Background Facts
On 23 March 1985 the parties were married. The parties had no assets of significant value at the commencement of their marriage.
At the commencement of the marriage the husband was employed as a tradesman with O Pty Ltd and the wife was employed in the service industry.
In 1986 P Pty Ltd (“PPL”) was established. The name of this company was subsequently changed to Q Pty Ltd. The husband and wife were both directors and shareholders of this company.
In 1986 the parties purchased E Street, Suburb F (“the Suburb F property”) for $86,000. This purchase was funded through a mortgage of $64,000 from the National Australia Bank (“NAB”).
From 1987 to 1989 renovations were undertaken to the Suburb F property.
In 1990 the parties purchased R Street, Suburb S (“the Suburb S property”) as an investment property for $123,000. To finance this purchase, $109,000 was borrowed from NAB.
In 1991 the parties sold the Suburb S property for $273,000.
In or around 1991 the parties created their own superannuation fund “PPL Superannuation Fund” and a property trust “Ashley Property Trust”.
In or around 1991 PPL, as trustee for the Ashley Property Trust, purchased T Street, Suburb U (“the Suburb U property”) for the sum of $315,000. To finance this acquisition $280,000 was borrowed from NAB.
In 1992 the parties’ first child, Ms M (“Ms M”) was born. Following her birth the wife ceased work.
In 1993 the PPL operations were relocated to the Suburb U property.
In 1993 the parties purchased W Street, Suburb X (“the Suburb X property”) for $227,000 as an investment property. The parties borrowed $100,000 from the husband’s parents to finance this investment.
In 1994, the parties’ second child, Mr N (“Mr N”) was born.
It is the husband’s evidence that he was last general manager of PPL and responsible for its management in 1998.
On 1 April 2004, Y Pty Ltd (“YPL”) was incorporated with the husband as a director.
In 2005 major renovations were conducted on the Suburb F property utilising funds from the home loan secured over the Suburb F property.
On 3 November 2006 the parties purchased a property located at B Street, Suburb C (“the Suburb C property”) for the sum of $740,000. The parties borrowed approximately $700,000 from NAB.
In 2006 the PPL operations were relocated to the Suburb C property.
In 2006 JJ Pty Ltd (“JJPL”) acquired a 50 per cent shareholding of PPL for the sum of $800,000. The husband received 16.51 per cent of JJPL shares and 33 per cent of YPL shares.
In November 2008 K Pty Ltd (“KPL”) was incorporated with the husband as a director. Ashley Investment Trust held one third of the shares in this company.
On 18 January 2010 the wife’s mother passed away. The wife received an inheritance of $116,226.07. Over time she also received a further $6,877.98 from that source, being funds in bank accounts.
On 31 July 2011 the parties separated on a final basis.
From 13 August 2011 to 9 June 2013 the husband travelled to the United States of America (“US”) on 20 occasions.
In 2012 the husband commenced a long distance relationship with Ms Z in the US.
In May 2012 the husband ceased employment with PPL. The husband had accused a fellow employee of PPL, Mr AA of stealing company funds. It was the husband’s evidence that he: “showed Mr BB all of the misappropriation of funds by Mr AA”. I took that to mean that the husband showed Mr BB documents to support his allegations about Mr AA. The husband understands that Mr BB discussed the matter with the board of JJPL, which was the majority shareholder in PPL and as a result Mr BB asked him to resign because he was seen (no doubt correctly) as having a conflict of interest with Mr AA. The husband did resign. It is the husband’s evidence that forthwith upon the change of ownership of PPL to Mr CC in 2015, Mr AA was stood down and proceedings were taken against him by the company in the NSW District Court for misappropriation of company funds. The husband understands that those proceedings were settled on terms whereby Mr AA did not repay the misappropriated money but forfeited his employee entitlements.
Prior to May 2012 there was an income splitting arrangement in respect of the husband’s PPL income, whereby he and the wife each received $75,000 per annum. The husband agreed in cross-examination that at that time his earning capacity was $150,000 per annum.
As part of his entitlements on leaving PPL, the husband received all shareholdings held by JJPL in YPL, making the husband the sole shareholder of YPL. The husband also received $139,351.65 as a termination package on the understanding that he would facilitate payment of the existing debt of $53,750[1] owed by YPL to PPL. It is his evidence that on 30 June 2012 he paid $45,000[2] from the balance to reduce his loan account with PPL. It is the husband’s evidence that the remainder of the termination package funds of approximately $40,000 was used by him in the short term, to live on. The husband also received approximately $27,000 for his long service leave from PPL.
[1] In his affidavit the husband gave inconsistent figures for the existing debt but in cross-examination he said that the debt was $53,750
[2] Page 85 cross-examination bundle
From May 2012, after leaving employment with PPL, the husband undertook contracting work for PPL via YPL. From 7 May 2012 to 9 June 2013 payments were made from PPL to YPL in the total amount of $80,364. Some payments for YPL were made into the husband’s NAB account ending in ...04. The wife’s income also continued after May 2012. She was preparing Business Activity Statements for the company. The wife’s salary from the company ceased in early 2013.
The husband was asked in cross-examination whether he retained an earning capacity of $150,000 per annum after May 2012, he initially disagreed. He said that upon leaving the company and at his age his earning capacity then would have been reduced to that of a less senior role in the industry and would have been of the order of $100,000 per annum. Later in his cross-examination, however, the husband conceded that his earning capacity was and is $150,000 per annum.
In July 2012 the husband withdrew $100,000 from the joint account of the parties. The husband asserts that he paid $50,000 to his parents by way of part payment of the loan of $100,000 advanced to the parties by the husband’s parents. The wife asserts that this loan had already been repaid and gave evidence about the husband making payments of $7,000 at around Easter of each year. The husband concedes that he made those payments but it is his evidence in cross-examination that those payments were by way of interest on the loan.
On 19 January 2013 the parties were divorced.
Sadly, on 19 March 2013 the wife was diagnosed with breast cancer. She was urgently admitted to DD Hospital in early 2013 for a left mastectomy and axillary dissection. She was hospitalised for 10 days and subsequently underwent chemotherapy and radiation treatment.
On 25 March 2013 the wife commenced these proceedings by filing an application seeking property orders and spousal maintenance.
On 1 April 2013 PPL ceased paying a wage to the wife. Prior to that time she was being paid $1,090 per week.
On 15 April 2013 orders were made by consent that:
·The husband pay the wife spousal maintenance of $1,090 per week;
·The wife be permitted to draw down on the mortgages over the Suburb U property and the Suburb X property for $20,000 towards payment of her medical expenses and $20,000 towards payment of her legal costs;
·The husband was to maintain the wife’s current level of health insurance for 12 months; and
·The parties do all things to sell the Suburb U property and the Suburb X property and the balance paid into a controlled monies account.
In May 2013 the wife received an insurance payout for critical illness in the sum of $137,130.10.
On 13 May 2013 the wife received $21,620.07 as a termination payment from PPL.
On or around 9 June 2013 all financial and working arrangements between PPL and YPL ceased.
In July 2013 the Suburb X property was sold, in accordance with the orders of 15 April 2013, for $850,000. The net proceeds of sale were $442,223. These funds were deposited into a controlled monies account.
In October 2013 one of the parties’ daughters wrote off the family car. The husband conceded in cross-examination that he received the insurance payout on the car and did not provide those funds to the wife but used them for his living expenses. The husband conceded that the wife was being treated for cancer at that time and that she had no motor vehicle.
In late 2013 the Suburb U property was sold for $686,000. The net proceeds of sale were $90,552.
On 11 November 2013 orders were made for the wife to receive spousal maintenance in the sum of $1,090 per week and arrears of spousal maintenance from the controlled monies account.
In or around September 2014 PPL sold 4/60 B Street, Suburb C for $570,000 plus GST. Following the sale of this property PPL moved its operations to the Suburb C property.
In February 2015, pursuant to orders made on 28 January 2015 the controlled monies account was distributed to the parties.
In April 2015 the husband obtained an E2 visa from the US Government. That allows him to work in the US. The visa expires in April 2019. An E2 visa is referred to as an investor’s visa. The advice from the relevant US Government website suggests that an E2 visa applicant must be an investor from one of a number of specific countries who is to invest and thereby generate more than his or her own income. It is the husband’s evidence that in 2014 he overstayed a visitor’s visa for the US, was questioned by US authorities for 12 hours and was placed on a plane to Australia. As a result he was told that he could not travel on such a visa again. Back in Australia he obtained advice from the US embassy and applied for and obtained an E2 visa. He completed an eight page application form but says that he was not required to deposit or invest any money in the US. He is permitted to work in the US provided he does so through a company and he is permitted to have only one bank account. It is the husband’s evidence that in 2015 he incorporated Y Pty Ltd LLC in the US (“YLLC”). He says that there is one bank account for the company with three sub-accounts with different designations, including a personal account and a company account.
On 30 October 2015 Mr CC and Ms CC as trustees for the CC Family Trust purchased the shares in PPL owned by JJPL (being 50 per cent of the shareholding) for the sum of $180,000.
In 2015 the husband asserts that KPL ceased trading. There was approximately $148,000 in the KPL bank account in 2015 but the husband is unaware of the fate of those funds.
In March 2016 the wife was diagnosed with brain metastases secondary to breast cancer and underwent two craniotomies.
On 3 May 2016 YPL was deregistered as a company.
In early 2017, PPL ceased making rental payments for their occupation of the Suburb C property and the Bankwest mortgage on this property subsequently went into arrears.
On 2 February 2017 JJPL held an extraordinary general meeting. As a result of this meeting the husband’s shareholding in JJPL was acquired on a fully franked basis and the husband received the sum of $134,290.34. This sum was in part used to pay the husband’s credit card debts of $32,054. I understand that notwithstanding the disposal of his shares, the husband retains a 16.5 per cent interest in JJPL which as a Pooled Development Fund (“PDF”) vehicle may also have a value. The husband conceded that if the PDF entity can be sold he might receive a further $20,000 from such a sale.
In June 2017 the wife withdrew $40,855.55 from the Ord Minnett account in the name of the Ashley Investment Trust to pay her legal fees.
On 20 June 2017 the husband travelled to the US.
On 14 July 2017 orders were made for the sale of the Suburb C property.
On 4 September 2017 the Suburb C property was sold for $1,870,000. The proceeds went towards payment of legal costs and the balance invested into a controlled monies account overseen by the wife’s lawyers. The husband paid the sum of $9,834 to repaint the property prior to sale.
In 2017 a new company called Q Group Pty Ltd was incorporated. The sole shareholder is Ms CC. Her husband, Mr CC acquired the major shareholding in PPL in 2015 and retains those shares. It was the husband’s evidence in cross-examination that he had no knowledge of the incorporation of the new company. It was put to him that in 2016 he and Mr CC intended to establish a new company to market a cheaper range of products. The husband did not deny that there was such a proposal but denied that the new company was the result of that proposal.
Issues
There were a number of issues in respect of the balance sheet. The parties agreed that their contributions were equal and that there should be an adjustment in favour of the wife. There was an issue as to the extent of that adjustment, the wife seeking a 20 per cent adjustment and the husband proposing a three per cent adjustment. It is agreed that, should it become relevant, the wife should be given three months to purchase the husband’s interest in the Suburb F property.
Credit
The only witnesses cross-examined were the wife and the husband. There are some disputed issues in respect of which there is little or no independent evidence. In that regard something should be said about credit.
The wife was not successfully challenged on any significant part of her evidence. However, it transpired that she had remained silent during the trial, knowing that $13,400 of joint funds in the Ashley Investment Trust account was no longer in that account but had been withdrawn by her, without the husband’s knowledge. No submissions were made on behalf of the wife in that regard. The wife allowed the husband and the Court to be misled. That said, the withdrawal would no doubt have subsequently come to attention.
The husband was not a good witness. He was obliged to concede that some of the documents filed in the proceedings by him contained incorrect evidence and that in some instances that was deliberate. For example for much of the proceedings he sought to obscure the nature of his relationship with Ms Z. In an affidavit sworn on 16 September 2013[3] the husband deposed, among other things:
3.…
(c)In or around February to May 2013, and again in July to September 2013 I lived at [DD Street, Suburb EE, in FF State, US] as the guest of friends [Ms and Mr Z]. I lived in their garage which had been converted into a bedroom. I did not pay rent but have promised to pay back something to [Mr and Ms Z] once I am able to do so. I pay all my own daily living expenses myself however do have use of a car belonging to [Mr and Ms Z] if I need it.
[3] Page 95 cross-examination bundle
It transpires that Mr Z died prior to 2013 and that the husband and Ms Z had and have a personal relationship. The husband said that he gave that misleading evidence in order to protect the wife from being hurt by the knowledge of his relationship with Ms Z.
Disclosure
There is an issue about the husband’s disclosure. In my view he has not made every effort to provide timely disclosure about the parties’ financial circumstances or about his own financial circumstances. At paragraph 111 of his affidavit filed 23 October 2017 the husband deposed:
111.…
I understand there was approximately $148,000 in the [KPL] bank account in 2015. I am unaware if these monies remain in the account.
What could be the purpose of such a deposition? Why was no effort made to ascertain the fate of those funds?
The husband did not give the wife timely notice of his incorporation of YLLC in the US. The husband did not report to the wife the fact of large tranches of joint funds coming into his hands since separation, nor did he account to her for his use of those funds.
The Law
The approach in proceedings under s 79
In the context of these proceedings, s 79 of the Family Law Act 1975 (Cth) (“the Act”) relevantly provides:
79 Alteration of property interests
(1)In property settlement proceedings, the court may make such order as it considers appropriate:
(a) in the case of proceedings with respect to the property of the parties to the marriage or either of them - altering the interests of the parties to the marriage in the property; or
….
including:
(c)an order for a settlement of property in substitution for any interest in the property; and
(d) an order requiring:
(i)either or both of the parties to the marriage; …
….
to make, for the benefit of either or both of the parties to the marriage or a child of the marriage, such settlement or transfer of property as the court determines.
….
(2) The 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.
(4) In considering what order (if any) should be made under this section in property settlement proceedings, the court shall take into account:
(a) the financial contribution made directly or indirectly by or on behalf of a party to the marriage or a child of the marriage to the acquisition, conservation or improvement of any of the property of the parties to the marriage or either of them, or otherwise in relation to any of that last-mentioned property, whether or not that last-mentioned property has, since the making of the contribution, ceased to be the property of the parties to the marriage or either of them; and
(b) the contribution (other than a financial contribution) made directly or indirectly by or on behalf of a party to the marriage or a child of the marriage to the acquisition, conservation or improvement of any of the property of the parties to the marriage or either of them, or otherwise in relation to any of that last-mentioned property, whether or not that last-mentioned property has, since the making of the contribution, ceased to be the property of the parties to the marriage or either of them; and
(c) the contribution made by a party to the marriage to the welfare of the family constituted by the parties to the marriage and any children of the marriage, including any contribution made in the capacity of homemaker or parent; and
(d) the effect of any proposed order upon the earning capacity of either party to the marriage; and
(e) the matters referred to in subsection 75(2) so far as they are relevant; and
(f) any other order made under this Act affecting a party to the marriage or a child of the marriage; and
(g) any child support under the Child Support (Assessment) Act 1989 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.
There is a preliminary aspect of the requirement created by s 79(2) as to whether there should be any order at all. The proceedings before me do not involve any controversy about that issue. As was observed in Stanford v Stanford (2012) 247 CLR 108 that preliminary, just and equitable requirement, is often readily satisfied. Here, the marriage of the husband and wife involved more than 26 years of cohabitation and their contributions spanned more than 30 years. The relationship of the husband and wife has broken down and they live apart. They both invoked s 79 of the Act. I note the exhortation in s 81 of the Act to “…as far as practicable, make such orders as will finally determine the financial relationships between the parties to the marriage and avoid further proceedings between them”. It is just and equitable that the parties have relief under s 79.
I turn to the task of identifying orders that will alter the interests of the husband and wife in property in a just and equitable way. There is no mention of steps or stages in s 79, let alone of the sequence set out in (a) to (d) below. However, I will address the following matters:
(a)Make findings as to the identity and value of the property, liabilities and financial resources of the parties at the date of the hearing;
(b)Identify and assess the contributions of the husband and wife within the meaning of ss 79(4)(a), (b) and (c) and determine their contribution based entitlements, expressed as a percentage of the net value of the property of the parties;
(c)Identify and assess the relevant matters referred to in ss 79(4)(d), (e), (f) and (g), (“the other factors”) including, because of s 79(4)(e), the matters referred to in s 75(2) so far as they are relevant and determine the adjustment (if any) that should be made to the contribution based entitlements of the husband and wife; and
(d)Consider the effect of those findings and determinations and resolve what order is just and equitable in all the circumstances of the case.
The Property of the Parties
In determining what order is appropriate, it is necessary to make a finding as to the property of the parties. That involves identifying assets, liabilities and financial resources and their values.
A joint balance sheet was settled by the parties and provided to my chambers under cover of an email dated 9 November 2017. The joint balance sheet was marked exhibit 1 and through concessions and discussion it was a developing document during the trial. As at the commencement of submissions, the joint balance sheet was as follows:
Assets
| Owner | Description | Wife’s value | Husband’s value | |
| 1 | J | E Street, Suburb F | $3,000,000 | $3,000,000 |
| 2 | J | Net proceeds of sale of B Street, Suburb C | $1,006,926 | $1,006,926 |
| 3 | J | Q (50 per cent shareholding) (“PPL”) | $0 | $0 |
| 4 | J | Ashley Investment Trust | $10 | $10 |
| 5 | W | Furniture | $5,000 | $5,000 |
| 6 | W | NAB Account No. X …96 | $1,098 | $1,098 |
| 7 | W | NAB Account No. X …87 | $3,551 | $3,551 |
| 8 | W | NAB Account No. X …39 | $8 | $8 |
| 9 | W | D Bank Direct X …36 | $1,361 | $1,361 |
| 10 | W | Motor vehicle 1 | $8,000 | $8,000 |
| 11 | H | NAB Account No. X …04 | $4,667 | $4,667 |
| 12 | H | YLLC (USA) (100 per cent shareholding) | Not known | $2,175 |
| 13 | H | JJ Pty Ltd Limited (16.5 per cent shareholding) (“JJPL”) | $0 | $0 |
| 14 | H | Motor vehicle 2 | $8,500 | $8,500 |
| 15 | H | Motor vehicle 3 | $0 | $0 |
| 16 | H | Vehicle Purchase | $0 | $0 |
| 17 | H | Cash in the bank (USA) | $3,614 | Not known |
| 18 | H | Yacht” (50 per cent interest) | $0 | $0 |
| Total | $4,042,735 | $4,041,296 | ||
Add-backs
| Owner | Description | Wife’s Value | Husband’s Value | |
| 21 | H | Settlement monies from KK for Motor vehicle 4 | $ 35,695 | Not applicable |
| 39 | H | Decrease in value of the parties 50 per cent share interest in PPL | $800,000 | Not applicable |
| 39A | H | Proceeds of JJPL | $134,000 | Not applicable |
| 39B | W | Moneys removed by the wife on 10 November 2017 from the Ashley Family Trust account | $13,400 | $13,400 |
| Total | $983,095.00 | $13,400 | ||
Liabilities
| Owner | Description | Wife’s value | Husband’s value | |
| 40 | J | Mortgage – E Street, Suburb F | $ 907,716 | $907,716 |
| 41 | J | Loan from GG + HH Ashley on 27 W Street | $0 | $50,000 |
| 42 | J | Joint shareholder’s loans – Q | $0 | $0 |
| 43 | J | ATO Liability (GST for B Street) | $ 170,000 | $170,000 |
| 44 | W | Shareholder Loan from Q | $0 | $0 |
| Total | $1,077,716.00 | $1,127,716.00 | ||
Superannuation
| Owner | Description | Wife’s value | Husband’s value | ||
| 45 | W | G Super | Accumulating | $202,646 | $202,646 |
| 46 | H | H Super P/L | Accumulating | $47,900 | $47,900 |
| 47 | H | J Super | Accumulating | $111,779 | $111,779 |
| Total | $362,325.00 | $362,325.00 | |||
Financial resources
| Owner | Description | Wife’s value | Husband’s value | |
| 48 | H | Husband’s De facto partner Ms Z | $ NK | Not Applicable |
As to the issues about the balance sheet:
Assets
Item 12: YLLC (USA)
The husband is the sole owner of YLLC. Although initially put at $181, the husband obtained leave to re-open his case to adduce evidence that the company has a value of $2,175, representing funds at bank. The wife did not accept either $181 or $2,175 as the value of the company. There is no formal valuation evidence. The husband incorporated YLLC in 2015. He refers to that incorporation in his trial affidavit and annexed to that affidavit copies purporting to be taxation documents for the company. There was no request or application on behalf of the wife to have the company valued. The wife contends that there was no earlier disclosure about the company other than the husband’s trial affidavit which was filed on or about 23 October 2017.
I suggested to the wife’s counsel that if I did not put the company in the balance sheet at the value asserted by the husband, there would be no value brought to account for the company. The wife’s counsel did not accept either asserted value. The documents annexed to the husband’s affidavit do not suggest that the company is anything more than a bare vehicle for the husband’s income. However, the parties have obligations of complete disclosure to each other. In my view the husband should have provided notice to the wife of the incorporation of the company at or about the time in 2015 when he says it was created. The husband should have provided financial records for the company earlier than the time of service of his trial affidavit. Disclosed as it was, there was no time for the wife to consider, let alone implement, the steps necessary for an independent assessment of value.
There is no formal valuation evidence. The asserted value is not conceded. I will mark the value of the company as “unknown”.
Item 17: Cash at Bank USA
The wife asserts that the husband has $3,614 in a US bank account. The husband says that the document relied on is dated much earlier in the year. The husband’s counsel said during final submissions that his client would obtain a current balance. I asked the parties’ counsel to confer about that and to provide an agreed balance. There was thereafter no further reference to the account and I was not told of a balance, agreed or otherwise for the account.
Adding to the confusion about this issue, was the husband’s evidence about his US bank account. It was his evidence that it was a condition of his E2 visa that he could have only one bank account in the US. He then gave evidence of a J Bank account which had three separate account numbers. The husband said that that there was one account with three sub accounts. Exhibit 7 is styled “Combined Snapshot” and refers to a J Bank Primary Account number ending in …44, an account named YLLC number ending in …. 9943, an account in the husband’s name with a number ending in … 7815 and another account in the husband’s name with the same account number as the primary account. The husband said something to the effect that the accounts were all components of one grouped senior bank account. I am not in a position to resolve the apparent conflict in the evidence.
Exhibit 7 puts the balance as at 30 April 2017 at US$8,959.87. There being no other formal evidence I will adopt that figure and the figure of $11,711[4] for the Australian dollar equivalent of that sum.
Item 21:Settlement monies from KK for Motor vehicle 4
[4] A$ to US$ = 0.7651 being the official rate on 5 December 2017
One of the parties’ daughters wrote off a family motor vehicle in about October 2013. The husband received the insurance payout of $35,695 and he did not account to the wife for those funds, instead using them for his living expenses. The wife argues that the amount of the payout should be added back to the list of assets as if it still existed.
There have been circumstances in other cases whereby assets are included in the list prepared for property settlement proceedings, even though they no longer exist. The same logic has been applied to the exclusion from the relevant list of liabilities, debts that do exist at the date of the hearing. The current state of the authorities has the use of add-backs in the first step in the process of identifying what, if any, orders for settlement of property are just and equitable, as the exception rather than the rule. The practice has neither been mandated in any particular situation, nor has it been conclusively proscribed.
In Vass & Vass (2015) 53 Fam LR 373, the Full Court said at page 394:
137.At [50] to [65] of the First Reasons under the heading “Add-backs,” the trial judge held that $25,000 withdrawn by the husband from the parties’ bank accounts post-separation should be added back into the pool of assets, and further concluded that $50,000 which the husband had, post-separation, paid to his parents, purportedly in repayment of a loan from them, should also be added back.
138.There is no error committed per se in adjusting the parties’ actual property interests by a calculation involving notionally adding back into the pool sums which have been dissipated by the parties. We reject any suggestion that the decision of Bevan v Bevan (2013) 49 Fam LR 387; [2013] FamCAFC 116 – or, more particularly, the decision of the High Court in Stanford v Stanford(2012) 247 CLR 108; 293 ALR 70; 47 Fam LR 481; [2012] HCA 52 - is authority for any necessary contrary solution. Some statements made by the High Court may lead to the conclusion that references to “notional property” as have been referred to in decisions of this court and at first instance may need to be reconsidered.
139.The decisions referred to seek to remind the Court that, however the exercise of discretion might seek to deal with property that is said to be the subject of “add back”, proper consideration must be given to existing interests in property, and the question posed by s 79(2) as a separate inquiry from any adjustment to property interests by reference to s 79(4) if a consideration of s 79(2) reveals that it is just and equitable to alter existing interests in property.
As learned counsel for the husband referred, In the Marriage of Omacini (2005) FLC 93-218 the Full Court noted at 79,617:
30.To date, three clear categories of cases have emerged where the Court has determined that it is appropriate to notionally add back to the pool of assets, that is, assets that no longer exist. They are:
(a)Where the parties have expended money on legal fees. In DJM and JLM (1998) FLC 92-816 the Full Court said at 85,262:
“11.6 For reasons set out in Farnell, s 117 provides that each party to proceedings under the Family Law Act shall bear their own costs unless the Court otherwise orders. Failing to add back monies expended by parties on costs frequently has the effect of defeating the policy of s 117 by permitting the pool of available assets for distribution between the parties to be diminished by any monies that either of the parties have managed to spend on their costs up to the date of trial. We are of the view that the normal approach ought be to add costs already paid back into the pool. Whilst there may be cases where that approach is inappropriate, the reasons why it is not taken ought normally be spelt out.”
(b)Where there has been a premature distribution of matrimonial assets. In Townsend and Townsend (1995) FLC 92-569 Nicholson CJ as he then was with whom Fogarty and Jordan JJ agreed, said at 81,654:
“In my view, what occurred in this case, as I said during the course of argument was, in fact, a premature distribution of a proportion of the matrimonial assets. What the husband did was to distribute to himself an asset in which the wife had a legitimate interest. In such circumstances I consider that it would be unjust in the extreme to simply treat such conduct by the husband as a matter to which regard should be had under section 75(2). It seems to me that the husband has had the benefit of that money. Had he retained, for example, the taxi licence instead of selling it, that would have been brought into account as an item of property which would have been dealt with in the same way as the remaining items of property in this case. Accordingly, I am of the view that the correct way in which to deal with the husband’s receipt of those moneys is to bring them into the pool of assets on a notional basis and make a distribution accordingly.”
(c)In the circumstances outlined by Baker J in Kowaliw and Kowaliw (1981) FLC 91-092 at 76,644:
“As a statement of general principle, I am firmly of the view that financial losses incurred by parties or either of them in the course of a marriage whether such losses result from a joint or several liability, should be shared by them (although not necessarily equally) except in the following circumstances:
(a)where one of the parties has embarked upon a course of conduct designed to reduce or minimise the effective value or worth of matrimonial assets, or
(b)where one of the parties has acted recklessly, negligently or wantonly with matrimonial assets, the overall effect of which has reduced or minimised their value.
Conduct of the kind referred to in para (a) and (b) above having economic consequences is clearly in my view relevant under sec 75(2)(o) to applications for settlement of property instituted under the provisions of sec 79.”
31.As the Full Court said in Browne v Green (1999) FLC 92-873 at 86,360:
“44.We agree with her Honour that the principles stated by Baker J in Kowaliw certainly do not constitute any form of fixed code. They are no more than guidelines for use in the exercise of the discretionary jurisdiction conferred by s 79 of the Family Law Act 1975. Nevertheless, they have over the considerable period of time since they were enunciated, become a well accepted guideline in this jurisdiction – a guideline the use of which assists in the achievement of the important goal of consistency within the jurisdiction.”
The wife is understandably aggrieved about this issue. She had been diagnosed with cancer in 2013 and had commenced treatment; her motor vehicle was written off; and the husband kept the proceeds of the insurance payout which would normally be applied to the cost of a replacement vehicle. It is the husband’s evidence that he used those moneys for living expenses. In the normal course moneys applied to living expenses would not be added back. The issue here is that the husband had received a number of payments and had not accounted to the wife for the application of those moneys. In those circumstances, how could she, or the Court, be satisfied that the insurance moneys were required by the husband for his living expenses?
It is said in the husband’s case that the wife too failed to account to the husband for all of the capital funds coming to her over the long period of the parties’ separation. When challenged, it transpired that the wife had provided the necessary disclosure. The fact is that the husband necessarily had more to disclose than did the wife. Although she played a role for PPL, the husband was involved in the establishment, management and main business of the firm since its inception in the 1980’s.
The primary position is that the balance sheet comprises assets and liabilities at the date of the hearing. There is no suggestion that the proceeds of the insurance claim still exist in some form. Although the husband’s disclosure was inadequate and there remains a doubt that the payout was required for the husband’s living expenses, I will not add-back that payout to the balance sheet.
Item 39:Decrease in value of the parties 50 per cent share interest in PPL
The husband gave an estimate of $800,000 for the parties’ interest in PPL at the time of separation. The single expert valued the interest as at 30 June 2015 at $180,000 and at no value today. It is the wife’s contention that the husband is responsible for or has failed to account for the loss of that asset and therefore the operation of s 79 should be applied to a balance sheet that pretends that the parties’ interest in the company remains at $800,000.
The circumstances of the husband’s departure from PPL and of the deterioration in its value are highly unusual and perhaps even, suggestive. Nevertheless, in my view the wife cannot make a case for adding back $800,000 to the balance sheet.
I have referred earlier in these reasons to the husband’s evidence about his departure from PPL. It is submitted in the wife’s case that the husband should not have resigned, that he should have told her about the problem and together their shareholding might have allowed another outcome of the Mr AA incident. It was submitted that the husband should have taken legal proceedings about the incident. Then there is a concern about the books of PPL. Over the years since 2012 the earnings of the company dropped while, in some years, the cost of commissions rose.
I refer to the observations made about add-backs above. Add-backs are the exception. They cause mischief to the process of adjusting the parties’ interests in current assets. In this instance the Court would need to be confident that but for the husband’s conduct there would have been $800,000 available for division between the parties. There is absolutely no basis for that confidence. There will be no add-back for this item.
Item 39A:Proceeds of JJPL
The wife submits that $134,000 should be added to the balance sheet to represent the husband’s receipt of those moneys in March 2017 from the sale of his 16.5 per cent interest in JJPL. It is the husband’s evidence that he received $134,290.34 representing 83.9 cents he was paid on the acquisition of each of his shares in JJPL. It is the husband’s evidence that he used $32,054 of those funds to pay credit card debts and that he lived off the balance.
On those facts, which were not challenged, the only add-back could be in respect of $102,236.34. The notes to the husband’s 2017 Financial Statements refer to the sale of the JJPL shares being in January 2017.
Again, the primary position is that the balance sheet comprises assets and liabilities at the date of the hearing. It was not put to the husband that the proceeds of the JJPL shares still exist in some form. Although the husband’s disclosure was inadequate and there remains a doubt about the husband’s need to rely on those moneys to meet his living expenses I will not add-back the proceeds of sale of the JJPL shares to the balance sheet.
Item 41:Loan from GG + HH Ashley on W Street
The husband contends that he owes his parents $50,000 being the balance of a loan they advanced for the purchase of the Suburb X property in 1993.
It is an agreed fact that there was a loan. The husband contends that $50,000 is still owed, the wife asserts that this loan had already been repaid and gave evidence about the husband making payments of $7,000 at around Easter of each year. The husband concedes that he made those payments but it was his evidence in cross-examination that those payments were by way of interest on the loan.
(o) any fact or circumstance which, in the opinion of the court, the justice of the case requires to be taken into account;
Some of the wife’s case was argued in the alternative. The overall contention was that an adjustment of 20 per cent is appropriate. I will deal with some of the submissions made on behalf of the wife in a summary way, as follows:
·That it is open to conclude that the husband colluded with the proprietors of PPL and JJPL as his explanation for the circumstances of him leaving PPL doesn’t make sense.
That conclusion is not available as the proposition was not put to the husband.
·PPL and the husband’s role in it is very significant in this case:
oThe husband failed to exercise his rights in relation to his position at PPL;
oThe husband’s role at PPL was significant but after separation he stepped away from that completely, which had a number of consequences; and
oAs a result, PPL has reduced in value from $800,000 to nil and the debt of $900,000 secured over the Suburb F property was PPL’s responsibility but that responsibility will now fall to the parties. If not added back, that is relevant to a s 75(2)(o) adjustment.
The husband provided an explanation as to what happened in 2012 and 2013, leading to him leaving PPL. The information would have been better provided at the time and the late notice may have prevented the wife from making enquiries to corroborate the husband’s evidence. I accept that although the wife was herself an employee of PPL after the husband resigned, her personal circumstances would likely have prevented her from pursuing enquiries about the changes in the husband’s status with the company.
The problem with this argument is that there is no necessary link between the husband’s resignation and the deterioration in the company’s circumstances. The husband has set out at paragraphs 75 and 76 of his affidavit some changes which could be seen as adversely affecting the PPL business. It was his unchallenged evidence that in about 2014 PPL lost the sole rights to sell and distribute certain equipment and as a result, the source of 80 per cent of PPL’s business was affected. At that time changes by the industry regulator cost PPL a significant market in supplying packages to developers.
·Related to that argument, it is argued that if the husband had continued to earn $150,000 per annum after 2012 there would be a great deal more money for the parties to divide now;
That may be true but it is not relevant to the question of what adjustment might be made to a property settlement outcome based on contributions alone. The failure to work in a particular way cannot be relied on as an argument of waste in the style identified in cases such as Kowaliw and Kowaliw (1981) FLC 91-092 cited earlier in these reasons.
·The husband’s non-disclosure:
oHis trial affidavit was the first reference to the company he incorporated - YLLC;
The husband should have disclosed the incorporation of YLLC at an earlier time in the proceedings. That said, there is no evidence suggestive of lifestyle expenditure at a level that is consistent with the company being anything more than a vehicle for the husband’s income.
oThe termination pay from PPL for the husband was in a greater sum than that for the wife although both payments were described as termination pay;
The evidence about the termination payments is confusing. I do not follow the logic of the argument that the parties’ termination payments should have been the same.
oIn May 2012 the husband received the further termination payment of $139,351.65 and that was described as a termination payment but was structured as a payment to YPL because of tax. This payment was hidden from the wife and misrepresented. The payment was not disclosed in an affidavit or Financial Statement in 2013 nor were the dividends received from the company;
The husband could have provided more timely and fulsome disclosure.
oThe husband’s initial evidence about his living arrangements in the US said to be with Ms and Mr Z were false;
I have referred to this earlier in these reasons. Kindly meant or not, the husband set out to mislead the wife and the Court.
oThe husband deposed that he can only have one US bank account but exhibit 7 refers to three bank accounts that the husband says are grouped under the one account;
The evidence does not permit a confident finding about the US requirements in respect of the visa in question. In any event, the issue is not directly relevant to these proceedings.
oThe payments from PPL into the US account are not fully disclosed and it was not for the wife to try and ‘catch out’ the husband;
oYPL payments were directed to the husband’s own account. The lack of disclosure and informal accounting represents the equivalent of a second set of accounts and suggests a fraud on the wife;
In my view the evidence does not amount to evidence of a fraud on the wife or on the Court.
oThere are various other aspects of the husband’s evidence which are unsatisfactory. For example his reference to the KPL bank account with $148,000 in it in 2015. It seems bizarre that he has an interest in the account and yet does nothing to identify the fate of the funds;
Bizarre it may be but it is not the Court’s role to adjust property settlement orders based on the extent of unusual behaviour by one of the parties.
oThe husband did not tell the single expert company valuer about the fraud by Mr AA;
It was the husband’s contention that the valuer was aware of the issue with Mr AA.
oWhen taken to payments shown in the PPL ledger to the husband’s NAB account number #...04, he could not provide a satisfactory explanation;
No adverse inference can be drawn against the husband as a result of his lack of knowledge of individual transactions in an account.
oThe husband was initially unsure if he was a director or shareholder of KPL until shown a company search;
There was nothing sinister in this aspect of the husband’s evidence.
oThe husband provided no disclosure as to his girlfriend’s assets and liabilities and Ms Z has been in Australia since 28 October 2017;
This is something of a straw man argument – the husband has no obligation to disclose the details of his girlfriend’s financial circumstances unless he knows of them.
oThe husband conceded he received the proceeds of the insurance for the motor vehicle 4 in 2013, a dividend of $99,000, YPL had billed PPL $117,000 just prior to this period and he received $139,000 as a termination payment a year earlier. The husband had ample other income to pay for expenses and the BMW proceeds should have been an add-back.
It is the husband’s evidence that he applied the $99,000 dividend directly to his PPL loan account. I do not recall there being any challenge to that evidence. It is the husband’s case that he retained only about $40,000 of the $139,000 termination payment, the balance going to repay a YPL debt to PPL and to the loan account. As I understood the husband’s evidence, billing PPL for an amount may not represent profit that would be available to YPL or the husband. The fact is that both parties relied on capital after separation. There has not been a reconciliation of the amounts received and applied by them and it is usually not practicable to undertake such a reconciliation in the course of a trial. That proved to be the case here.
I have also referred to some of those issues earlier in these reasons. The husband’s disclosure was not fulsome and he misled the wife and the Court in relation to his domestic circumstances in the US. The husband has not pursued enquiries about his entitlements aggressively or at all and he did not consult with the wife or seek her aid in connection with his departure from PPL in 2012.
In my view the matters raised here are not sufficient to add to the adjustment warranted by the balance of s 75(2).
(p) the terms of any financial agreement that is binding on the parties.
There is no binding financial agreement.
Section 79(4)(f)
Beyond those referred to above, there are no relevant orders made under the Act.
Section 79(4)(g)
There is no child support assessment.
Conclusion
The relevant matters arising from the remaining elements of s 79, which include the s 75(2) factors referred to above are:
·The husband’s earning capacity is greatly superior to that of the wife;
·The wife’s working life and the costs associated with her health care are likely to be impacted by ill-health;
·The wife contributed to the husband’s earning capacity; and
·The husband is in a permanent but part-time relationship with Ms Z and they subsidise each other’s living expenses. Ms Z owns a valuable home.
Each of those factors favours an adjustment to the wife.
The wife seeks an adjustment of 20 per cent. In these proceedings 20 per cent is $669,801.32 and an adjustment of that order would create a difference between the parties of twice that sum. In my view, such an outcome would be outside the legitimate range of discretion.
The submission on behalf of the husband’s counsel was that the adjustment should be three per cent but it was conceded that an adjustment of six or seven per cent would be within an acceptable range. However, those remarks were made on a series of submissions that included the proposition that the wife has effectively met her legal costs for these proceedings whereas the husband owes something of the order of $165,000. It transpired that there are funds held in trust by the husband’s solicitors and as a result, he like the wife, will not face any significant further legal costs.
In my view the allowance to the wife should be 10 per cent. Ten per cent represents about $334,841 and will make a difference between the parties of about $669,768.
Just and Equitable
The net assets have a value of $3,348,841 ($4,064,232 - $1,077,716 + $362,325) of which $362,325 is in the form of superannuation and $2,986,516 is in the form of non-superannuation assets.
If the assets are divided in the proportions 60 per cent to the wife and 40 per cent to the husband then the wife will have about $2,009,304.60 and the husband will have about $1,339,536.40. As to the form of the orders, the operative order will give the wife the opportunity to buy the husband out of his interest in the Suburb F property. If that is not possible, that property will be sold and the proceeds divided in a way which approximates the settlement I have identified.
The parties have agreed that $11,663 will be paid out of the account holding the B Street proceeds and into the mortgage. That will make no difference to the net value of the assets but I will make the adjustment to both accounts before considering the impact of the property settlement I propose.
Of the pool of assets identified by me, the wife has the benefit of and would like to retain:
Description Value E Street, Suburb F $3,000,000 Furniture $5,000 NAB Account No. X …96 $1,098 NAB Account No. X …87 $3,551 NAB Account No. X …39 $8 D Bank Direct X …36 $1,361 Motor vehicle 2 $8,000 Funds withdrawn by the wife from the Ashley Family Trust account on 10 November 2017 $13,400 G Super $202,646 Mortgage – E Street, Suburb F -$896,053 $2,339,011.00
In order to bring her to 60 per cent of the net assets if the wife is to retain the Suburb F property she would need to refinance the Suburb F loan and pay the husband $329,706.40 ($2,339,011.00 - $2,009,304.60).
That would leave the husband with:
Description Value Net proceeds of sale of B Street, Suburb C $995,263 Ashley Investment Trust $10 NAB Account No. X …04 $4,667 Motor vehicle 3 $8,500 Cash in the bank (USA) $11,711 H Super $47,900 J Super $111,779 ATO Liability (GST for B Street) -$170,000 Payment from the wife $329,706.40 $1,339,536.40
There are some issues to work through for the orders implementing this settlement. There is an agreement that the wife will have three months to arrange finance in order to retain the Suburb F property. Retaining the property will require the wife to pay the husband $329,706.40 and refinance the Suburb F mortgage to the effect that the husband is no longer liable thereunder. If the wife is able to satisfy those requirements, all is well. If, however, the wife cannot satisfy those requirements, the property will need to be sold and in that process there is the potential for unfairness as she alone benefits or suffers from any difference between the net proceeds of sale and the notional figure for the value of that property, used for the purposes of these proceedings. If for example the property sells for $3,000,000, effectively, the wife alone will bear the costs of sale. If the property sells for $2,500,000 the ultimate settlement will be significantly less favourable to the wife than was intended by these reasons. If the property sells for $4,000,000 the ultimate settlement will be significantly disadvantageous to the husband compared to the outcome intended. Normally those risks are managed by expressing the distribution of the net proceeds of sale in percentage terms. However, that will be of no benefit if the husband has already received his part of the settlement from the invested funds and the wife is to retain the lion’s share of the Suburb F sale proceeds.
I will make provision for the parties to re-list the matter when they have read the orders I have made and will consider any agreed variation to the machinery orders or submissions as to a better way of giving effect to the settlement.
In the meantime I will express the orders so as to spread the potential risks and rewards that I have identified. Unfortunately, that will mean delaying the disbursement of the invested funds until effect is given to the disposition of the Suburb F property. I will cause the division of the net proceeds of sale, the controlled monies account and the Ashley Investment Trust in the proportion required to reflect a 60:40 division of the net assets.
Apart from the Suburb F property and its mortgage, the controlled monies account and the Ashley Investment Trust, the parties have the following assets:
Wife’s assets Value Furniture $5,000 NAB Account No. X …96 $1,098 NAB Account No. X …87 $3,551 NAB Account No. X …39 $8 D Bank Direct X …36 $1,361 Motor vehicle 1 $8,000 Funds withdrawn by the wife from the Ashley Family Trust account on 10 November 2017 $13,400 G Super $202,646 $235,064.00
Husband’s assets Value NAB Account No. X 5004 $4,667 Motor vehicle 2 $8,500 Cash in the bank (USA) $11,711 H Super $47,900 J Super $111,779 $184,557.00
For the purpose of these reasons, the Suburb F property, the controlled monies account and the Ashley Investment Trust have the following net value:
Description Value E Street, Suburb F $3,000,000 Mortgage – E Street, Suburb F -$896,053 Net proceeds of sale of B Street, Suburb C $995,263 Ashley Investment Trust $10 ATO Liability (GST for B Street) -$170,000 $2,929,220.00
If the assets are divided in the proportions 60 per cent to the wife and 40 per cent to the husband then the wife will have about $2,009,304.60 and the husband will have about $1,339,536.40. The wife has or has had the benefit of $235,064.00. In order to receive 60 per cent overall, she should receive another $1,774,240.60 from the undivided assets. That is about 60.57 per cent of their net value. Similarly, the husband has or has had the benefit of $184,557 in assets. In order to receive 40 per cent overall, he should receive another $1,154,979.40 from the undivided assets. That is about 39.43 per cent of their net value.
Therefore, in order to bring the wife and husband to 60 per cent and 40 per cent of the value of the assets, respectively, after taking account of the personalty they will retain, the remaining net assets would be divided as to 60.57 per cent to the wife and 39.43 per cent to the husband.
Conclusion under Section 79
This was a marriage that involved cohabitation spanning over 26 years and very significant contributions were made by each of the parties. They acquired substantial assets and provided a comfortable life for their family. The parties undertook the work of the marriage in different ways but overall, their contributions were equal. A 10 per cent adjustment in favour of the wife is justified by reference to the difference in the parties’ earning capacities, the wife’s poor health prognosis and the fact that the husband’s new partner has substantial assets. In my view that will reflect a just and equitable division of their property.
I certify that the preceding one hundred and seventy five (175) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Loughnan delivered on 8 December 2017.
Associate:
Date: 8 December 2017
Key Legal Topics
Areas of Law
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Family Law
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Equity & Trusts
Legal Concepts
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Consent
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Remedies
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Costs
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Jurisdiction
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