Baldoni & Baldoni (No 2)
[2023] FedCFamC1F 337
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 1)
Baldoni & Baldoni (No 2) [2023] FedCFamC1F 337
File number(s): SYC 1234 of 2019 Judgment of: KARI J Date of judgment: 5 May 2023 Catchwords: FAMILY LAW – PROPERTY SETTLEMENT – Short relationship of no more than 3 and a half years – Significant acrimony and mistrust between the parties – Where the legal costs of the matter were disproportionate – Where a significant issue in the litigation centred around the ownership and liquidation of a company, initially contributed by the wife – Where the liquidator intervened in these proceedings – Where the claim of the intervener was resolved by consent – Where there is a dispute as to how the liability to the liquidated company is to be paid – Where the Court considered the wife to be a truthful and accurate historian – Where the wife asks the Court to consider a range of amounts received and dissipated by the husband – Where the Court finds that the husband’s conduct both during the relationship and in the post separation period was reckless, negligent and/or wanton with a direct result of reducing the property available for division between the parties – Where the wife made significantly greater contributions to that of the husband – Where the Court considers there should be a further adjustment in favour of the wife pursuant to 75(2) – Where the husband is restrained from dealing with any of the assets that he is to retain pending the determination of any cost applications Legislation: Corporations Act 2001 (Cth), ss 180, 181, 1317H
Evidence Act 1995 (Cth), s 50
Family Law Act 1975 (Cth), ss 75, 69.
Federal Circuit and Family Court of Australia (Family Law Rules) 2021, r 1.04
Cases cited: Baldoni & Baldoni [2019] FamCA 446
Bertrand & Bertrand [2021] FedCFamC1F 70
Bevan & Bevan [2013] FamCAFC 116 (‘Bevan’)
Biltoft and Biltoft (1995) FLC 92-614
Clauson & Caluson (1995) FLC 92-595
Commissioner of Taxation & Worsnop and Anor [2009] FamCAFC 4
Dickons & Dickons (2012) 50 Fam LR 244
Hayne and Hayne (1977) FLC 90-265
Hickey & Attorney-General (Intervener) (2003) FLC 93-143
Jabour & Jabour (2019) FLC 93-898
Kennon v Kennon (1997) FLC 92-757
Kowaliw and Kowaliw (1981) FLC 91-092
Stanford & Stanford (2011) FamCAFC 208 (‘Stanford’)
Steinbrenner & Steinbrenner [2008] FamCAFC
Trevi & Trevi (2018) FamCAFC 173
Trustee of the Property of G Lemnos, A Bankrupt & Lemnos and Anor [2009] FamCAFC 20
Vass & Vass (2015) 53 FamCAFC 51
Division: Division 1 First Instance Number of paragraphs: 252 Date of hearing: 4 - 8 April, 11 April, 2 May, 20 June, 21 October, 7 November 2022, 17 February 2023 Place: Sydney (in person) and Adelaide (via Microsoft Teams) Counsel for the Applicant: Mr O Solicitor for the Applicant: Edwards Family Lawyers Counsel for the Respondent: Mr Z Solicitor for the Respondent: Rockliffs Lawyers Counsel for the Intervener: Mr Noakhtar Solicitor for the Intervener: Somerset Ryckmans ORDERS
SYC 1234 of 2019 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN: MS BALDONI
Applicant
AND: MR BALDONI
Respondent
MR VERTUE
Intervener
order made by:
KARI J
DATE OF ORDER:
05 May 2023
NOTATIONS
A.The Court notes that the following definitions apply for the purposes of these Orders:
(i)“the Town C property” means the property situate at and known as B Street, Town C in the State of New South Wales being the whole of the land described in Certificate of Title Folio Identifier … and registered in the Parties’ joint names as tenants in common in equal shares.
(ii)“the Town C Mortgage” means the mortgage in favour of Australia and New Zealand Banking Group Limited registered against the title of the Town C Property (registered no. …72).
(iii)“the N Street Property” means the property situate at and known as N Street, City P in the State of New South Wales being the whole of the land described in Certificate of Title Folio Identifier … and registered in the Wife’s sole name.
(iv)“the N Street Mortgage” means the mortgage in favour of BB Limited registered against the title of the N Street Property (registered no. …32).
(v)“the K Street Property” means the property situate at and known as 1 K Street, Suburb L in the State of New South Wales being the whole of the land described in Certificate of Title Folio Identifier … and registered in the Parties’ joint names as tenants in common in equal shares.
(vi)“K Street Mortgage” means the mortgage in favour of CC Pty Limited registered against the title of the K Street Property (registered no. …05).
(vii)“the joint H Street Property” means the property situate at and known as 1 H Street, Suburb L, in the State of New South Wales being the whole of the land described in Certificate of Title Folio Identifier … and registered in the Parties’ joint names as tenants in common in equal shares.
(viii)“the joint H Street Mortgage” means the mortgage in favour of CC Pty Limited registered against the title of the joint H Street Property (registered no. …60).
(ix)“the J Street Property” means the property situate at and known as J Street, Suburb M in the State of New South Wales being the whole of the land described in Certificate of Title Folio Identifier … and registered in the Husband’s sole name.
(x)“Husband’s Entities” means any and all corporations, trusts and businesses over which the Husband has possession and control to the exclusion of the Wife, including but not limited to the following:
(A) V Pty Limited (ACN …);
(B)DD Pty Limited (ACN …) (former name E Pty Limited);
(C) S Pty Limited (ACN …);
(D) EE Pty Limited (ACN …);
(E) FF Pty Ltd (ACN …);
(F) GG Company;
(G) HH Company;
(H) JJ Company;
(I) KK Company;
(J) LL Company;
(K) MM Company;
(L) NN Company;
(M) PP Company;
(N) QQ Group;
(O) TT Association;
(P) V Company;
(Q) V Company Centres;
(R) SS Company; and
(S) R Company.
(xi)“Wife’s Entities” means any and all corporations, trusts and businesses over which the Wife has possession and control to the exclusion of the Husband, including but not limited to the following:
(A)The U Trust, the discretionary trust of which the Wife is the Trustee, Appointor and Beneficiary (ABN …);
(B) BM Pty Limited (ACN …); and
(C) T Pty Limited (ACN …).
(xii)“the Liquidator” means Mr Vertue in his capacity as Liquidator of R Pty Ltd (In Liquidation) ACN ….
(xiii) “settlement date” shall be 42 days from the date of these orders.
THE COURT ORDERS THAT:
1.On the settlement date the husband shall do all such acts and things and sign all documents necessary to transfer all of his right, title and interest in each of the following properties to the wife (at the wife’s expense in all things save and except as to any legal fees incurred which shall be borne by each party respectively):
(a)the Town C property;
(b)the K Street property; and
(c)the joint H Street property.
2.On the settlement date and contemporaneously with the transfer of each the Town C property, the K Street property and the joint H Street property, the wife shall discharge and thereafter fully and forever indemnify the husband with respect to any liability the husband may have respectively in relation to each the Town C mortgage, the K Street mortgage and the joint H Street mortgage (at the wife’s expense in all things save and except as to any legal fees incurred which shall be borne by each party respectively).
3.On the settlement date the wife shall pay to the Liquidator such sum as is necessary (after the distribution made pursuant to order 6(b) herein) to discharge in full the liability to R Company totalling $547,458.
4.To secure the payment to the Liquidator pursuant to order 3 herein, the Liquidator shall be entitled to lodge a caveat on the title of any or all of each the Town C property, the N Street property, the K Street property or the joint H Street property.
5.Liberty to the Liquidator to apply on 7 days’ notice in the event that the wife does not comply with order 3 herein.
6.That as and from the date of these Orders:
(a)Save and except as to any bank accounts which are to be closed as a consequence of order 2 herein, the parties shall do all such acts and things and sign all documents necessary to close any and all bank accounts in the joint names of the parties.
(b)The parties shall do all such acts and things and sign all documents necessary to distribute those funds presently held in each the Edwards Lawyers Trust Account and the Somerset Ryckmans Trust Account to the Liquidator.
(c)The Husband shall indemnify and keep indemnified the Wife against all or any manner of actions, suits, causes of action, arbitrations, debts, dues, costs, interest and demands whatsoever both at law and in equity which the Husband’s Entities or any of them now has or may have at any time or times hereafter against the Wife or which may arise in respect of any act or thing done or omitted to be done by the Wife up to and including the date of these Orders whether by reason of the Wife having been an employee and/or Director and/or officer of the Husband’s Entities or any of them and/or by reason of her shareholding within any of them and/or any loan account in her name and/or any personal guarantee provided by her for any loan of the Husband’s Entities and/or the receipt by her of any moneys at any time from the Husband’s Entities or any of them.
(d)The Wife shall release, indemnify and hold harmless the Husband’s Entities, and relinquish any and all entitlements, emoluments, fees or other such items, moneys, choses in action or otherwise which she has or may have at any time or times hereafter against the Husband’s Entities or any of them or which may arise in respect of any act or thing done or omitted to be done by the said companies up to and including the date of these Orders.
(e)The Wife shall indemnify and keep indemnified the Husband against all or any manner of actions, suits, causes of action, arbitrations, debts, dues, costs, interest and demands whatsoever both at law and in equity which the Wife’s Entities or any of them now has or may have at any time or times hereafter against the Husband or which may arise in respect of any act or thing done or omitted to be done by the Husband up to and including the date of these Orders whether by reason of the Husband having been an employee and/or Director and/or officer of the Wife’s Entities or any of them and/or by reason of his shareholding within any of them and/or any loan account in his name and/or any personal guarantee provided by him for any loan of the Wife’s Entities and/or the receipt by him of any moneys at any time from the Wife’s Entities or any of them.
(f)That the Husband shall release, indemnify and hold harmless the Wife’s Entities, and relinquish any and all entitlements, emoluments, fees or other such items, moneys, choses in action or otherwise which he has or may have at any time or times hereafter against the Wife’s Entities or any of them or which may arise in respect of any act or thing done or omitted to be done by the said companies up to and including the date of these Orders.
(g)Subject to compliance with these Orders, the parties shall each otherwise retain those assets, liabilities and financial resources in their respective sole name, possession or control, including but not limited to real property, furniture and effects, motor vehicles bank accounts and superannuation entitlements.
(h)That save as otherwise provided for in these Orders the parties shall each otherwise be solely responsible for and fully and forever indemnify the other of them with respect to their separate debts and liabilities.
7.That the parties do all things necessary and sign all such documents as may be required to give effect to the terms of this order and in default pursuant to s 106A of the Family Law Act 1975 (Cth) a Judicial Registrar shall be empowered to sign such documents as may be necessary to ensure compliance by each of the parties with these orders.
8.That pending the determination of any costs applications the husband is restrained and an injunction is granted restraining the husband from dealing in any way (including but not limited to disposing, assigning, transferring, further encumbering by mortgage or charge) with his interest in the property situate at 2 H Street, Suburb L in the State of New South Wales being the whole of the land described in Certificate of Title Folio Identifier … and registered in the husband’s sole name.
9.That the proceedings otherwise be dismissed as finalised save and except as to:
(a)The question of costs; and
(b)Any application by the Liquidator pursuant to order 5 herein.
10.Liberty to apply as to consequential orders.
Note: The form of the order is subject to the entry in the Court’s records.
Note: This copy of the Court’s Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 10.14(b) Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 10.13 Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).
Section 121 of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish proceedings that identify persons, associated persons, or witnesses involved in family law proceedings.
IT IS NOTED that publication of this judgment by this Court under a pseudonym has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
KARI J
INTRODUCTION
These proceedings relate to the division of property arising from a relatively short relationship of no more than 3 and a half years between the parties.
The proceedings however became complicated by the liquidation of a company that was the vehicle for a commodities trading business that the wife owned and ran prior to the relationship, but which was transferred to the husband in controversial circumstances during the relationship.
The proceedings are also coloured by allegations on the part of each of the parties that they have acted poorly, maliciously and improperly both during the relationship and in the post separation period.
The trial hearing proceeded over eight days, with judgment reserved on 20 June 2022.
Unfortunately, after judgment was reserved the husband considered it appropriate to breach injunctions made by the Court on 10 July 2019 for the preservation of assets. He did so by selling a freehold property held in his sole name for approximately $215,000 and dissipating $100,000 of the net proceeds within a little over a 2-week period.
These actions resulted in further hearings in the matter, and costs orders being made with the consent of the husband, in favour of both the wife and the intervener.
The husband's conduct after judgment was reserved is emblematic of his poor attitude towards the wife and significantly the Court process. More importantly however, as these reasons bear out, this conduct underscores the husband's lax approach to financial affairs which has been ruinous to these parties.
SHORT HISTORY OF THE PARTIES
The short history of the parties and their relationship is as follows:
(a)The husband was born in 1963 and he is 60 years of age.
(b)The wife was born in 1969 and she is 53 years of age.
(c)The parties began their relationship after meeting online sometime in late 2014.
(d)The parties began living together in early 2015, when the husband moved to live with the wife at her property at B Street, Town C, NSW.
(e)The parties married in late 2015, having earlier participated in a "symbolic" wedding ceremony overseas.
(f)There is a dispute as to the date of final separation. The wife asserts that the parties finally separated on 4 December 2018, whereas the husband asserts the relationship ended in January 2019. It is not clear what if anything turns on this dispute, other than perhaps matters related to the R Company business.
(g)In September 2019, the wife obtained a Final Apprehended Domestic Violence Order naming the wife as the protected person and the husband as the defendant. That order expired in September 2021.
(h)The parties divorced in mid-2020.
(i)Prior to their final separation, the parties separated for a period of approximately 4-5 months between about October 2015 and February 2016.
(j)There are no children of the relationship.
The wife has been married previously between 1999 and 2016. She has two daughters from that relationship who at the start of the trial were aged 19 and 17 respectively. During the relationship of the parties, the wife's daughters lived with her and spent time with their father approximately once per month.
While not a straightforward process, the wife and her former husband resolved the question of property settlement between them with the making of an order on 27 April 2016. The effect of that order was that the wife retained significant property and resources, including but not limited to:
(a)Real property situate at N Street, City P, New South Wales ("the N Street property");
(b)Control of the X Family Trust, which owned the farming property at B Street, Town C, New South Wales ("the Town C property", which is also known by the parties as the "Property G" property);
(c)The business known as R Pty Ltd;
(d)The business T Pty Ltd;
(e)Livestock and farm equipment; and
(f)Entitlements in the Super Fund 1.
The husband has been married on three previous occasions and has two adult children.
At the commencement of the relationship the husband asserts that he owned the following property:
(a)A property at J Street, Suburb M, NSW ("the J Street property"), which he asserts he purchased with the proceeds from the sale of a property he owned at Town WW totalling $139,578;
(b)Superannuation entitlements;
(c)Cash savings, including monies in bank accounts and the balance remaining of an inheritance he had received from his late father in 2013, which he asserts was buried on his property.
The parties do not agree their initial financial contributions. The central dispute between the parties relates to two topics, namely:
(a)The value of the assets held by the wife, in circumstances where the wife now asserts values for certain items of property that differs from that which she disclosed in the Application for Consent Orders that was lodged when the final order for property settlement was made between the wife and her former husband Mr X.
(b)Whether the husband brought and/or applied any cash funds of significance into the relationship.
HISTORY OF THE LITIGATION
The proceedings were commenced by the wife on 28 February 2019, approximately two months after separation.
At the time that the wife commenced these proceedings it appears that there was significant acrimony and mistrust between the parties, which has continued unabated since.
It is apparent that a significant source of the acrimony and mistrust between the parties stems from issues connected to the company called R Pty Ltd, which traded as "R Company".
The relevant history of R Company which does not appear to be in dispute is:
(a)The wife registered the "R Company" name in 2006, originally running the business through a family trust.
(b)R Pty Ltd was incorporated in 2007, and from that time the wife was the sole director and sole shareholder of the company.
(c)The trading focus of R Company was the wholesale purchase and on-sale of farm commodities.
(d)R Company has always operated from premises in rural NSW. Originally from City P, with a warehouse in Town YY and following the relationship of the parties from various locations in Town C, City ZZ and City P.
(e)The wife retained ownership and control of R Company following her separation from Mr X.
(f)After the marriage of the parties, and while there is some dispute as to how it came about, the husband became a Director of R Company in 2016 and a second company share was issued and held by him.
(g)The wife resigned as a Director of R Company in 2017. The husband asserts that the wife did this unexpectedly and without any prior notice or warning to him.
(h)Following her resignation as a Director of R Company the wife continued to work for R Company as an employee from the date of her resignation until 6 December 2018 when the husband terminated the wife's employment. This date is proximate to the date of separation as asserted by the wife.
When the matter first came before the Court the parties were each pursuing a range of orders relating to the various businesses and assets under their respective control. In particular each of the parties wished to retain control and operation of the R Company business.
On 10 July 2019, a range of orders were made both with the consent of the parties and as a result of judicial determination (Baldoni & Baldoni [2019] FamCA 446). The effect of those orders was that the husband would remain in control of and operating the R Company business, and the wife would remain in control of and operating a new business she had established in the post separation period in direct competition with R Company, called "T Company". In addition, the parties were each to retain control of the various other assets and entities in their respective possession and control. Injunctions were also made restraining the parties from dealing in any of the real property.[1]
[1] It is this injunction that the husband breached after the trial concluded on 20 June 2022, when judgment was reserved.
The following day (11 July 2019), it appears that the finance company that provided working capital to R Company terminated their finance arrangements with R Company.
The husband asserts that this factor and a range of other issues adversely affected the operation of R Company (including allegations as to the wife's poor conduct), the net result of which is that he placed R Company into voluntary administration mere weeks later in late July 2019.
R Company was then placed into voluntary liquidation in late September 2019.
On or about 12 November 2019, the appointed liquidator Mr Vertue intervened in these proceedings ("the liquidator"). The focus of the liquidator has always been to pursue on behalf of the creditors of R Company the various debts asserted to be owed by each the husband and/or the wife and/or the separate entities that they control. At the time of intervention, the total debts that the liquidator sought to recover was an amount nearing approximately $1,000,000.
It is the liquidator's unchallenged position that as at 14 October 2020, the unsecured creditors of R Company were owed approximately $5,780,511, of which $5,445,027 was owed to trade creditors, $112,116 was owed to the Australian Taxation Office and $115,574 was owed to the Department of Agriculture. In addition the secured creditors had claims totalling approximately $958,096.[2]
[2] Written Submissions of Intervener filed 1 May 2022, at [11].
On 12 June 2020, orders were made with the consent of the parties and the liquidator which provided for the business premises of R Company at 2 K Street, Suburb M in the state of NSW ("the K Street business premises") to be sold by the liquidator.
There was some complexity to the sale of the K Street business premises in circumstances where:
(a)The property had been purchased by the parties in mid-2018 for $800,000.
(b)The purchase contract provided for a delayed settlement requiring the parties to pay monthly instalments towards the purchase price, with a final instalment of $460,000 payable in mid-2020.
(c)As part of the arrangements made with the liquidator, the parties agreed for an equitable charge to be registered over the property. The equitable charge was in the amount of $821,490, and represented all of the monies which had been paid towards the purchase of the K Street business premises.
(d)The parties and the liquidator also agreed, that the claim against the parties and their related entities by the liquidator be reduced by an amount of $291,490 which represented amounts of monies the parties themselves had paid towards the purchase of the K Street business premises prior to the liquidator's involvement.
In late July 2020, the liquidator commenced proceedings in the Federal Court against the Husband. In that context the liquidator alleged:
(a)That R Company had become insolvent on or about late April 2019 (which incidentally was a point in time well after the wife resigned as a Director of R Company, and some four months after her employment was terminated).
(b)That during the period of insolvency, R Company incurred debts "in the amount of at least $2,491,543.22".
(c)That the husband had engaged in insolvent trading in breach of section 588G(2) of the Corporations Act 2001 (Cth).
(d)That R Company was entitled to recover the sum of $1,720,080.26 from the husband.
(e)That the husband had breached his director duties to R Company pursuant to sections 180 and 181(1)(a) of the Corporations Act 2001 (Cth).
(f)That the company was entitled to compensation for the husband's breach of director duties pursuant to s 1317H of the Corporations Act 2001 (Cth), together with an order for damages.
I August 2020, the husband filed an Application in a Case in these proceedings in which he sought (among other things) an anti-suit injunction in relation to the proceedings taken by the liquidator in the Federal Court, together with orders relating to the alleged liabilities of the parties and/or the entities to R Company and an order for the appointment of a single expert to give an opinion on taxation issues.
In October 2020, the parties agreed and the Court made orders providing for the sale of a property situate at D Street, Suburb F, in the State of NSW ("the Suburb F property"). As part of those orders, the parties agreed to the net proceeds from the sale of the Suburb F property (after the payment of agents fees and commissions, legal costs of sale, the mortgage registered over the property and outstanding council and water rates), to be paid firstly towards an AB Company debt (which was secured by a caveat registered over the husband's interest in the Suburb F property), secondly an amount of $20,000 to each the husband and the wife by way of "interim property settlement" and the balance to be placed into the wife's solicitors trust account.
In November 2020, the Federal Court action commenced by the liquidator was transferred to the Family Court of Australia (as it then was).
The husband's application, filed in August 2020, was ultimately resolved with the consent of the parties and the liquidator. The agreement that the parties and the liquidator reached was distilled into a detailed order which the Court made with the consent of all the parties in March 2021. That order provided among other things a process for:
(a)The liquidator to "clarify" the orders that he pursued against the husband and/or the wife and/or their related entities.
(b)The quantification by an agreed single expert of the debts the liquidator alleged that each the husband and/or the wife and/or their related entities owed to R Company.
(c)The identification of any taxation consequences by an agreed single expert in relation to the debts owed be each the husband and/or the wife and/or their related entities.
(d)A single expert valuation of livestock.
(e)A single expert valuation of the real properties.
In October 2021, the parties and the liquidator reached further agreement in the form of an order made by consent. By that order declarations were made in the following terms:
(a)That the wife's liability to the intervener/R Company is $137,730 inclusive of interest.
(b)That the husband's liability to the intervener/R Company is $409,728 inclusive of interest.
As a result of that agreement, when the trial was heard, and in an effort to minimise costs, the liquidator elected to play a lesser role in the trial, and limited participation to the filing of trial evidence and closing submissions.
THE COSTS INCURRED IN THE PROCEEDINGS
From the outset, comment must be made about the volume of material that has been produced for trial purposes and the costs that have been incurred by the parties.
The parties each prepared Court Books, which included not only the filed material that they each wished to rely upon, but also vast swathes of documents that had been annexed to their respective trial affidavits, together with additional documents.
The wife's trial book runs to some 748 pages and the husband's trial book runs to a staggering 2,195 pages.
While each of the parties had annexed voluminous documents to their respective trial affidavit, the Court did not receive those documents into evidence during the course of the trial. Rather, during the course of the final hearing, the Court received as exhibits those documents that became the focus of oral evidence in the trial. Ultimately the Court received 91 separate exhibits.
While all of these numbers alone speak for themselves, in light of them it appears trite to comment that the effort expended by the parties and their legal representatives in producing those documents in concert with the manner in which the case has been run, is borne out in the astronomical costs that they have each incurred.
From the Costs Notices that were filed just prior to the Court hearing closing submissions in June 2022 (which do not include the costs of each of the parties generated when the proceedings were reopened in October 2022 or a further hearing which took place in February 2023), the Court understands:
(a)The husband's billed legal costs were approximately $665,960, with a further $92,400 to be billed by counsel (presumably counsel fees for the trial and closing submissions) and a further $3,300 by his solicitors, bringing his total legal fees at that stage to approximately $761,660. Of that sum, the husband had paid a total amount of only $112,500,[3] leaving him owing an amount of $649,160.
(b)The wife's billed legal costs were approximately $795,782, together with a further amount of approximately $20,400 to be incurred by the wife's solicitors and counsel, bringing her total legal fees at that stage to $816,182 (and not the $765,982 identified in the Costs Notice, which was presumably a calculation error). Of that amount the wife appeared to have paid a sum of approximately $715,244, leaving her owing approximately $100,938.
(c)The intervener's legal fees billed and anticipated were a combined $224,460. Which will presumably be paid from any funds recovered by the liquidator on behalf of the creditors of R Company.
[3] Noting however that $112,500 is the amount given as a summary of the total costs paid to date, but when regard is had to the scheduled setting out the source of funds for the payment of legal fees the total amount paid appears to be slightly less at $108,330.
In closing submissions on behalf of the wife, the wife's counsel submitted with some force:
… the significant thing about these proceedings is the lack of proportionality that - and we contend, largely as a consequence of the husband choosing to run the proceedings in the manner he has…[4]
[4] Transcript 20 June, p. 3 line 20-23.
These are submissions with which I entirely agree.
How it has come to pass that a combined sum of no less than $1.8 million has come to be expended on legal fees in this matter defies all logic and most certainly all proportionality. Particularly when regard is had to all of the matters discussed in these reasons and the final orders which are to be made.
The disproportionate amount of legal fees incurred at the husband's end will almost certainly not be paid by him, as he will not be left with sufficient assets to do so. That both the husband and his legal representatives have allowed this to occur is a mark of not only the husband's intransigence, but a lack of perspective in every sense by everyone involved on his side of the case.
The Overarching Purpose expressed in the Federal Circuit and Family Court of Australia (Family Law Rules) 2021 articulates:
R1.04(1)The overarching purpose of these Rules, as provided by section 67 of the Federal Circuit and Family Court Act, is to facilitate the just resolution of disputes according to law and as quickly, inexpensively and efficiently as possible.
R1.04(2)Parties to family law proceedings must conduct the proceedings (including negotiations for settlement of the dispute to which the proceeding relates) in a way that is consistent with the overarching purpose.
R1.04(3)A party's lawyer must, in the conduct of a proceeding before the court (including negotiations for settlement) on the party's behalf:
(a)take account of the duty imposed on the party referred to in subrule (2); and
(b)assist the party to comply with the duty.
(Emphasis added)
On any view, the overarching purpose has not been met in these proceedings. For that, as these reasons bear out, the husband and to the extent that they facilitated it, his legal representatives bear a significant responsibility.
THE EVIDENCE
The applicant wife relied on the following documents which were provided to the Court in an electronic Court Book:
(a)The wife's Further Amended Initiating Application filed 15 January 2020;
(b)The wife's Trial Affidavit filed 25 October 2021, and further affidavit filed 23 March 2022;
(c)The wife's Financial Statement filed 15 November 2021;
(d)The affidavit of the wife's mother Ms AC filed 26 October 2021;
(e)The affidavit of the wife's father Mr AC filed 26 October 2021;
(f)The affidavit of the single expert valuer, Mr AD filed 3 November 2021. Mr AD was instructed by the husband and the wife to undertake valuations of the real property.
(g)The affidavit of the single expert valuer Mr AE filed 31 March 2022. Mr AE was instructed by the husband and the wife to undertake a valuation of livestock.
(h)The affidavit of livestock agent Mr AG filed 28 March 2022. Mr AG was instructed by the wife to answer specific questions regarding the retrospective valuation of livestock.
(i)Case Outline filed 15 November 2021 together with a draft Minute of Order.
The husband relied on the following documents which were also provided to the Court in an electronic Court Book:
(a)The husband's Further Amended Response to Initiating Application filed 3 July 2020.
(b)The husband's Trial Affidavit filed 20 October 2021, together with a further affidavits filed 4 November 2021 and 30 March 2022.
(c)The husband's Financial Statement filed 16 November 2021.
(d)The affidavit of Ms AH, the former bookkeeper for R Company, filed 3 July 2020.
(e)The affidavit of Mr AJ, a delivery driver, filed 27 October 2021.
(f)The affidavit of Mr AK, a delivery driver, filed 8 November 2021.
(g)Case Outline filed 15 November 2021, together with a Chronology and Short Minute of Orders sought.
The liquidator relied on the following documents which were provided to the Court in an electronic Court Book:
(a)The Response to Initiating Application filed 28 April 2021.
(b)The Trial Affidavit of the liquidator, Mr Vertue filed 21 October 2021.
(c)Case Outline filed 15 November 2021 together with a draft Minute of Orders sought by the liquidator.
Each the husband and wife and the intervener also relied upon written submissions provided to the Court prior to the hearing on 20 June 2022.
In addition, the wife (through her legal representatives) engaged in a detailed exercise of preparing a Notice to Admit certain facts, together with Notices prepared pursuant to Section 50 of the Evidence Act 1995 (Cth). The focus of those notices was an effort to minimise those facts in dispute during the trial hearing, and to save Court time; which undoubtedly was the beneficial result of that exercise. Those notices were contained in the wife's electronic Court Books as follows:
(a)Notice to Admit dated 21 March 2022;
(b)Section 50 Notices dated 21 October 2021, 29 October 2021, 5 November 2021, 11 November 2021 and 23 March 2022.
The husband responded to the wife's Notice to Admit by providing a Notice Disputing Fact dated 1 April 2022.
The parties additionally each filed detailed closing written submissions.
The sheer volume of the material received into evidence makes it impossible to make detailed reference to all of the documents in these reasons. However all material has been considered together with the oral evidence of the parties and the other witness'.
THE FINAL ORDERS SOUGHT BY THE PARTIES
The orders sought by each of the parties are set out in the detailed draft Minute of Order each of them provided to the Court.
The liquidator is not seeking any further orders in these proceedings, beyond orders focussed on recovering the funds totalling an amount of $547,458, being the combined amount of the parties separate liabilities to R Company as set out in the order of 19 October 2021.
The parties themselves however are in dispute as to how the liability to R Company is to be paid.
The husband and the liquidator each assert that the amount to be paid to R Company should be treated as a joint liability of the parties. The rationale of this position is that each the husband and the liquidator assert that both parties have received the benefit of R Company funds which ultimately contributed to the insolvency and ultimate liquidation of the company. The corollary of this position is that the husband and the liquidator assert that the debt of $547,458 be brought to account when calculating the net assets of the parties available for division, before calculating the parties respective entitlements.
I also suspect that the liquidator has taken this view as he likely quickly came to a realisation that the only chance of recovering the debt owed by the husband was if this approach was taken.
Conversely, the wife's position is that the parties should each be responsible for their own respective portion of the liability now owing to R Company as determined by the liquidator and set out in the orders made on 19 October 2021. The rationale for the wife's position is that the liquidator has correctly assessed each of the parties' respective liabilities to R Company, and there should be no interference with that assessment. This position would see the debt being excluded from the calculation of the divisible net assets of the parties, and the parties each paying their own respective liability from their respective entitlements.
I do not propose to set out the precise orders sought by each of the parties. The parties each provided the Court with a draft Minute of the Orders they sought and regard has been had to those proposals.
The effect of the orders sought by the wife is that each the husband and the wife be restored to the position that they were in at the commencement of the relationship, and that thereafter the parties be responsible for the payment of their own liability to R Company.
The effect of the outcome promoted by the husband is less clear. On the one hand the husband contended that after the payment of monies owing to R Company there be an equal division of the parties combined net assets. The Court however understands from the closing submissions made on behalf of the husband that there is some acceptance, at least by his counsel, that such an outcome is unrealistic and unlikely. Indeed, on being challenged in closing submissions about the husband's position, the following exchange ensued:
[MR Z]: He vies for a - an equal outcome. I accept, though, that there are difficulties with that proposition.
HER HONOUR: There are more than difficulties with that proposition, [Mr Z]. So that's the hitch your wagon proposition as to outcome. Tell me what the realistic outcome is at your end.
…
HER HONOUR: Because a 50/50 in a short relationship where an income-producing asset now no longer exists, where the property that the wife came in with remains intact, where your client is left with some real estate - not the same was what he came in with but real estate - which is [Mr O]'s point and I haven't run the sums of leave things where they are and where does that fall. [Mr O] might be able to tell me as a percentage but what do you say? Because I can't see - and, frankly, even before the trial started I was having difficulty with your client's position but I've now heard all of the evidence and I have - still have difficulty with that position. In fact, my initial views were probably kinder to your client than they might be now on outcome.
[MR Z]: Your Honour, I'm going to give a response and I'm not trying to be deliberately obtuse in this response and I do apologise upfront for any insult - - -
HER HONOUR: Just - - -
[MR Z]: - - - the court may consider but - - -
HER HONOUR: - - - spit it out, [Mr Z].
[MR Z]: - - - I - it's not a response, respectfully, that I can answer.
HER HONOUR: I don't know why your instructor is looking so incredulous about what I - what has just fallen from me, [Mr Z].
[MR Z]: I can't speak for her, your Honour. I can't answer your Honour's question in relation to what my views on the case may be. I can answer this and say - - -
HER HONOUR: Well, you can answer me in terms of what your instructions are. Your instructions are a 50/50.
[MR Z]: My instructions are a 50/50 but I accept that the way in which the evidence has fallen that there are difficulties in my client maintaining an equal-division proposition.
HER HONOUR: So then what? If I assess contributions - because, really, the wife's approach is more or less leave things where they fall now because that leaves the parties largely where they were at the start, accounting for the fact that [R Company] no longer exists. That's - [Mr O] was just nodding his head. That's the effect of what her case amounts to. Your client's case seems to do something different, which says apportion the liability equally between us and give us a 50/50. The liquidator's liability - - -
[MR Z]: Yes.
HER HONOUR: - - - I'm talking about. And it's a 50/50. Well, [Mr Z], not any day of the week was this ever a 50/50. So I'm giving you the opportunity now to address me about that because I've been concerned - I sent you all off for mediation, hoping the reality check would come at some point, particularly at your client's end, on whether that outcome was achievable or not. You're now acknowledging that the evidence hasn't fallen that way. So costs start to loom large but that's a question for another day because I don't know what offers have been exchanged in the background, but if you accept that 50/50, given where the evidence has fallen, isn't on the cards, then what is it? What is it? What do I give the parties when I assess contributions and what do I do when I bring to account 75(2) factors?
And there's something in [Mr O]'s submission that this is really not a case where the usual 75(2) factors prevail, save and accept 75(2)(o), and any waste arguments. So let's assume I take the liability to the liquidator off the top. I then bring to account that liability in some way, and the parties' conduct and the like, in some way at the 75(2)(o) step of the exercise. So where does that leave us? What do I give each of them on contributions, and what do I give each of them to account for the 75(2) factors, or those that are relevant, particularly 75(2)(o), given the length of the relationship?
[MR Z]: Might I have a moment, your Honour? Beyond my personal opinion on where this - - -
HER HONOUR: Your instructions are still a fifty-fifty?
[MR Z]: My instructions are still a fifty-fifty. I do not hold those - I do not hold any instructions to the contrary, and - - -
HER HONOUR: But there's an acknowledgment by you that the evidence hasn't fallen in a way that would support a fifty-fifty division?
[MR Z]: Indeed, your Honour.
HER HONOUR: Well, [Mr O]'s submissions about perspective and proportionality start to ring true. Anyway, that ultimately won't be a matter for me as to how I decide the matter, but it might be an issue when costs come, whatever my decision is, if there's a costs application made, which I can only imagine there will be.
[MR Z]: I - - -
HER HONOUR: Can I understand something, if I leave the debt where it is, and I - and it might be a question better asked of [Mr O], but I will raise it with you, and then I want to give [Mr O] the opportunity to respond, and to deal with that which I raised with you earlier about the way I apportion the liability. But if I leave things where they are, where does that leave your client in terms of a net position? I leave the liability where it is, and I leave everything else where it is in the way the wife proposes, which is a transferring of the property to her, and the various assets being - I think the two joint assets being [Suburb M] and [H Street], isn't it, [Mr O]?
[MR O]: Yes, 1 H Street, your Honour.
HER HONOUR: To the wife? To the wife. What about [K Street, Suburb M]? What happens to that property? I think that gets transferred to the wife as well on your proposal, [Mr O]?
[MR O]: Yes, yes. If it does assist, your Honour, doing the best we can with slight variations to the balance sheet, if your Honour made the orders that we assert are appropriate, there would be a division of 89 per cent to about 11 per cent. They're not precise calculations, but - - -
HER HONOUR: Thereabouts?
[MR O]: About that. That would leave the husband with about $440,000 from which he would owe, if your Honour constructs the balance sheet as we contend it should be, the $409,000. So he would be left with very little indeed. But we say that's appropriate. He would also be left with his legal fees, and it's a concern that nearly - well, more than three quarters of a million, it seems, have been - has been - - -
HER HONOUR: It's a concern to me that we've gotten to this point of the process. There's a concession by counsel that this is not a fifty-fifty, which, as I've said, was obvious to me when I read the material. But I was - came to the matter with an open mind. The evidence hasn't fallen that way. I'm less disposed to that outcome than I originally was, as a consequence of the evidence. And I still can't be given anything with certainty as to what the outcome should be, after - in terms of legal fees spent at the husband's end. It's combined over 1.5. But then I add the liquidators. It is astonishing and staggering and is all the reasons why this jurisdiction attracts so much criticism. It's astonishing that we could get to that amount spent on legal fees, and at the husband's end, it's not a fifty-fifty, but we can't tell you what it should be. It's astonishing.
The views expressed during that exchange with Counsel have not diminished in the preparation of these reasons; rather they have been amplified. It is simply unacceptable that in making closing submissions, the court is left in a position where no plausible outcome is promoted by a party, in this instance the husband.
While it is not an issue to be traversed any further in these reasons, these matters, when coupled with the staggeringly high legal fees incurred in these proceedings are likely to be relevant to determining any cost applications that may be made.
LEGAL PRINCIPLES
The jurisdiction of the Court to make orders with respect to financial matters arising out of the marriage of the parties are set out in Part VIII of the Family Law Act 1975 (Cth).
When determining the question of property settlement, s 79 of the Act empowers the Court to make such orders as it considers appropriate "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".
The legal principles relevant to the adjustment of property interests on the breakdown of a marriage were considered by the High Court in Stanford & Stanford (2011) FamCAFC 208 ('Stanford').
In particular, the High Court identified:
(a)Firstly, that the Court must identify the existing legal and equitable interests of the parties in the property, liabilities and financial resources of the parties at the time of the hearing; and
(b)Secondly, and importantly, that in the application of s 79(2) of the Act the Court must not make any order adjusting the parties legal and equitable interests in property unless the Court is satisfied that "in all of the circumstances, it is just and equitable" to do so.
(c)If the Court determines that it would be just and equitable to make orders adjusting the parties interests in property, then s 79(4) of the Act requires:
(i)The consideration of the contributions made by the parties to the acquisition, conservation and improvement of any property, both of a financial nature but also of non-financial nature;
(ii)The effect of any proposed orders on the earning capacity of each of the parties;
(iii)Those relevant factors set out in s 75(2) of the Act;
(iv)Any other order affecting each of the parties; and
(v)Any child support either party has or is liable to provide, or might be liable to provide in the future for a child of the relationship.
(d)Finally, the Court must consider the "justice and equity" of the actual orders to be made.
Prior to the decision in Stanford, the appropriate approach in a property settlement case was well settled and had been distilled into the "four step process" as identified by the Full Court in Hickey & Attorney-General (Intervener) (2003) FLC 93-143 as follows:
(a)Identification of the value of the property of the parties;
(b)Identification and evaluation of the contributions of the parties to the acquisition, conservation and improvement of the property;
(c)Identification and assessment of the relevant future needs factors of the parties; and
(d)Considerations of justice and equity.
The significance of the decision in Stanford with reference to the four step process was discussed by the Full Court in Bevan & Bevan [2013] FamCAFC 116 ('Bevan'). In that decision, the Full Court identified that the four step process "merely illuminates the path to the ultimate result," but that the overarching obligation of the Court is not to make an order unless it is just and equitable to do so.
In Stanford (at [42]), the Full Court identified:
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 …
Here both of the parties have competing applications for property adjustment before the Court. In addition, the parties have no common intention as to the ongoing use of property.
Significantly, there is a dispute as to how certain liabilities of the parties, in particular those owed to R Company are to be paid.
Accordingly, the Court readily accepts that in all of those circumstances it is just and equitable to make an order adjusting the parties' interests in property.
Thereafter, the Court proposes to adopt the four step approach.
THE WITNESSESS'
During the trial hearing each of the parties gave oral evidence and were cross examined.
The husband's counsel choose not to call on the wife's parents for cross-examination. The effect of that decision is that their evidence has been received by the Court unchallenged. This was a significant concession, given several of the husband's witness' filed affidavit's, the effect of which was to take issue with the version of events presented by the wife's parents.
I make the following observations about the wife's oral evidence:
(a)The wife appeared to be a careful and considered witness, who only answered the specific questions asked of her. She was not prone to elaboration, exaggeration or unnecessary commentary. Instead, she concisely answered the questions she was asked.
(b)The effect of this is that it appeared that unless the wife was asked a specific question, some of the nuances to her evidence was likely lost.
So far as the oral evidence of the husband is concerned:
(a)The husband's presentation and the answers he gave, raised significant concerns as to the frankness, honesty and candour of his evidence.
(b)Much like the wife, the husband appeared to only want to answer the specific questions asked of him, however the impression gained from him was entirely different to the impression gained of the wife.
(c)At times the husband appeared determined to give the answer and narrative that he wanted to give, rather than answering the question that had been asked of him. This approach by him had the appearance of avoiding the questions that were being asked of him.
(d)At other times when the husband was probed and asked to elaborate on his answers, the inconsistencies and/or implausibility in the husband's evidence became apparent.
(e)In addition, the husband would not make concessions to questions that were put to him to what in some cases were obvious concessions to be made.
(f)As a consequence, the husband's presentation was at times argumentative and at other times he appeared to force deferential charm. Overarching his presentation, however was his own self-aggrandisement and lack of perspective.
The husband's incongruous presentation was apparent on more than one occasion throughout his oral evidence. On more than one occasion, I raised concerns directly with the husband about the manner in which he was giving his evidence. Three specific occasions when this occurred were (which have been chosen as they are relevant to matters discussed later in these reasons):
(a)During the husband's evidence on 8 April 2022, he was asked questions about the existence of financial statements for an entity known as V Pty Ltd, which trades under the name V Company, for the financial years ending 30 June 2020 and 30 June 2021. The husband gave evidence that there were no financial statements for the company for those years. When probed further the husband indicated that he had produced those financial statements. The inconsistency between those two answers led to the following exchange:
[MR O]: Well, didn't you tell us a few answers ago, that there were no financial statements for [V Company] for the year ended 30 June 2020?
HUSBAND: I presumed you meant tax returns, sir.
[MR O]: You presumed I meant tax returns?
HUSBAND: Yes, sir.
[MR O]: So
HER HONOUR: Did [Mr O] ask you about tax returns, because that's not the question I heard him ask you?
HUSBAND: No, your Honour. That's - that was my mistake, sir - your Honour.
HER HONOUR: Well, what other mistakes have you made in the course of your evidence?
HUSBAND: I - I'm not - I'm aware of many others, sir - your Honour.
[MR O]: But, sir, you told me that there were no financial statements for the year ended 30 June 2021. Is that another mistake?
HUSBAND: What I believe, sir, is that we have disclosed - - -
[MR O]: Sir, is that another mistake? Don't - you won't find the answer on the letter?
HUSBAND: Possibly. Possibly. Possibly. Yes, it's a mistake.
[MR O]: You understood, didn't you, that one of the fundamental issues in this case was your capacity to earn income?
HUSBAND: Yes, sir.
[MR O]: And your case has been, hasn't it, that some conduct of my client impeded your capacity to earn income?
HUSBAND: Yes, sir.
[MR O]: So it was crucial to the court determining that matter to have documents going to the income you, in fact, could earn?
HUSBAND: Yes, sir.
[MR O]: And you knew that?
HUSBAND: I know that, sir.
(b)During the husband's evidence on 11 April 2022, the wife's counsel asked the husband questions about transactions entered in the R Company accounts as "freight" costs of R Company in the amount of $50 and $150. The husband acknowledged that these entries were made in the R Company records, which then led to the following exchange:
[MR O]: Let me show you, sir, a copy of the [R Company] bank account at the ANZ bank. And they identified the two payments out of the [R Company] account?
HUSBAND: Correct, sir.
[MR O]: And they were payments to you, weren't they?
HUSBAND: It appear - yes, sir.
[MR O]: You were, let me suggest, taking cash from the [R Company] account and causing it to be recorded as a genuine expense of [R Company], for example, in the example I've shown you from the [R Company] records, as freight?
HUSBAND: I would have asked [Ms AH] [the bookkeeper] just to treat it the same way as [Ms Baldoni] used to do it. I'm not sure what the $50 or $150 was for, but if [Ms AH] had have asked me, I would have asked her to treat the drawings the same way.
HER HONOUR: [Mr O]'s question was quite precise. He was not asking you about [Ms Baldoni], he was asking you about those two transactions specifically, and his question to you was that you were taking cash from [R Company], and you were causing it to be recorded in the books as an expense - recorded as [R Company] freight?
HUSBAND: Not intentionally, your Honour.
…
HER HONOUR: It's actually not a difficult question, [Mr Baldoni]. And you see, when you give me a million different answers to the questions that are being asked, I start to form view about your evidence?
HUSBAND: I understand, your Honour.
HER HONOUR: All right. The answer is quite simple, would you accept? [Mr O] is right, do you now admit that?
HUSBAND: Yes, your Honour.
(c)During the husband's evidence on 8 April 2022, the husband was asked questions about his experience in the commodities industry before meeting the wife, in the context of shortly prior to the parties first separation, the husband having set up companies with similar sounding names to R Company which had the effect (I am satisfied) of the husband passing himself off as the wife and/or companies operated by her.
[MR O]: You, sir, in October - that is, shortly prior to the separation - had set about setting up a number of business names, hadn't you?
HUSBAND: Yes. Correct.
[MR O]: And they were business names which I suggest to you were very similar to the business that [Ms Baldoni] then controlled and owned, operated by [R Pty Ltd]. That's correct, isn't it?
HUSBAND: One of them is. Yes, sir.
[MR O]: And you set those up, sir, with a view to passing off conduct of your own as conduct of [R Company]?
HUSBAND: No, sir.
[MR O]: You accept, however, don't you, sir, that on - I will just find it here - 1 October 2015, you set up a business name [AL Company]?
HUSBAND: Yes, sir.
[MR O]: At that point, you had had no experience in commodities trading, apart from that which you might have seen as a consequence of being associated with my client?
HUSBAND: No, sir.
[MR O]: You set up also a second business, [AO Company]?
HUSBAND: They're business names, sir.
[MR O]: And they were intended to be business names which would assist you to pass off a business you considered you might set up as one associated with [R Company]?
HUSBAND: No, sir.
HER HONOUR: What experience had you had prior to your relationship with the wife in [commodities trading]?
HUSBAND: None.
HER HONOUR: Well, when [Mr O] asked you a minute ago that you had no experience in [commodities trading] other than that which you had seen through your relationship with the wife, why did you answer no?
HUSBAND: Sorry. I answered no from 1 October '15, but prior to that - up until that date, [Ms Baldoni] had taught me quite a few things about the [commodities trading] business.
HER HONOUR: Well, that's the very question [Mr O] asked you?
HUSBAND: Well, I'm sorry, your Honour.
HER HONOUR: He asked you - - -?
HUSBAND: I got confused.
HER HONOUR: - - - other than your association with the wife, what experience did you have?
HUSBAND: Well, I'm sorry, your Honour. I misunderstood the question.
HER HONOUR: Well, listen to the question carefully - - -?
HUSBAND: Thank you.
HER HONOUR: - - - because if you don't and you answer in that way, I'm left thinking that I don't accept your evidence?
HUSBAND: I understand, your Honour.
In addition, and by way of example of the husband's determination to stick to his own narrative and avoid making an obvious concession, there was an exchange which arose during the husband's evidence on 7 April 2022 in relation to questions put to the husband about inflammatory communications he sent to the wife during the period that the parties had separated (again chosen as it relates to matters discussed later in these reasons).
[MR O]: And on 28 November of 2015, following the separation, you sent, didn't you, sir, an email to my client which included the words - reference to somebody called […], who was an author of a document, […] - you sent a text - an email which said this, didn't you:
You may wonder why a covert female narcissist stick to just one supply rather than to go out in the world and keep raping other innocent men's souls.
HUSBAND: I would have to see the document, sir.
…
[MR O]: And that's a text message that you sent, is it not?
HUSBAND: It's an email, sir.
[MR O]: An email, I'm sorry. It's an email you sent?
HUSBAND: Correct, sir.
[MR O]: And it's an email that you intended would distress [Ms Baldoni]?
HUSBAND: I was simply explaining how I felt, sir.
[MR O]: It was an attempt, sir, let me suggest, to intimidate her?
HUSBAND: No, sir.
[MR O]: You were intending that she should accept the proposition that she was a narcissist?
HUSBAND: No, sir. It was part of the conversation we were having in a series of emails and text messages at the time. This is only one of them.
[MR O]: You intended that content, let me suggest to you, to cause her distress?
HUSBAND: It was in reply to a series of - - -
[MR O]: Sir, answer my question, please?
HUSBAND: No, sir.
While these are only four examples that have been taken from the husband's evidence, they illustrate the very significant concerns that I hold over the veracity of his version of events, and his desire to paint himself in a positive light despite evidence before the Court to the contrary.
The written closing submissions on behalf of the husband seek to interrogate the inconsistencies in the wife's oral evidence as against her affidavit material. The husband's position is that the Court should only accept the wife's evidence to the extent it can be corroborated by independent sources. Often this is a submission that would have merit. Unfortunately, in all of the circumstances of this case, and particularly where I am satisfied that the husband was not a witness of credit, and where I am satisfied that at least some of the independent records are not always as they appear, this would not be an appropriate approach (including for example the exchange with the husband set out above over the freight records and matters discussed latter in these reasons relating to false R Company invoicing that diverted funds to the husband’s bank account).
Moreover, in circumstances where voluminous material has been filed by each of the parties, it is simply impossible to interrogate each and every written or spoken word deposed by each of them.
It is for all of these reasons that a nuanced approach focused on the evidence that is relevant to deciding the issues in dispute, needs to be taken.
On the whole however, I am satisfied that the wife did her best to be a truthful and accurate historian.
The same however cannot be said for the husband.
The wife's position is that the husband "was evasive, non-responsive and defaulted to speechifying throughout his evidence".[5] For the reasons I have identified, this is a submission with which I agree.
[5] Wife’s Outline of Final Submissions, tendered at trial, paragraph 3.3.
It is for all of these reasons that for the most part wherever the husband's version of events differs from that of the wife and her witness’, I prefer the evidence given by the wife and her witness’.
THE EXISTING LEGAL AND EQUITABLE INTERESTS OF THE PARTIES
Over the course of the final hearing the Court received a joint balance sheet that had been prepared by the parties at the Court's direction (Exhibit W2).
In closing submissions, the wife's counsel commented that the joint balance sheet was "overly complex". I agree with this submission. Principally because there are 12 pages of extensive notes to the balance sheet which presumably the parties had an expectation would form part of either the evidence and/or their respective submissions. Unhelpfully, the majority of those notes, particularly at the husband's end were confusing (particularly when read together with the 87 pages of written closing submissions of the husband), as some of the matters covered in the notes were not matters about which there was evidence during the trial.
As a consequence of these issues, I ultimately considered it appropriate that the matter be recalled for further submissions. This occurred on 17 February 2023. At that hearing, I indicated to the parties that I would not have regard to the notes to the balance sheet. Rather I asked counsel to address the Court on each item in the balance sheet, line by line, so that I could understand exactly that which was in dispute and that which was not, together with the evidence before the Court enabling the resolution of any disputes.
The process that was undertaken at the hearing on 17 February 2023, was illuminative. By the end of it, where it had initially appeared that there was much in dispute between the parties, there remained very little.
The joint balance sheet is now best distilled as follows (taking into account the husband's sale of the J Street property after the conclusion of the trial):
A. REAL PROPERTY OWNER VALUE 1. B Street, Town C (“the Town C property”) Joint 3,550,000 2. N Street, City P (“the N Street property”) Wife 350,000 3. 1 K Street, Suburb M (“the K Street property”) Joint 375,000 4. 1 H Street, Suburb L (“the joint H Street property” Joint 420,000 5. 2 H Street, Suburb L (“the husband’s H Street property”) Husband 400,000 SUB TOTAL – REAL PROPERTY 5,095,000
B. PROCEEDS FROM SALE OF REAL PROPERTY OWNER VALUE 6. Proceeds: D Street, Suburb F and J Street, Suburb M
(Edwards Family Lawyers Trust Account)Joint 107,266 7. Proceeds: 2 K Street, Suburb M
(Somerset Ryckmans Trust)Joint 12,899 SUBTOTAL – PROCEEDS OF SALE 120,165
C. U TRUST OWNER VALUE 8. Trust Assets Wife (a) Livestock excl. GST 429,100 (b) Motor Vehicle 1 71,131 (c) Motor Vehicle 2 77,480 (d) Beneficiaries account 0 9. Trust Liabilities (a) ANZ Overdraft (…46) secured by Town C property (99,772) (b) ANZ Loan (…49) secured by Town C property (825,330) (c) GST Payable (32,620) (d) AQ Pty Ltd (310,700) (e) AR Finance for Motor Vehicle 1 (65,735) (f) AR Finance for Motor Vehicle 2 (62,669) SUBTOTAL – U TRUST (819,115)
D. BANK ACCOUNTS OWNER VALUE 10. BM Pty Limited ACN …
Westpac Account (…23)Wife nominal 11. T Pty Limited ACN … Wife (6,251) 12. R Company Joint 0 13. ANZ Account (…34) Wife 1,976 14. AV Bank Account (…24) Wife 7,183 15. V Pty Limited (ACN …) Westpac Account (…41) Husband 0 16. DD Pty Limited (ACN …) Husband 0 17. S Pty Limited (ACN …) Westpac Account (…62) Husband 0 18. EE Pty Limited (ACN …) Husband 0 19. FF Pty Limited (ACN …) Husband 0 20. Westpac Account (…08) Husband 0 21. Westpac Account (…16) Husband 0 22. ANZ Etrade Cash Investment (…79) Husband 0 SUBTOTAL – BANK ACCOUNTS 2,908 E. MOTOR VEHICLES OWNER VALUE 23. Motor Vehicle 3 Husband 13,500 24. Motor Vehicle 5 Husband 2,500 SUBTOTAL – MOTOR VEHICLES 16,000
F. LIABILITIES – REAL PROPERTY OWNER VALUE 25. N Street, City P
BB Limited (AW Finance) (...66)Wife (178,276) 26. 1 K Street, Suburb M
CC Pty Limited (…22)Joint (167,752) 27. 1 H Street, Suburb L
AX Finance (…45)Joint (194,728) 28. 2 H Street, Suburb L
AX Finance (…57)Husband (184,521) SUBTOTAL – REAL PROPERTY LIABILITIES (725,277)
G. LIABILITIES - R COMPANY 29. Wife’s liability to R Company as per Consent Orders of 19 October 2021 Wife (137,730) 30. Husband’s liability to R Company as per Consent Orders of 19 October 2021 Husband (409,728) SUBTOTAL – R COMPANY (547,458)
H. SUPERANNUATION OWNER VALUE 31. BM Pty Limited - SMSF Wife $133,489 32. Super Fund 2 (Member No. …68) - Accumulation Husband NIL ITEMS OF PROPERTY THE SUBJECT OF DISPUTE
With reference to this detailed schedule there are three items about which comment is required.
The first is the monies held in the wife's solicitors trust account at item 6. In that regard:
(a)A small balance remained in the trust account from the sale of the Suburb F property previously referred to.
(b)Pursuant to orders made on 17 October 2022, the husband deposited the sum of $100,000 into the wife's solicitors trust account, being those funds he had not dispersed from the sale of the J Street property.
(c)Accordingly, the figure of $107,266 is a combination of what remains from each separate property sold.
The second is the loan from AQ Pty Ltd identified at item 9(d). In that regard:
(a)The parties agree the quantum of this liability.
(b)The parties also agree that this loan was taken out by the wife on behalf of the U Trust for the purpose of conducting the farming enterprise on the Town C property.
(c)The wife asserts that the funds were utilised to purchase livestock, which has been included as an asset of the U Trust at item 8(a).
(d)The husband asserts that the wife has used the funds instead to fund her legal expenses in these proceedings.
(e)The husband therefore asks that the Court exclude this liability, and that there be a notional add back to reflect the fact that the wife expended these funds on legal fees.
(f)No evidence was put before the Court to support the assertions made by the husband.
(g)While I accept that the wife has used income derived from the U Trust to meet her various post separation expenses, including her legal fees, ultimately, where there is agreement that the loan was taken out to purchase livestock, and the value of that livestock is to be included, it is appropriate to bring this liability to account. It is a real liability of the U Trust, taken out in the usual course of the farming enterprise business.
(h)While the husband's counsel did not have instructions to agree this approach, he acknowledged that it was appropriate.
The final item about which comment is required is the Motor Vehicle 5 at item 24. In that regard:
(a)Each of the parties had proffered an estimate for the value of the Motor Vehicle 5; the wife $3,000 and the husband $2,000.
(b)There had been no formal valuation of the Motor Vehicle 5.
(c)Counsel for each of the parties ultimately conceded that in those circumstances it would be appropriate to include the Motor Vehicle 5 at a value of $2,500.
(d)Again, the husband's counsel did not have instructions to agree this approach, however he again acknowledged that this approach was appropriate.
LIABILITIES INCURRED POST SEPARATION WHICH THE PARTIES ASK THE COURT TO HAVE REGARD
In addition to the liabilities that have been identified in the above schedule, the parties have also mutually drawn the Court's attention to their respective post-separation liabilities. They do so, not because they ask the Court to bring those liabilities to account as liabilities in the calculation of the composition of the matrimonial assets and liabilities to be divided, but rather so that the Court has some understanding of these liabilities in the overall assessment of the matter.
Those liabilities are as follows:
A. LIABILITIES – CREDIT CARDS OWNER VALUE 1. ANZ Credit Card (…01) Wife Nominal 2. AY Finance Credit card (…52) Husband (11,432) 3. BR Finance (…64) Wife (6,966)
B. LIABILITIES - TAXATION OWNER VALUE 4. Personal income tax for 2018 and 2019 Financial years Husband (66,584) 5. Personal income tax for 2020 Financial Year Husband (4,821) 6. ATO Tax liability 551 Wife (3,517)
With regards to that schedule, the personal liabilities of the wife at the time of trial totalled approximately $10,483, and the personal liabilities of the husband totalled approximately $82,837.
To those liabilities I also understand, as earlier identified, that the parties have significant outstanding liabilities for their legal fees in these proceedings. With reference to the June 2022 Costs Notices those outstanding legal fees are approximately $100,938 for the wife and $649,160 for the husband.
If I include those legal fees in the calculation of the parties separate personal liabilities, I understand that:
(a)The wife's personal liabilities total approximately $111,421; and
(b)The husband's personal liabilities total approximately $731,997.
DISSIPATED FUNDS
In addition to the assets and liabilities that have been identified, the wife asks the Court to consider a range of amounts received and dissipated by the husband.
In some instances the wife asks the Court to add back into the matrimonial pool certain amounts as notional property; being monies received by the husband, which has been expended and therefore no longer exists. In other instances the wife asks the Court to treat the funds received and expended by the husband when consideration is given to the relevant future needs factors enunciated in s 75(2) of the Act, and in particular pursuant to s 75(2)(o).
Before considering this issue, it is important to highlight that there are no firm rules as to how the Court is to bring to account funds that have been dissipated.
In Vass & Vass (2015) 53 FamCAFC 51, the Full Court identified:
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.
In Trevi & Trevi (2018) FamCAFC 173 ('Trevi'), Murphy J highlighted that adding back notional property is exceptional, commenting:
27.The Full Court held in Omacini and Omacini that addbacks fall into "three clear categories": where the parties have expended money on legal fees; where there has been a premature distribution of matrimonial assets; and "waste" or wanton, negligent, or reckless dissipation of assets.
28.However, the Full Court also made it clear that an addback does not necessarily occur whenever "a party has expended money realised from the disposition of assets that existed as at the date of separation", the Full Court describing such a proposition as "unduly simplistic". An earlier Full Court made the same point, saying that adding back is "the exception rather than the rule".
29.The fundamental precept that addbacks are exceptional, reflected in the decisions just referred to, also mirrors what has been said in earlier decisions of the Full Court that, for example, "the Family Court must take the property of a party to the marriage as it finds it" at trial. An important parallel proposition is that the parties do not "go into a state of suspended economic animation" after separation. Thus, reasonably incurred expenditure does not usually come within accepted categories of addback.
30.Two fundamental premises emerge from Omacini and the authorities preceding it. First, "adding back" is a discretionary exercise. When the discretion is exercised in favour of adding back, it reflects a decision that, exceptionally, in the particular circumstances of a case, justice and equity requires it. The second premise is its corollary: in cases that are not "exceptional" justice and equity can be achieved, not by adding back, but by the exercise of a different discretion - usually by taking up the same as a relevant s 75(2) factor. Indeed, it has been said that the latter is "a course which is, perhaps, technically more correct" than adding back to the list of existing interests in property.
(Footnotes omitted)
On the topic of waste, the decision in Kowaliw and Kowaliw (1981) FLC 91-092 at 76,644 is of assistance. There, Baker J identified:
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.
Later, at 76,644 Baker J reiterated his earlier comments by stating:
If a party has acted in a manner to which I have referred earlier… then such conduct in my view and the economic consequences which flow therefrom are clearly matters to which the Court may have regard pursuant to the provisions of sec. 75(2)(o).
Therefore, and in light of these authorities, it is apparent that when considering the question of monies that have been dissipated, the Court firstly needs to understand the manner in which the funds have been dissipated and thereafter determine whether or not to exercise discretion in one of two ways:
(a)Firstly, by adding back those funds that have been dissipated; or
(b)In the alternative by taking any amounts expended into account pursuant to the provisions of s 75(2)(o).
Importantly however, the distinction remains that the Court has a discretion as to how to deal with these dissipated funds. Moreover, the Court is not required to exercise discretion to either add back, or consider the notional property pursuant to s 75(2)(o), if the circumstances of the case do not warrant that occurring.
Agreed add-back - Proceeds from the sale of the J Street property
While the majority of the notional property is the subject of dispute, there is one item which is the subject of agreement. This item relates to the husband's sale of the J Street property after judgment was reserved, and in that regard:
(a)The J Street property was sold with a contract price of $215,000.
(b)The amount of $100,000 has been preserved in the wife's solicitors trust account.
(c)The amount of $115,000 represents the monies received and expended by the husband between the settlement of the sale of the J Street property on 4 October 2022 and the 20 October 2022 when the husband swore an affidavit deposing to the sale of the property and his use of the proceeds of sale.
So far as the monies that were expended by the husband in the period of a little over a fortnight between the receipt of the funds and the filing of his affidavit, the husband asserts,[6] that the funds had been spent by him as follows:
[6] Husband’s affidavit filed 20 October 2020.
(a)A little over $15,000 was absorbed by the costs of sale;
(b)Mortgage arrears for the husband's H Street property "due to [CC Pty Ltd]" (presumably a debt collection agency) in the amount of $10,000;
(c)Repayment of the husband's AY Finance Mastercard in the amount of $12,000;
(d)The sum of $37,000 was withdrawn in cash and applied to:
(i)The sum of $6,028 on "essential repairs to my [vehicle]";
(ii)The sum of $4,400 to purchase a trailer;
(iii)Some additional items for camping in the amount of $3,200;
(iv)A bike for transport in the amount of $2,800;
(v)An undisclosed amount on "dog food and accessories so that my neighbours could look after my [...] dogs in my absence";
(vi)An undisclosed amount on "medication for [various medical conditions] ";
(vii)The sum of $1,600 for building and contents insurance for the husband's H Street property;
(viii)The sum of $3,000 on "outstanding utilities bills" on the husband's H Street property;
(ix)The sum of $10,200 on "a company based [overseas] to develop the software required for application I am hoping to develop"; and
(x)An undisclosed amount on "clothes, shoes and self-care and improved food".
(e)The sum of $5,984 on accountant's fees;
(f)The sum of $10,500 in repayment of an alleged loan from "[Ms BA]";
(g)The sum of $11,400 in repayment of an alleged loan from "[Ms BC]"
The first comment that might be made about the husband's expenditure of the funds received from the sale of the J Street property, is that the rapid dissipation of such a significant sum of money was devastatingly swift and cavalier.
While the husband was not cross examined about his expenditure, it is impossible to overlook two specific issues, namely:
(a)The husband's explanations fall short by almost $15,000; and
(b)The amounts to "[Ms BC", "Ms BA]" and the "company based [overseas]" appear particularly incredulous and/or at the very minimum the explanation is entirely lacking in plausibility, detail or clarity.
Whatever the case may be about the husband's dissipation of funds, the parties agreed to an order on 21 October 2022 that notional property in the amount of $115,000 would be attributed to the husband.
In bringing the matter before the court in October 2022, the wife and the liquidator actively eschewed bringing a contempt application to deal with the husband’s flagrant breach of the orders.
The parties' agreement as to how to approach the dissipation of funds however, does not absolve the husband from comment being made about his conduct.
What is most egregious about the husband's sale of the property and rapid dissipation of funds is that he did so in full knowledge that he was in breach of orders of this Court. Somewhat incredulously however, the husband sought to explain away his actions by telling the Court that he sold the property without notice to the wife or seeking to be discharged from the injunction, as he "anticipated that the wife would object to any release of funds following the sale of the property to discharge the pressing liabilities which I faced".[7]
[7] Husband's affidavit filed 20 October 2022, paragraph 4.
It would be trite to comment that the injunction existed to prevent the very thing that the husband ultimately ended up doing.
It is for all of these reasons that I am of the view that the husband acted recklessly, negligently and/or wantonly with respect to the proceeds from the sale of the J Street property.
Moreover, when I couple the husband's actions in this regard, with the balance of matters discussed throughout these reasons which address the husband's financial dealings, this conduct underscores why I have come to the firm view that the husband:
(a)has an inability to manage his financial affairs;
(b)has a lax attitude to finances;
(c)has a tendency to profligately spend whatever funds come into his possession;
(d)has no regard for the consequences of his actions on others; and
(e)has no regard for orders of this court.
It is for all of these reasons that I consider that it is appropriate, noting the agreement of the parties to do so, to notionally add back the funds received and dispersed by the husband from the sale of the J Street property in the amount of $115,000.
Monies expended by the husband during the relationship and in the post separation period
Even before the husband's decision to sell the J Street property and dissipate funds, a significant complaint of the wife which was canvassed extensively in the parties filed material and during the trial, was the husband's financial conduct and use of funds during the relationship and in the post separation period.
As best can be summarised, the wife's complaints about the husband's financial conduct falls into three specific of categories:
(a)Gambling losses;
(b)Debt incurred by a failure to meet financial obligations; and
(c)Monies spent on unidentified discretionary spending.
The main reason that the wife asks the Court to bring to account in some way the husband's financial conduct in the lead up to separation and in the post separation period, is because she asserts that he has acted recklessly, negligently and/or wantonly with the overall effect of depleting the matrimonial assets that are now available for division.
In advancing this proposition, the husband was cross examined at some length about the way he conducted his financial affairs prior to the relationship, during the relationship and in the post separation period. As a result of this cross examination the Court is satisfied as to a number of matters.
For the period immediately prior to the relationship of the parties, I am satisfied when regard is had to a number of exhibits and when read together with the oral evidence of the husband, as to the following:
(a)At the commencement of the relationship the husband owed a child support debt in relation to his child BD. While the husband identified in his oral evidence that the liability was in the amount of $3,000, when regard is had to the Child Support Agency "Decision Regarding Change of Assessment"(Exhibit W15), it appears that the debt may have been a little higher and in the amount of $4,278. Whatever the case may be, it is apparent that the husband had an extant child support liability at the commencement of the relationship.
(b)At the commencement of cohabitation, the husband also had a liability for unpaid rent on a rental property about which he was being pursued, in the amount of $15,000, which the husband asserts he subsequently repaid.
(c)As at March 2015, the last time the husband had lodged a tax return was for the financial year ending 30 June 2012, in the amount of $17,069 (Exhibit W15).
(d)The husband received Centrelink entitlements in the amount of $7,623 for the financial year ending 30 June 2013 and $12,668 for the financial year ending 30 June 2014 (Exhibit W15).
(e)The husband lodged a tax return for the financial year ending 30 June 2015 (which included a little over the first two months of the parties relationship) which identified his taxable income for that financial year as $2,317 (Exhibit’s W8 and W9).
(f)On or about 24 March 2015 the husband received two payments of $132,000 and $7,500 (a total of $139,500) from the sale of a property he owned at Town WW, which was entirely dissipated by 30 June 2015 (Exhibit W13) on at the very minimum the following:
(i)$69,060 to the "[BF Company]" on gambling;
(ii)$4,500 on the purchase of farm equipment; and
(iii)$30,000 towards the purchase of the J Street property (less the contribution from the wife referred to later in these reasons).
In Steinbrenner & Steinbrenner [2008] FamCAFC 193 Coleman J observed:
234. Given the evaluation of contribution based entitlements inevitably moves from qualitative evaluation of contributions to a quantitative reflection of such evaluation, there will inevitably be a "leap" from words to figures. That is the nature of the exercise of discretion, whether it be in the assessment of contributions in the matrimonial cause, assessment of damages in a personal injuries case, or determination of compensation in a land resumption case.
In taking that leap from words to figures, the Court is also required to take holistic approach to the assessment of contributions, and weigh together all of the parties' contributions throughout the course of their relationship.
As the Full Court identified in Dickons & Dickons (2012) 50 Fam LR 244:
24.There can be little doubt that the classification of contributions by reference to terms such as "initial contributions", "contributions during the relationship", and "post-separation contributions", can be helpful as a convenient means of giving coherent expression to the evidence in a s 79 case and to giving coherence to the nature, form and extent of the parties' respective contributions. However, the task of assessing contributions is holistic and but part of a yet further holistic determination of what orders, if any, represent justice and equity in the particular circumstances of this particular relationship. So much is clear from the terms of s 79 itself and, in particular, s 79(2). The essential task is to assess the nature, form and extent of the contributions of all types made by each of the parties within the context of an analysis of their particular relationship.
Those comments of the Full Court in Dickons, were reinforced more recently by the Full Court in Jabour & Jabour (2019) FLC 93-898. In particular, in Jabour the Full Court warned against emphasising any particular contributions at the expense of the "myriad of other contributions that each of the parties has made during the course of the relationship" (at [35]).
Taking a holistic approach to the question of contributions, and given the short nature of the parties' relationship, I am satisfied that when weighed together the contributions significantly favour the wife. I accordingly propose to bring to account the contributions of the parties as to 75 per cent to the wife and 25 per cent to the husband.
RELEVANT S 75(2) FACTORS
I only propose to discuss those s 75(2) factors that have weighed in my decision; bearing in mind that I have already identified a range of matters that I intend to bring to account pursuant to s 75(2)(o), which I do not propose to repeat here.
The husband is 60 years of age.
The wife is 53 years of age.
The relationship of the parties is at best a combined 3 and a half years in duration.
Despite the short length of the relationship, it has been financially catastrophic for the parties.
The saving grace however is that the wife has been able to retain and maintain the Town C property that she brought into the relationship, and this property has appreciated in value significantly. This property, and the farming enterprise, if retained by the wife will mean that she will both have a home to live in and a means of supporting herself into the future.
While the relationship and this litigation has resulted in the husband incurring significant debts, I am satisfied for all of the reasons that I have discussed, that the husband's own conduct and behaviour has significantly resulted in the predicament that he now finds himself in.
I am satisfied that each of the parties are in relatively good health and capable of earning an income, if they choose to do so. However, if history is a predictor of the future, I cannot assume that the husband has any desire to avail himself of the opportunity to obtain meaningful paid employment. This is despite his self-professed skills, and his tertiary qualifications. Whatever the case may be however, I am not satisfied that this relationship has had any particular impact on the husband's ability to obtain employment and meet his own financial needs. If anything, the wife provided the husband with employment in R Company, and thereafter a position of power and significance which he might not have otherwise been able to achieve elsewhere given his limited work history and the fact that he had previously been bankrupt.
I am also satisfied that both parties have suffered reputational damage from the demise of R Company, which may equally impact their respective employment prospects and/or their ability to run their own business moving forward.
I am also concerned that the husband appears to have gone to extensive efforts to tarnish the wife's reputation (including sending vile messages to the wife's family and friends, sending damaging communications to financiers and customers of R Company where he falsely represented himself among other things as the Chief Executive Officer (‘CEO’) of R Company, posting vile social media posts about the wife, setting up companies in an attempt to pass himself off as the wife both around the time of the first separation and in the post separation period). In light of all of the matters discussed in these reasons (particularly as to the husband's financial dealings), the husband's conduct in this regard was particularly calculated and nasty. Moreover, where at the time of trial there remained online some of those toxic and offensive social media posts, the Court must have some concern that the husband may well continue to make efforts to injure the wife's professional reputation well beyond the finalisation of these proceedings.
APPROACH TO THE R COMPANY LIABILITY
Section 75(2)(ha) requires the Court to consider:
the effect of any proposed order on the ability of a creditor of a party to recover the creditor's debt, so far as that effect is relevant.
As identified earlier in these reasons, there is no dispute between the parties that the combined liability to R Company is $547,458. The husband and the liquidator agree that the parties combined liability to R Company be included as a joint liability of the parties and therefore included in the calculation of the net pool of property available for division. Whereas the wife asks the Court to leave the parties respective liability where it lies, such that they each be responsible for their own liability from whatever their entitlements might be.
For reasons discussed below in my overall assessment of the matter, if I were to take up the approach promoted by the wife, there is some certainty that the husband will be unable to fully pay his liability to R Company. While this factor is not determinative of the dispute as to how the R Company liability is to be paid, it is none-the-less still a relevant consideration.
From my perspective and of far greater significance however, is a consideration of how the insolvency of R Company came to pass, and in particular whether the parties themselves and or any entities controlled by each of them had the benefit of R Company funds.
Significantly I have had regard to the decisions of the full court in Commissioner of Taxation & Worsnop and Anor [2009] FamCAFC 4 and Trustee of the Property of G Lemnos, A Bankrupt & Lemnos and Anor [2009] FamCAFC 20 as to how the Court might treat the payment of unsecured liabilities in the context of family law litigation.
Those two separate decisions from the Full Court, were delivered within a month of each other and each produced a different outcome. In both cases, the husband owed a significant liability to the Australian Taxation Office which by nature was an unsecured liability (additionally in Worsnop a company controlled by the husband also had significant taxation liabilities). In each case the liability of the husband exceeded the property available for division. In Worsnop the Commissioner of Taxation intervened in the proceedings, and in Lemnos the husband had entered bankruptcy and the husband's Trustee in Bankruptcy intervened in the proceedings. In both instances, representations were made by each the Commissioner and the Trustee as to how the taxation liability should be met in the context of the s 79 proceedings between the husband and the wife.
In Worsnop, the trial Judge had determined that the husband's personal taxation liability would not be bought to account in the "net property of the husband and wife". Relevant in making that determination the trial judge accepted the wife's evidence that she had no knowledge and had not been complicit in the husband's conduct which led to the taxation liability. After considering the contributions of the parties and the relevant s 75(2) factors, the trial judge determined that the appropriate division was a 50/50 outcome. The trial judge then turned to the question of justice and equity, and cognisant of the priority issues that existed between the wife and the Commissioner, determined that the only asset of significance be sold and the net proceeds divided between the wife and the Commissioner. The Commissioner's appeal against that decision was dismissed.
In Lemnos, the trial judge had made orders with the effect that the husband's Trustee in Bankruptcy would bear the entire burden of the husband's taxation liability. The Trustee successfully appealed that decision. Coleman J determining that the discretion of the trial judge had miscarried and commenting:
175.… I conclude that the exercise of that discretion miscarried in the circumstances of this case. With respect to his Honour, only after a consideration of s 75(2)(ha) could his Honour have permissibly concluded that it was “appropriate in this case to require the husband to satisfy the debt to the ATO from his own resources”. Such consideration would in my view have included consideration of the facts and circumstances referred to by Counsel for the parties before this Court in the context of Ground 8 of the Amended Notice of Appeal.
176.Perhaps understandably, with respect to him, the trial Judge’s focus on the absence of complicity or culpability on the part of the wife diverted him from the discretionary exercise which the statute required him to undertake. Having concluded, as was open to him, that the wife had not been complicit in the husband’s taxation indiscretions, and rejected the trustee’s contention that W property was only available because of such indiscretions, as was also reasonably open to him, the trial Judge was able to contemplate making an order in favour of the wife out of the property of her bankrupt spouse. Had his Honour not made those findings, any order in favour of the wife may not have been reasonably open to him. In my view, his Honour erred in concluding that the husband should satisfy the debt to the ATO from his resources by relying solely upon the matters to which he had previously referred, before having regard to s 75(2)(ha)...
As helpfully summarised by Berman J in Bertrand & Bertrand [2021] FedCFamC1F 70 at [495-496]:
495.The gravamen of the decisions in Lemnos (supra) and Worsnop (supra) is to ensure that the factors relevant to a determination of a just and equitable outcome are properly considered. Hence, s 75(2)(ha) of the Act requires the Court to give close consideration to the interests of third party creditors. That is not to suggest that they gain a priority but equally the Court’s determination should not be clouded by considerations of potential hardship caused to the wife and/or the children. The exercise required is one of balancing the competing interests, informed but not necessarily determined by a consideration of the conduct of the parties.
496.It is a trite observation that the extent to which consideration must be given pursuant to s 75(2)(ha) of the Act is less onerous where it is likely that the taxation liability will be discharged from the resources of the parties, either jointly or severely.
I have already discussed in these reasons a range of factors relating to the specific behaviour of the husband, which would speak in favour of the position advanced by the wife. I do not propose to repeat all of those matters again, other than to reiterate that the husband's conduct significantly includes (but is not limited to):
(a)Fraudulent bookkeeping and accounting practices that saw monies from R Company diverted to the husband (the full extent of which is unknown without there being a forensic accounting audit); and
(b)The failure to make the necessary insurance claim for stock lost in the incident at the Town C property.
What I have not otherwise discussed is the benefit that each of the parties derived from R Company during the currency of the relationship which is quite separate to the unilateral conduct of the husband
There is no dispute between the parties that they used funds from R Company for a range of their activities. I understand that each of the parties received an income from R Company at various times, and that they each applied their respective income to their daily expenses and outgoings. The parties however both depose to applying significant monies from R Company to the purchase of real properties and additionally to fund improvements to the various properties.
Additionally, the wife gave oral evidence that in addition to amounts that the parties each received by way of income, they each drew monies from R Company for various expenses, both business and personal, and that there was no real auditing of how those entries were recorded and attributed to the parties respective loan accounts with R Company (save and except as to any larger drawings).
During the trial, the Court received various exhibits, which the husband and the liquidator point at to support the submission that the parties mutually benefitted from R Company funds, beyond those funds received by each of them by way of income. While not intended to be an exhaustive itemisation, it is clear that the following funds were drawn from R Company which to a large extent benefitted the parties and/or the wife and/or the Town C property and/or the farming enterprise:
(a)A sum of approximately $7,815 of R Company funds were applied to the renovation and improvement of the J Street property.
(b)On 18 April 2018, R Company funds were used to make a payment on behalf of the wife to Mr X in the amount of $15,627 (Exhibit H14), in satisfaction of the wife's obligations pursuant to the final orders for property settlement with Mr X.
(c)By 30 June 2018, the records in relation to the parties drawings from R Company suggest that the wife had drawn a total of $788,828, significantly $785,000 drawn on 30 June 2018 (exhibit H14), albeit that it is not clear from the evidence how this amount was comprised;
(d)On 9 November 2018 the parties each drew a sum of $14,173.50 (totalling $28,347), to fund excavation works at the Town C property which were not an expense of R Company (Exhibits H18, H19, H20);
(e)On 5 October 2018 R Company paid $35,475 (inclusive of GST) for machinery that was delivered to the Town C property [Exhibit H27];
(f)Works were undertaken at the Town C property and other items were delivered to the Town C property, which I am satisfied from the wife's oral evidence were all paid by R Company, including:
(i)An amount of $7,133.25 (Exhibit H21) for repair works to a road and the laying of gravel;
(ii)An amount of $15,834.67 Exhibit H22) for the supply of gravel, levelling and surfacing works;
(iii)An amount of $4,651.77 (Exhibit H23) for the excavation of trenches, laying of pipes and installation of concrete bases;
(iv)An amount of $24,091.58 (Exhibit H24) for the supply, preparation and finishing of concrete;
(v)An amount of $8,596.50 for fencing works (Exhibit H25);
(vi)An amount of $92,400 for the installation of storage (Exhibit H26);
(vii)An amount of $41,800 for the installation of storage (Exhibit H29);
(viii)An amount of $30,570 for the installation of storage (Exhibit H30);
(ix)An amount of $17,380 for livestock feeders (Exhibit H31); and
(x)An amount of $15,884 for livestock feeders (Exhibit H32).
(g)On 6 December 2018 the wife withdrew the sum of $136,000 from the R Company bank account. The wife acknowledges that this sum was applied to the payment of the mortgage registered over the Town C property.
When considering all of these funds, it is clear that the total amounts received by either the parties and/or the wife and/or the U Trust, particularly where the Town C property is concerned, that the total amount far exceeds the amount the liquidator has ultimately attributed to the wife of $137,730 and in addition it far exceeds the combined liability of the parties to R Company of $547,458.
While the Court accepts that after the wife ceased working in the business (and possibly from as early as when she resigned as a Director), the wife was no longer in charge or control of how the R Company bookkeeping was carried out, the fact remains, that the wife's own evidence admitted to either personally or through the U Trust having the benefit of significant R Company funds.
While I am satisfied that the husband's conduct in relation to R Company was abhorrently fraudulent, negligent and wasteful, I am not on balance satisfied that it would be appropriate to leave the parties' respective debt to R Company where it lies and exclude it from the net assets of the parties in the overall assessment of the matter.
Rather I am of the view that there is no basis to depart from that identified by the Full Court in Biltoft and Biltoft (1995) FLC 92-614 at 82,124:
A general practice has developed over the years that, in relation to applications pursuant to the provisions of s. 79, the Court ascertains the value of the property of the parties to a marriage by deducting from the value of their assets the value of their total liabilities. In the case of encumbered assets, the value thereof is ascertained by deducting the amount of the secured liability from the gross value of the asset. See, Ascot Investments Pty Ltd v Harper & Anor (1981) 148 CLR 337 where Gibbs J. (as he then was) pointed out at p 355 that the Court "must take the property of a party to the marriage as it finds it. The Family Court cannot ignore the interests of third parties in the property, nor the existence of conditions or covenants that limit the rights of the party who owns it". Where the assets are not encumbered and moneys are owed by the parties or one of them to unsecured creditors, the court ascertains the value of their property by deducting from the value of their assets the value of their total liabilities, including the unsecured liabilities.
CONCLUSION AS TO SECTION 75(2) FACTORS
For all of the reasons the reasons that I have identified I am satisfied that it is appropriate to make a further adjustment in light of s 75(2) factors in favour of the wife. I have determined that the appropriate adjustment is a further 15 per cent in the wife's favour, resulting in an overall division of 90 per cent in favour of the wife and 10 per cent in favour of the husband.
In making that adjustment and as identified in the discussion that follows, I have had regard to the "real impact in money terms" of the assessment of s 75(2) factors, as identified by the Full Court in Clauson & Caluson (1995) FLC 92-595 at p 81,911.
When consideration is given to the effect of the adjustment in the discussion that follows, I am satisfied that an appropriate outcome in this matter results is an outcome that leaves the parties essentially retaining those assets and resources presently in their sole name, possession and control without any further adjustment, save and except as to the payment of the R Company liability.
CONCLUSION
I have already identified in these reasons the property that is to be bought to account comprises the following:
(a)The gross value of property to be divided is $4,663,447 comprised as follows:
(i)Real property $5,095,000;
(ii)Proceeds from the sale of properties $120,165;
(iii)The U Trust ($819,115);
(iv)Bank Accounts $2,908;
(v)Motor Vehicles $16,000;
(vi)Superannuation $133,489; and
(vii)Add back $115,000.
(b)The gross liabilities (including the liability to R Company of $547,458) total ($1,272,735).
(c)The net value of property is therefore $3,390,712.
An adjustment that sees the wife retaining 90 per cent of the net assets and the husband 10 per cent of the net assets would see the wife retaining net assets to the value of $3,051,641, and the husband retaining net assets to the value of $339,071.
If the wife were to retain the jointly owned real property as she proposes, the wife shall retain and/or hold net property valued at $3,471,526 comprised as follows:
ASSETS OWNER VALUE 1. B Street, Town C (“the Town C property”) Joint 3,550,000 2. N Street, City P (“the N Street property”) Wife 350,000 3. 1 K Street, Suburb M (“the K Street property”) Joint 375,000 4. 1 H Street, Suburb L (“the joint H Street property” Joint 420,000 5. Net value of the U Trust Wife (819,115) 6. BM Pty Limited ACN …
Westpac Account (…23)Wife nominal 7. T Pty Limited ACN … Wife (6,251) 8. ANZ Account (…34) Wife 1,976 9. AV Bank Account (…24) Wife 7,183
LIABILITIES OWNER VALUE 10. N Street, City P
BB Limited (AW Finance) (…66)Wife (178,276) 11. 1 K Street, Suburb M
CC Pty Limited (…22)Joint (167,752) 12. 1 H Street, Suburb L
AX Finance (…45)Joint (194,728)
SUPERANNUATION OWNER VALUE 13. BM Pty Limited - SMSF Wife $133,489
The husband holds net property of $346,479, comprised as follows:
ASSETS OWNER VALUE 1. 2 H Street, Suburb L (“the husband’s H Street property”) Husband 400,000 2. Motor Vehicle 3 Husband 13,500 3. Motor Vehicle 5 Husband 2,500 4. Notional Property added back Husband 115,000 5. 2 H Street, Suburb L
AX Finance (…57)Husband (184,521)
As can be seen from the property to be retained by each of the parties, the husband is retaining net assets with a value of $346,479, which is slightly in excess of 10 percent (which I have calculated at $339,071). I am satisfied that it is appropriate that there be no further adjustment.
The wife on the other hand is retaining net assets of $$3,471,526 which is far in excess of the entitlements that I have determined ($3,051,641). Therefore, the practical effect is that the wife will be required to meet the liability to R Company from the assets that she is to retain.
In the first instance the liability to R Company is to be met from those funds held by the wife's solicitors in their trust account from the proceeds of sale of the two properties totalling $120,165.
Thereafter, the wife is to make a payment in the amount of approximately $427,293 to satisfy in full the liability to R Company.
While I accept that the differential between the parties is significant, I am cognisant that the parties are in effect being restored to the same position that they were in at the commencement of the relationship, noting the findings that I have made and summarised at [180-183] herein.
In all of the circumstances of this case I consider such an outcome to be just and equitable.
COSTS APPLICATION
The Court understands that the each of the parties have made general applications for costs as part of the final orders that they have each sought.
It is apparent from the orders that I propose to make as a result of these reasons, that the outcome and entitlements that I have determined are more closely aligned with the outcome promoted by the wife; albeit that the approach to the liability to R Company aligns with the orders promoted by each the husband and the liquidator.
I have already commented earlier in these reasons as to the disproportionality of the approach taken by the husband to these proceedings, which has resulted in the parties incurring extraordinary and excessive legal costs.
The determination of any costs applications that might be agitated will be a question for another day.
However, given all of the matters I have discussed in these reasons I have no confidence that the husband, unless restrained will preserve assets to meet any successful costs application. I accordingly consider it appropriate that the husband be restrained from dealing in any of the assets that he is to retain, pending the determination of any costs applications.
For all of those reasons, I now make those orders that appear at the commencement of these reasons.
I certify that the preceding two hundred and fifty-two (252) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Kari. Associate:
Dated: 05 May 2023
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