Bardes & Mumford
[2024] FedCFamC2F 247
•29 February 2024
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 2)
Bardes & Mumford [2024] FedCFamC2F 247
File number: TVC 1573 of 2020 Judgment of: JUDGE COPE Date of judgment: 29 February 2024 Catchwords: FAMILY LAW – PROPERTY - matrimonial property division – where significant asset is husband’s business interests – husband is minority shareholder and partner - where husband’s evidence that he is unable to borrow against business interests – where husband’s partners and shareholders oppose sale - where sale of business and instalment payments considered – husband ordered to pay wife lump sum – default clause that husband is to pay instalments to wife – further default to attempt sale of business Legislation: Family Law Act 1975 (Cth) Pt VIII, ss 74, 75, 79, 80(1), 81
Federal Circuit and Family Court of Australia (Family Law) Rules 2021 Ch 7, Div 7.1.6, rr 7.02, 7.09
Cases cited: Aitken & Aitken [2023] FedCFamC1A 69
AJO v GRO (2005) FLC 93-218; [2005] FamCA 195
Bevan & Bevan (2013) FLC 93-545; [2013] FamCAFC 116
C & C [1998] FamCA 143
Cahill & Cahill (2006) FLC 93-253; [2003] FamCA 172
Dickons v Dickons (2012) 50 FamLR 244; [2012] FamCAFC 154
Hickey & Hickey (2003) FLC 93-143; [2003] FamCA 395
M & M [1998] FamCA 42
Mallet v Mallet (1984) 156 CLR 605; [1984] HCA 21
Norbis v Norbis (1986) 161 CLR 513
Paskandy & Paskandy [1999] FamCA 1889
Stanford v Stanford (2012) FLC 93-518; [2012] HCA 52
Tomaras & Tomaras (2021) 64 Fam LR 237
Trevi & Trevi (2018) FLC 93-858; [2018] FamCAFC 173
Wallis & Manning (2017) FLC 93-759; [2017] FamCAFC 14
Division: Division 2 Family Law Number of paragraphs: 201 Date of last submissions: 29 August 2023 Date of hearing: 28 & 29 August 2023 Place: Townsville Counsel for the Applicant: Mr Raeburn Solicitor for the Applicant: Mobbsmarr Legal Pty Ltd The Respondent: Appeared on her own behalf ORDERS
TVC 1573 of 2020 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN: MR BARDES
Applicant
AND: MS MUMFORD
Respondent
ORDER MADE BY:
JUDGE COPE
DATE OF ORDER:
29 FEBRUARY 2024
THE COURT ORDERS THAT:
Real Property
1.On or before 4:00pm on 30 June 2024:
(a)The applicant will transfer all of his right, title and interest in the property located at B Street, Suburb C (‘the property’) to the respondent; and
(b)Contemporaneously with paragraph 1(a), the respondent will refinance any loan, encumbrance or mortgage associated with the property so as to remove the applicant’s name and will indemnify and keep indemnified the applicant in respect of same.
2.In the event that the respondent wife is unable to refinance the property in accordance with paragraph 1(b) then the applicant and the respondent will forthwith take all necessary steps and execute all necessary documents to cause the property situated at B Street, Suburb C in the State of Queensland, being Lot … on Survey Plan … having title reference … (‘the property’) to be sold by private treaty at the earliest possible date at a price to be agreed on between the parties and failing such agreement to be determined by the proper officer of the Real Estate Institute of Queensland or their nominee and that the proceeds of the said sale be disbursed as follows:
(a)Payment of agent’s commission and advertising expenses and legal expenses of the sale;
(b)Payment of any money due and owing to the mortgagee;
(c)Payment of any Council or Water Rates due and owing; and
(d)The net balance will be included in the asset pool, in place of the current value and liability, and the asset pool and the respondent’s 55% entitlement to the asset pool will be recalculated.
Campervan
3.Within thirty (30) days of the date of this Order, the applicant and the respondent will sign all such documents and do all such acts and things so as to transfer to the respondent any right, title and interest the applicant holds in the Campervan (Registration Number …).
The Entities
4.The executor applicant husband will retain his right, title or interest to the exclusion of the respondent wife and will indemnify and keep the respondent indemnified in the following entities other than as provided for in this Order:
(a)D Pty Ltd;
(b)E Pty Ltd;
(c)F Partnership (“The Partnership”); and
(d)G Pty Ltd.
5.The respondent will remain a beneficiary of the Bardes Family Discretionary Trust until the end of the 2029 financial year and at that juncture she will cease as a named potential beneficiary under the Trust, and for that purpose the following provisions apply:
(a)The applicant will prepare the documents necessary to remove the respondent as a named potential beneficiary under the Trust;
(b)The applicant will be solely responsible for the cost of preparing the documents; and
(c)The respondent will sign any required documents to give meaning and effect to this order and return them to the applicant within seven (7) days of receipt of same.
6.In respect of paragraph 5, this Order will be binding upon the applicant into the future and will be a representation that the respondent will have no right, title or interest to any property belonging to or within the control of any of the abovenamed entities, except as contained in paragraph 5 herein.
7.With respect to this Order, it will not prevent, nor exclude the applicant from making a financial distribution to the respondent from the Bardes Family Discretionary Trust (‘the Family Trust’) pursuant to the terms of this Order or as otherwise agreed to by the applicant and respondent in writing.
Cash Payment to the respondent
8.The applicant will pay to the respondent the sum of $288,361.36 on or before 4:00 pm on 30 June 2024.
Default – Instalment Payments
9.In the event that the applicant fails or is unable to make the lump sum payment referred to in paragraph 8 above, then he will:
(a)forthwith notify the respondent in writing that he is in default of paragraph 8 and the amount owing is to be paid by instalments in accordance with paragraph 9 of the Order; and
(b)pay to the respondent the sum of $50,000 at the end of each financial year with the first payment to be made on or before 4:00pm on 30 June 2024 and the final payment in the sum of $38,361.36 to be made on or before 4:00 pm on 30 June 2029, such that the total payments made to the respondent equal $288,361.36, save for any tax payable in accordance with this Order.
Default – Sale of Business Interests
10.In the event that the respondent fails and refuses to make an instalment payment as required by paragraph 9 above then the following provisions will apply:
(a)The applicant will forthwith notify the respondent in writing that he is in default of paragraph 8 and paragraph 9, and the amount owing is to be paid in accordance with clause 10 of this Order;
(b)The applicant will, pursuant to clause 17 of the Shareholder’s Agreement, deliver to the other shareholders of E Pty Ltd a Notice of Sale specifying that he wishes to transfer all of the shares in E Pty Ltd held in the name of G Pty Ltd as trustee for the Bardes Family Discretionary Trust.
(c)Contemporaneous to paragraph 10(a), the applicant will, pursuant to clause 17 of the Partnership Agreement, deliver to the other partners of F Partnership a Notice of Sale specifying that he wishes to transfer any and all interests held in the applicant’s name in F Partnership.
(d)Within fourteen (14) days of giving notices referred to in paragraphs 10(a) and 10(b) of this Order, the applicant will take all steps and do all things as required by clause 19 of the Shareholders Agreement to determine the share value of F Partnership and E Pty Ltd (collectively referred to as the business).
(e)Upon the share value of the business being determined under paragraph 10(c), the applicant will thereafter comply with the sale/offer conditions imposed or provided for in clauses 20 and/or 21 and/or 22 of the Partnership agreement and Shareholders agreement.
(f)If an unconditional offer is received in relation to the business, the applicant may:
(i)be at liberty to relist the Application before the Court upon three (3) business days’ notice to the respondent; or
(ii)comply with the requirements set forth in the Shareholders Agreement and Partnership Agreement in regard to including the applicant offering the continuing partners/directors of the business the right to purchase his share/interest in the event that an offer is received.
11.In the event that the business is sold then the asset pool annexed to this Order and marked with the letter “A” will be recalculated as follows:
(a)the value of the business in the attached asset pool will be changed to the sale price,
(a)the Capital Gains tax payable on the sale of the business will be added to the liabilities;
(b)the broker’s fee for sale of the business will be added to the liabilities;
(c)any legal fees or other expenses directly relating to the sale of the business or litigation with the applicant’s business partners/shareholders in order to effect the sale of the business will be added to the liabilities;
(d)the asset pool will then be re-calculated with the new business value and additional liabilities relating to the sale; and
(e)the respondent’s entitlement to a property distribution will remain 55%.
Tax Consequences
12.In the event that the applicant is able to make the payment by way of one lump sum in accordance with paragraph 8 then he will be solely responsible for any tax consequences or any interest payable on any loan or loans acquired to pay the money.
13.In the event that the applicant makes instalment payments to the respondent in accordance with paragraph 9, then the following terms and conditions will apply:
(a)the applicant will ascertain the most tax effective way for the payment to be made and advise the respondent in writing four (4) weeks prior to the date the instalment is due;
(b)the respondent will upon written request form the applicant provide such information to the applicant as he may request in order for him to ascertain the most tax efficient manner of payment;
(c)the applicant will provide to the respondent his calculations for each option prior to payment; and
(d)the tax consequences for that payment will be shared equally by the parties, and in order to achieve that the applicant will deduct one half of the tax payable from the payment to be made to the respondent.
Superannuation
14.In relation to the applicant husband’s interest in the Super Fund 1 account (“the Fund”) (client number: …):-
(a)The applicant as required by Section 90XT(1)(a) of the Family Law Act 1975 transfer the base amount of $132,723.24 of the applicant’s Superannuation Fund account (“the Fund”) (client number: …), to the respondent wife.
(b)Paragraphs 14(c) to 14(e) below have effect from the operative time;
(c)In accordance with Section 90XT(1)(a) of the Family Law Act 1975, whenever a splittable payment becomes payable from the applicant husband’s interest in the Fund (account number …) the trustee shall pay to the respondent wife the amount calculated in accordance with Part 6 of the Family Law (Superannuation) Regulations, using a base amount of $285,000.00 and there is a corresponding reduction in the entitlement of applicant husband;
(d)Having been accorded procedural fairness in relation to the making of this clause of the Order, this Order binds the Trustee of the Fund;
(e)Operative time for this Order is four (4) business days after the date of the sealed Court Orders is served on the Trustee of the Fund;
(f)The Trustee of the applicant husband’s Fund shall do all acts and things and sign all documents as may be necessary to:
(i)calculate in accordance with the requirements of the Family Law Act 1975 the entitlement awarded to the respondent wife in accordance with paragraph 14(c) of this Order; and
(ii)pay the entitlement whenever the trustee makes a splittable payment from the Fund.
Other Orders
15.Each party has liberty to apply to the court on short notice for directions to give meaning and effect to this Order.
16.Except as otherwise provided in this Order, the applicant husband and the respondent wife are entitled to be the sole legal and beneficial owners of all items of property, including money, motor vehicles, insurances, equities, superannuation entitlements and personal effects current in the possession or control of each of them respectively. For the avoidance of doubt, that includes but is not limited to the following:
(a)the respondent wife will retain to the exclusion of the applicant husband, the legal and beneficial ownership of the following:
(i)the benefit and ownership of all policies of superannuation (including death benefits attached thereto) and life insurance (including any shares issued or to be issued pursuant to any policy) held in her name;
(ii)any motor vehicles registered in her name;
(iii)the campervan (registration number …);
(iv)any shares held in her sole name;
(v)any redundancy payments, long service leave and all other benefits to which she is or has been entitled by virtue of any employment;
(vi)all monies and bank accounts held by the respondent wife; and
(vii)all chattels, household furniture, furnishings and contents including jewellery and items of personal property presently in the possession of the respondent wife.
(b)The applicant husband will retain, to the exclusion of the respondent wife, the legal and beneficial ownership of the following:
(i)the benefit and ownership of all policies of superannuation (other than paragraph 7) (including death benefits attached thereto) and life insurance (including any shares issued or to be issued pursuant to any policy) held in his name;
(ii)any motor vehicles registered in his name;
(iii)any shares held in his sole name;
(iv)any redundancy payments, long service leave and all other benefits to which he is or has been entitled by virtue of any employment;
(v)all monies and bank accounts held by the applicant husband; and
(vi)all chattels, household furniture, furnishings and contents including jewellery and items of personal property presently in the possession of the applicant husband.
17.Except as otherwise provided in this Order, each of the applicant husband and respondent wife will indemnify, and continue to indefinitely indemnify, the other in relation to any liability including but not limited to personal taxation liability (other than as provided for in these orders), credit card or any liability or loan in that party’s name.
18.Each party will do all acts and things and sign all documents necessary to give meaning and effect to this Order.
19.Unless otherwise provided for in this Order the party receiving the benefit of a transfer in accordance with this Order will be solely responsible for the costs associated with the transfer.
20.If either party refuses or neglects to execute any deed or instrument, a Registrar of the Court be appointed pursuant to s 106A of the Family Law Act 1975 (Cth), to execute such deed or instrument in the name of such party and to do all acts and things necessary to give validity to the operation to the deed or instrument.
Procedural
21.All outstanding applications are dismissed and the matter is removed from the pending cases list.
THE COURT NOTES THAT:
A.The Asset Pool ascertained by the court and set out at paragraph 121 of the Reasons is annexed to these orders and marked with the letter “A”.
ANNEXURE A
Ownership Description Value ASSETS 2 Applicant G Pty Ltd ATF Bardes Family Trust and F Partnership (a partnership) 786,172.00 5 Joint B Street, Suburb C Queensland – Matrimonial Home 535,000.00 6 Respondent Motor Vehicle 1 38,500.00 7 Respondent Campervan 19,000.00 8 Applicant Motor Vehicle 2 10,000.00 Total 1,388,672.00 LIABILITIES 13 Joint NAB Mortgage 315,093.31 14 Joint Motor Vehicle 1 17,600.00 15 Joint H Company – Campervan 9,942.23 17 Respondent HECS 16,757.00 18 Applicant Loans – Ms J 17,600.00 19 Tax Bardes Family Trust 2022 26,412.45 20 Applicant Tax Bardes Family Trust 2023 est 34,000.00 21 Applicant Credit Card 3,141.87 Total 440,546.86 SUPERANNUATION 23 Applicant Super Fund 1 295,903.55 24 Respondent Super Fund 2 66,719.37 Total 362,622.92 FINANCIAL RESOURCES 25 Balance of Bardes Family Trust 62,294.87 26 Applicant Applicant’s Bank Balance 3,001.43 27 Respondent Respondent’s Bank Balance 46,600 Total 111,896.30 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
JUDGE COPE
INTRODUCTION
These are matrimonial property proceedings commenced by the husband in October 2020.
The parties commenced cohabitation in 1999 and were married in 2006. The parties separated on a final basis on 15 February 2020. This was about a 20 year relationship.
There are three children of the relationship:-
·X born in 2009 aged 14 years;
·Y born in 2010 aged 13 years; and
·Z born in 2013 aged 11 years.
The parties entered into final consent orders for the children’s living arrangements on 30 January 2023. The two elder children live with the respondent wife and reunification counselling is to occur with the applicant husband. The younger child lives in a week about arrangement.
The parties were unable to agree on an asset pool. The significant assets of the relationship are the matrimonial home, superannuation and the husband’s business interests. The husband is a finance professional and owns a one third share in the entities which run the financial services business being E Pty Ltd and F Partnership (a partnership).
Asset Pool
On the husband’s figures, the asset pool amounts to $822,561 with financial resources of $65,396.30. On the wife’s figures, the asset pool amounts to $1,468,077 with $69,701.68 in financial resources. The parties have each included their current bank balances as financial resources.
The wife seeks a number of substantial add backs, however there is also significant disagreement about the value of relatively minor assets.
ORDERS SOUGHT
Husband’s Orders Sought
The husband’s outline of case document sets out a proposed 42:58 division favouring the husband.
The document attached proposed final orders as follows:
PROPERTY
1That within 30 days of the date of these orders:
aThe applicant transfer his right title and interest in the property located at [B Street, Suburb C] (‘the property’) to the respondent;
bContemporaneous to Order 1, the respondent shall refinance the property into her own name any loan, encumbrance or mortgage associated with the property and shall indemnify and keep indemnified the applicant in respect of same;
cThe applicant shall transfer to the respondent any right, title and interest in the [Campervan] (Registration Number […]) (‘the camper van’);
2The executor applicant shall retain his right, title or interest in the following entities:
a [D] Pty Ltd;
b [E] Pty Ltd;
c [F Partnership] (“The Partnership”); and
d [G] Pty Ltd.
3The respondent shall remain a beneficiary of the [Bardes] Family Discretionary Trust until the end of the 2028 financial year and at that juncture agrees that she will cease as a named potential beneficiary under the Trust.
4That in respect of Order 3, this Order shall be binding upon the applicant into the future and shall be a representation that the respondent shall have no right, title or interest to any property belonging to or within the control of any of the abovenamed entities, except as contained in Order 3 herein.
5With respect to Orders they shall not prevent, nor exclude the applicant from making a financial distribution to the respondent from the [Bardes] Family Discretionary Trust (‘the Family Trust’) pursuant to the terms of these orders or as otherwise agreed to by the applicant and respondent in writing.
6The applicant shall further and in addition to the property orders above pay to the respondent $50,000 contemporaneously with Order 1 and 25% of the gross distributions made from the Family Trust each year in the years ended 30 June 2025, 30 June 2026, 30 June 2027 and 30 June 2028 and such distribution shall constitute a distribution from the Family Trust.
Incidentals
7Except as otherwise provided in these Orders, the applicant husband and the respondent wife are entitled to be the sole legal and beneficial owners of all items of property, including money, motor vehicles, insurances, equities, superannuation entitlements and personal effects current in the possession or control of each of them respectively. For the avoidance of doubt, that includes but is not limited to the following:
ethe respondent wife shall retain to the exclusion of the applicant husband, the legal and beneficial ownership of the following:
ithe benefit and ownership of all policies of superannuation (including death benefits attached thereto) and life insurance (including any shares issued or to be issued pursuant to any policy) held in her name;
ii any motor vehicles registered in her name;
iii the [campervan] (registration number […]);
iv any shares held in her sole name;
vany redundancy payments, long service leave and all other benefits to which he/she is or has been entitled by virtue of any employment;
vi all monies and bank accounts held by the respondent wife;
viiall chattels, household furniture, furnishings and contents including jewellery and items of personal property presently in the possession of the respondent wife.
fThe applicant husband shall retain, to the exclusion of the respondent wife, the legal and beneficial ownership of the following:
viiithe benefit and ownership of all policies of superannuation (other than Order 7) (including death benefits attached thereto) and life insurance (including any shares issued or to be issued pursuant to any policy) held in his name;
ix any motor vehicles registered in his name;
x any shares held in his sole name;
xiany redundancy payments, long service leave and all other benefits to which he is or has been entitled by virtue of any employment;
xii all monies and bank accounts held by the applicant husband;
xiiiall chattels, household furniture, furnishings and contents including jewellery and items of personal property presently in the possession of the applicant husband;
8Except as otherwise provided in these Orders, each of the applicant husband and respondent wife shall indemnify, and continue to indefinitely indemnify, the other in relation to any liability including but not limited to personal taxation liability, credit card or any liability or loan in that party’s name.
9The gift received from [Ms K and Mr L] shall be the property of and shall be retained by [Ms Mumford] and [Mr Bardes] shall have no entitlement or claim upon that gift.
Superannuation
10In relation to the applicant husband’s interest in the [Super Fund 1] account (“the Fund”) (client number: […]):-
aThat the applicant as required by Section 90XT(1)(a) of the Family Law Act 1975 transfer the base amount of $285,000 of the applicant’s Superannuation Fund account (“the Fund”) (client number: […]), to the respondent wife.
b That Orders (c) to (e) below have effect from the operative time;
cThat in accordance with Section 90XT(1)(a) of the Family Law Act 1975, whenever a splittable payment becomes payable from the applicant husband’s interest in the Fund (account number […]) the trustee shall pay to the respondent wife the amount calculated in accordance with Part 6 of the Family Law (Superannuation) Regulations, using a base amount of $285,000.00 and there is a corresponding reduction in the entitlement of applicant husband;
dThat, having been accorded procedural fairness in relation to the making of this clause of the Order, this Order binds the Trustee of the Fund;
eThat operative time for this Order is four (4) business days after the date of the sealed Court Orders is served on the Trustee of the Fund;
fThat the Trustee of the applicant husband’s Fund shall do all acts and things and sign all documents as may be necessary to:
icalculate in accordance with the requirements of the Family Law Act 1975 the entitlement awarded to the respondent wife in accordance with Order 14(c) of these Orders; and
iipay the entitlement whenever the trustee makes a splittable payment from the Fund.
Notation
11That pursuant to section 81 of the Family Law Act 1975 is the intention of the applicant husband and respondent wife that this Order for property settlement shall so far as practicable, finally determine the financial relationship between them.
During closing submissions, however, the husband’s position changed such that his closing position was that, if the court accepted the single expert valuation of the business, then the business would need to be sold and only interlocutory orders should be made. It was submitted that without knowing the sale price of the husband’s business interests, the court could not ensure any orders were just and equitable.
No form of order was provided, and the matter was left in the hands of the court.
Wife’s Orders Sought
The wife’s Outline of Case document sets out a proposed 70:30 division favouring the wife.
Her proposed orders are those set out in the Amended Response filed on 17 March 2023 as follows:
Cash Payment
1That within forty-five (45 days) of the date of these Orders the applicant pay to the respondent a cash sum of $ (the total amount to be confirmed once the total value of the property pool is known).
2That contemporaneously with paragraph 1 above, should the applicant not be in a position to pay the respondent the cash sum determined at paragraph 1. the applicant shall do all things necessary to pay the amount due including but not limited to:-
2.1The applicant shall seek to obtain finance, including signing all necessary documents to finance the cash amount payable to the respondent including if necessary borrowing against the applicants interest in the business entities [G] Pty Ltd. [F] Partnership. [E] Pty Ltd and the [Bardes] Family Discretionary Trust in his sole name and will indemnify the respondent and keep the respondent indemnified in relation to the finance secured against the business entities; or
2.2The applicant shall seek to sell his interest. or part thereof in the business entities identified at 2.1 to meet these obligations. the applicant will indemnify the respondent and keep the respondent indemnified against all tax and associated liabilities associated with the sale of the applicant’s share of the entities or parts thereof.
3That contemporaneously with paragraph 1, should the applicant not be in a position to pay the respondent the cash sum determined at paragraph 1, all proceeds from the applicant’s interest in the entities [G] Pty Ltd. [F] Partnership. [E] Pty Ltd and the [Bardes] Family Discretionary Trust shall be frozen with all proceeds derived from these entities, paid to the respondent. the applicant will indemnify the respondent and keep the respondent indemnified against all tax liabilities and other costs associated with these payments and will continue to disclose all financial statements related to the business entities.
Transfer and Refinance of Real Estate
4That contemporaneously with the payment referred to in paragraph 1, the applicant shall transfer to the respondent all of his right. title and interest in the real estate located at [B Street, Suburb C] in the State of Queensland ("the [Suburb C] property") being Lot […] on the survey plan […] being the land contained in the Title reference […] and the respondent shall be responsible for and indemnify the applicant and keep the applicant indemnified in relation to any rates, water levies, taxes or charges on the property.
4.1.1Contemporaneously to paragraph 4 above. should the applicant fail to make the cash payment within the forty-five days stipulated at paragraph 1, both the respondent and applicant shall assume joint liability in relation to the mortgage, rates, water levies or charges on the property as and when they fall due.
5That contemporaneously with paragraph 1, the respondent shall do all things necessary including signing all necessary documents to refinance the mortgage registered against the [Suburb C] property referred to in paragraph 3 above, into her sole name and the respondent will release and indemnify the applicant and keep the applicant indemnified in relation to the mortgage secured against the [Suburb C] property.
5.1.1Contemporaneously to paragraph 4 above. should the respondent be unable to refinance the mortgage registered against the [Suburb C] property referred to in paragraph 4.1 above, the respondent shall be entitled to sell the property and retain all proceeds of sale, the respondent shall indemnify the applicant and keep the applicant indemnified in relation to the outstanding mortgage, rates, water levies, taxes or charges on the property.
6That until the transfer and refinance of the [Suburb C] property occurs as referred to in paragraph 3 above. the respondent will ensure that the house insurance is maintained. and that the respondent is to be solely responsible for the premium payments as and when they fall due.
6.1.1Contemporaneously to paragraph 6 above. should the applicant fail to make the cash payment within the forty-five days stipulated at paragraph 1, both the respondent and applicant will jointly ensure that the house insurance is maintained. and the respondent and applicant are to jointly be responsible for the premium payments as and when they fall due.
[Motor Vehicle 1]
7The respondent is to retain the [Motor Vehicle 1] registration number […].
8The respondent shall assume sole responsibility for the payment of the unsecured personal loan to [Ms J] that was loaned to purchase the [Motor Vehicle 1] referred to above at Order 4. The respondent will release and indemnify the applicant and keep the applicant indemnified in relation to the unsecured personal loan to [Ms J].
[Campervan]
9The respondent is to retain the [Campervan] with registration number […].
10 The applicant and respondent shall do all things necessary including signing all necessary documents to enable the respondent to refinance the personal loan held with [H Company] that is security for the [Campervan] referred to in paragraph 6 above into her sole name and the respondent will release and indemnify the applicant and keep the applicant indemnified in relation to the loan.
Superannuation
11In accordance with Section 90XT(1)(a) of the Family Law Act 1975 whenever a splitable payment becomes payable in respect of the interest of the applicant. [Mr Bardes], in the [Super Fund 1] ("the Fund"). [Super Fund 1] Board of Trustees ("the Trustee") the respondent. [Ms Mumford] is entitled to be paid an amount calculated in accordance with Part 6 of the Family Law (Superannuation) Regulation 2001, using a base amount $ that is to be determined once the value of the property pool is determined - however for purposes of procedural fairness say $178.000 of the applicants Superannuation interest and there is to be a corresponding reduction in the entitlements of the applicants entitlement in the said fund.
12The operative time will be the fourth business day after a Certified Copy of the scaled Orders is served on the Trustee.
13The applicant by himself. his servants and or agents be hereby is restrained from doing any act or thing which would prevent the respondent, her, heirs, executors, administrators or nominees from receiving the benefits from the fund to which she is entitled pursuant to these orders.
14The Trustees are bound by these Orders in relation to Superannuation and that the Trustee. the applicant and respondent will do all such things as may be necessary for the Trustee. to calculate the entitlement of and make payment to the respondent in accordance with these orders.
15That the respondent is required to serve a copy of these Orders on the Trustee within twenty-eight (28) days of the date of these Orders.
16 That the applicant retains the balance of his [Super Fund 1].
Personal Assets
17That contemporaneously with payment referred to in paragraph 1, that the applicant forthwith retain as his absolute property and the respondent forthwith relinquish and/or transfer to the applicant all right, title and claim (if any) in and to the following:-
17.1 His bank account in his name or to which he has an interest in;
17.2 Subject to Orders 8 to 13 above, his superannuation accounts;
17.3 Any motor vehicle in the applicant’s possession;
17.4 Furniture and effects currently in the applicant’s possession;
17.5The applicant’s interest in the entities [G] Pty Ltd, [F] Partnership, [E] Pty Ltd and the [Bardes] Family Discretionary Trust; and
17.6All other interest in property and financial resources of whatsoever nature that the applicant has at the date of these Orders.
18 That the respondent forthwith retains as her absolute property and the applicant forthwith relinquish and/or transfer to the respondent all right, title and claim (if any) in and to the following:
18.1 Her bank account;
18.2 Her superannuation account;
18.3The motor vehicle that is currently in the respondent’s possession – the [Motor Vehicle 1];
18.4 The [Campervan] ;
18.5 Furniture and effects currently in the respondent’s possession; and
18.6All other interest in property and financial resources of whatsoever nature that the respondent has at the date of these Orders.
Liabilities
19That the respondent and applicant be responsible for any other liabilities incurred in their name (have not already been referred to above in these Orders) including all borrowings, personal loans and credit card facilities and shall indemnify and keep indemnified the other against any liability that may occur in respect thereof.
Miscellaneous
20In the event that pursuant to these Orders contained herein. property is to be transferred form one party to another and in the event such property may be subject to a security interest registered in the Personal Properties Security Register (PPSR) pursuant to the provisions of thew Personal Securities Act 2009 (Cth) ('(registered security interest') then the Transferer shall ensure that the property to be transferred will be unencumbered at the date of transfer and shall provide the transferee either written confirmation from the Security Holder that such property is not affected by any registered security interest or alternatively, provide a discharge of the registered security interest.
21That the respondent and applicant each do all acts and things necessary including signing all necessary documents as to give full force and effect to the provision of these Orders and in the event that either party refuses or neglects to comply with any provision of these Orders within fourteen (14) days of a written to do so by the other party, then a Registrar of the Family Court of Australia, be hereby appointed, pursuant to Section 106A of the Family Law Act, to execute all documents in the name of that party and do all acts and things necessary to give validity and operation to these Orders.
22That the transferee spouse prepare any documents necessary to give effect to the provision of these Orders at their cost and further be responsible for the payment of registration fees (if any) in relation to the transfer of any properties into their name.
23That any stamp duty payable on transactions arriving from these Orders or any documents executed pursuant to these Orders be paid by the Transferee spouse.
24That the parties comply promptly with all requestions issued by the Office of State Revenue, Land Titles, Main Roads Department and any other Government Department in relation to any document executed or transacted pursuant to or put onto effect the terms and conditions of these Orders.
25In default of either of the parties hereto complying with any requisition so issued within fourteen (14) days of the date upon which the requisition issues, the party not in default shall be entitled to comply with any of the said outstanding requisitions and recover from the other party in default the costs and outlays incurred in complying with any of the said requisitions with such costs to be calculated in accordance with Family Law Rules.
26That both parties have liberty to apply to the Court on the giving of seven (7) days’ notice in writing for the interpretation and/or enforcement of the terms and conditions hereof and for consequential orders.
During closing submissions, the wife accepted that instalment payments may need to be made however she sought final orders. She was opposed to a super split in her favour of any significance as she would be unable to access those funds until retirement. In effect, she needed cash money in order to be able to function.
No form of order was provided as to her change of position however she sought default orders on a percentage rather than on a dollar basis; otherwise, the matter was left in the hands of the court.
BACKGROUND
Agreed Matters
This was a relationship of approximately 20 years with three children.
The husband was the primary income earner, and the wife was the primary carer for the children. The wife also worked, and the husband also made some contributions to the family – though the extent of those are disputed.
The matter was listed for final hearing in April 2023 but did not proceed as the parties had reached heads of agreement. That agreement fell over and so the matter was re-listed for trial on 28 and 29 August 2023.
The husband filed an Application in a Proceeding on 3 May 2023 seeking to sell the business interests – and as a consequence to further adjourn the final hearing whilst that process was attended to. That application was unsuccessful.
The husband is one of three partners of F Partnership. The husband is also one of three directors of E Pty Ltd. He is a minority owner of those business interests.
There is a shareholders’ agreement in relation to E Pty Ltd that provides under the definitions section that a “triggering event” includes the service on the company by the shareholder of a notice of sale.
Further to the “definitions” section, clauses 19, 20, 21 and 22 provide for certain steps that may be taken in the event of a “triggering event” – requiring or permitting the husband to take certain steps regarding obtaining a valuation if not agreement as to value, making an offer to sell to the existing shareholders and only then able to offer to sell to third parties. Even then, the sale to a third party must be approved by the remaining shareholders/directors.
There is a partnership agreement in relation to F Partnership that also provides under the definitions section that a triggering event includes the service on the partnership by a partner of a notice of sale. The “definitions” and clauses that also provide for certain steps that may be taken in the event of a “triggering event” and with similar conditions as the shareholders agreement.[1]
[1] Clauses 19, 20, 21 and 22 of the Partnership Agreement.
The husband makes no bones that he disputes the business valuation. He did not however follow the usual steps allowed by the legislation to put questions to the valuer or to conference.
LEGAL PRINCIPLES
Matrimonial property proceedings are governed by provisions of Part VIII of the Family Law Act 1975 (Cth) (“The Act”) and will be determined in accordance with an approach laid down by the Full Court in Hickey & Hickey (2003) FLC 93-143.
The relevant principles have been considered by the High Court in Stanford v Stanford (2012) FLC 93-518 (“Stanford”), noting subsequent Full Court decisions.
Separated parties are not entitled to a property settlement as of right. Once the Court is satisfied that it is just and equitable to make an Order under ss 79(1) and 79(2) of the Act, the court has what has been described as “a very wide discretion to make such Order as it thinks fit”: see Mallet v Mallet (1984) 156 CLR 605 at 608 per Gibbs CJ.
Whilst there has been debate as to the appropriate approach to be taken since Stanford’s case, it has been the practice of the court to determine, as an initial issue, whether it is just and equitable to make an adjustment of marital property. The pathway to be followed is then:
·To identify and value the asset pool being the property, liabilities and financial resources of the parties;
·To identify and assess the respective contributions by each party towards the assets pursuant to s 79;
·To identify and assess the relevant future factors set out in section 75(2) as well as any other matters arising pursuant to s 79(4)(d), s 79(4)(f) and s 79(4)(g). Having done so, to then determine what, if any, adjustment ought to be made to each party’s contributions-based entitlement; and
·Lastly, to consider the effect of any findings and proposed Orders so as to be satisfied that the proposed property Order (if any) is just and equitable.
In that process, however, the just and equitable requirement is also “one permeating the entire process”; Bevan & Bevan (2013) FLC 93-545 at [86].
In Wallis & Manning (2017) FLC 93-759, the Full Court referred to and approved the Court in Dickons v Dickons (2012) 50 Fam LR 244 at [21] where the Full Court said:
…the requirements of the section are met by approaching the assessment of contributions holistically and by analysing the nature, form, characteristics and origin of the property currently comprising that to which s 79 applied, and, in turn, analysing the nature, form and extent of the contributions (of all types) contemplated by s 79.
EVIDENCE
Documents Read
Each party filed an Outline of Case document which they relied on, together with the documents listed therein and a number of documents were tendered.
An Outline of Case was filed by the husband on 25 August 2023, and he relies on the following material listed therein as follows (excluding other party and court documents):
(a)Affidavit of Ms J filed by the husband on 15 March 2023;
(b)Affidavit of Mr M filed by the husband on 15 March 2023;
(c)Affidavit of Mr R filed by the husband on 15 March 2023;
(d)Affidavit of Mr O filed by the husband on 16 March 2023;
(e)Affidavit of Mr Q filed by the husband on 15 March 2023;
(f)Affidavit of Mr Bardes filed by the husband on 16 March 2023;
(g)Affidavit of Mr Bardes filed by the husband on 9 June 2023;
(h)Further Amended Initiating Application filed by the husband on 2 August 2023;
(i)Financial Statement filed by the husband on 2 August 2023; and
(j)Affidavit of Mr Bardes filed by the husband on 2 August 2023.
The wife filed an Outline of Case on 24 August 2023, and she relies on the following material listed therein as follows (excluding historical material, other party and court documents):
(a)Amended Affidavit of Ms Mumford filed by the wife on 31 July 2023;
(b)Amended Financial Statement filed by the wife on 31 July 2023; and
(c)Amended Response to Application filed by the wife on 17 March 2023.
The following documents were tendered:
(a)H1 - Amended Initiating Application filed 2 August 2023;
(b)H2 – Affidavit of Mr Bardes filed 16 March 2023;
(c)H3 – Affidavit of Mr Bardes (pages 39-50) filed 9 June 2023;
(d)H4 – Affidavit of Mr Bardes filed 2 August 2023;
(e)H5 - Financial Statement filed 2 August 2023;
(f)H6 - Affidavit of Ms J filed 15 March 2023;
(g)H7 - Affidavit of Mr M filed 15 March 2023;
(h)W1 – Affidavit of Ms Mumford filed 31 July 2023;
(i)W2 - Financial Statement filed 31 July 2023;
(j)W3 – Amended Response to Initiating Application filed 17 March 2023;
(k)H8 - Notice of Child Support Deductions dated 16 August 2023;
(l)H9 - Email from the husband to the wife dated 5 January 2023;
(m)H10 - Facebook posts of the stolen vehicle;
(n)H11 - B8 of the husband’s trial affidavit filed 15 March 2023;
(o)H12 - B9 of the husband’s trial affidavit filed 15 March 2023;
(p)H13 - B10 of the husband’s trial affidavit filed 15 March 2023;
(q)H14 - B11 of the husband’s trial affidavit filed 15 March 2023;
(r)H15 - B14 of the husband’s trial affidavit filed 15 March 2023;
(s)H16 - B15 of the husband’s trial affidavit filed 15 March 2023;
(t)H17 - B17 of the husband’s trial affidavit filed 15 March 2023;
(u)H18 - B22 of the husband’s trial affidavit filed 15 March 2023;
(v)H19 - B28 of the husband’s trial affidavit filed 15 March 2023;
(w)H20 - B31 of the husband’s trial affidavit filed 15 March 2023;
(x)H21 - B45 of the husband’s trial affidavit filed 15 March 2023;
(y)H22 - Bundle of documents (emails, letter);
(z)H23 - Email from Mr Marr to the wife dated 23 August 2023;
(aa)W4 - Annexure A of the wife’s trial affidavit filed 31 July 2023;
(bb)W5 - Annexure B of the wife’s trial affidavit filed 31 July 2023;
(cc)W6 - Annexure J of the wife’s trial affidavit filed 31 July 2023; and
(dd)W7 - Annexure U of the wife’s trial affidavit filed 31 July 2023.
WITNESSES
The Applicant husband
The husband confirmed the contents of his Affidavit material were true and correct and sought to make no changes to his evidence.
The husband was cross examined in relation to values of various assets which I shall address when I make findings as to the asset pool. He was also cross examined about the child expenses and who meets those expenses. I am satisfied that post-separation the husband makes significant financial contributions to the children’s day to day lives, school expenses and activities. I am not critical of the husband for being unable to financially support two households post separation on what is now a lesser income.
I accept his evidence as to the reasons for his significant decrease in salary in early 2022. The husband had been receiving an equal income to his business partners as a professional. A downturn in the business ultimately led to it being sold off and as a consequence of that the husband worked as a junior rather than a senior. The other partners reduced his income accordingly and he accepted that, albeit reluctantly.
I accept his evidence that in seeking to make trust distributions to the wife he was seeking a tax efficient way to pay school fees.
The husband was a persuasive witness. I am satisfied that he is doing the best he can in difficult circumstances – being the relationship breakdown and ensuing litigation, work challenges leading to a reduction in his income and the challenges in the relationships with his children.
I am satisfied that the wife’s concerns that the husband is deliberately attempting to minimise the asset pool and reduce her entitlement are unfounded.
The Respondent wife
The wife confirmed the contents of her Affidavit material is true and correct save for her failure to include the $45,000 distribution that was recently made to her from the family trust. Her explanation was, to the effect that, she did not know where to include that on the form. That seemed extraordinary, given that the money is sitting in a bank account.
The wife was a troubling witness. On the one hand, she has fought the husband’s efforts to reduce the value attributed to his business interests, but on the other hand in her financial statement she attributed a far greater value to it than that provided by the single expert by adding in the distributions made post separation. She ultimately accepted however that this was not an acceptable valuation process and that the value attributed by the single expert stood.
I formed the view that, she is angry and resentful about the changes to her own and the children’s financial situation as a consequence of the separation - and blames the husband for that. It is however simply a stark reality of life that often it is impossible to maintain two households in the same way that a family once maintained one household.
The wife was reluctant to make any concessions in favour of the husband and it was only after much resistance that she conceded the husband’s car had been stolen and that his partners were justified in their steps to reduce the husband’s salary. She was overall most reluctant to concede that the husband was not conspiring against her to reduce her entitlement to the matrimonial asset pool, however her position had softened by the end of the trial.
I formed the view that the wife wants to achieve the best possible outcome in these proceedings but that her judgment of the husband is clouded. Her cross examination was focussed on the discrepancies in the husband’s material, to show him as dishonest and unreliable. That evidence however was not as telling as she clearly believed. For example, her focus on an application in a proceeding the husband stated was filed on 22 June 2021 when it was in fact filed on 11 June 2021. I accept that was a simple typographical error, and certainly there was no benefit in changing that date. Also, her focus on a perceived contradiction between two paragraphs which were, on review, about two different dates and times.
The wife has pursued further disclosure from the husband of documents, despite advice that those documents do not exist. I accept the evidence of the husband and his business partners about those matters.
I accept that the wife was trying to give a good account of herself and was not deliberately attempting to mislead the court, but I formed the view that she has distorted thinking around the husband and his actions. Towards the end of her evidence however she conceded and accepted the husband’s evidence about matters such as the stolen car and salary reduction. She advised the court that there had been a re-establishment of a level of trust.
Ms J
This witness was not required for cross examination and her evidence is accepted unchallenged.
That evidence is to the effect that she has loaned an unspecified sum of money to the husband and that she expects that money to be repaid.
The husband’s evidence is that he borrowed $17,600 for the purchase of a car during the relationship. Post separation he has borrowed a further $76,577.50 for school fees, another car, a personal loan, valuation costs and court fees. It appears that all loans aside from the initial car loan are posts separation loans. I accept the husband’s evidence as to the quantum of the funds he owes to his mother and the use to which those funds have been put.
Mr M
This witness’ evidence was about the CGT assessment if the business is sold. He was not required for cross examination and thus his evidence is unchallenged. I accept it in its entirety.
The Applicant’s Business Partner – Mr Q
Mr Q was a sensible and straightforward witness. I accept his evidence.
His evidence confirmed that of the husband’s. To the effect that he and Mr O had jointly decided that the husband’s salary should be reduced, then discussed it with the husband who accepted the force of their position.
I accept his evidence that he does not want to buy the husband’s interest in the business, nor does he wish to have a different business partner.
The applicant’s Business Partner – Mr O
Mr O was also a reliable and sensible witness. I accept his evidence which was in direct agreement with that of Mr O and the husband.
Business Broker – Mr P
Although the husband was unable to produce this witness, the wife accepted his evidence that if the husband’s business interests have to be sold then there will be commission incurred and payable to the agent.
The Expert Evidence – Mr R
I accept Mr R’s evidence and in particular the valuation of the husband’s business interests. He was a considered and expert witness whose evidence made a great deal of sense.
I discuss his evidence later when ascertaining the asset pool.
DETERMINATION
Determining the assets and liabilities
The joint balance sheet reflects each party’s position as to the asset pool as follows:
Ownership Description Applicant’s
ValueRespondent’s Value ASSETS 1 Applicant E Pty Ltd 0.00 0.00 2 Applicant G Pty Ltd ATF Bardes Family Trust N/A 438,921.00 3 Applicant F Partnership (a Partnership) N/A 376,585.00 4 Applicant Business – E Pty Ltd & F Partnership 350,000.00 N/A 5 Joint B Street, Suburb C Queensland – Matrimonial Home 535,000.00 505,000.00 6 Respondent Motor Vehicle 1 36,400.00 31,000.00 7 Respondent Campervan 21,000.00 17,000.00 8 Applicant Motor Vehicle 2 15,000.00 10,000.00 Total 957,400.00 1,378,506.00 ADDBACKS 9 Joint G Pty Ltd (Bardes Family Trust). 0.00 73, 845.48 10 Joint Income from draw down on equity in F Partnership 0.00 58,000.00 11 Applicant Family Home B Street, Suburb C, Queensland. 0.00 27,132.00 12 Applicant Campervan. 0.00 4,726.00 Total 0.00 163,703.48 LIABILITIES 13 Joint NAB Mortgage 312,973.78 315,093.31 14 Joint Motor Vehicle 1 17,600.00 17,600.00 15 Joint H Company –Campervan 10,000.00 9,942.23 16 Joint Unsecured Home Deposit Loan 0.00 50,000.00 17 Respondent HECS 16,757.00 16,757.00 18 Applicant Loans – Ms J 76,577.50 N/A 19 Applicant Tax Bardes Family Trust 2022 26,412.45 0.00 20 Applicant Tax Bardes Family Trust 2023 est 34,000.00 N/A 21 Applicant Credit Card 3,141.87 N/A 22 Respondent Loans – Ms K and Mr L 0.00 27,363.10 Total 497,462.60 436,755.64 SUPERANNUATION 23 Applicant Super Fund 1 295,903.55 295,903.55 24 Respondent Super Fund 2 66,719.37 66,719.37 Total 362,622.92 362,622.92 FINANCIAL RESOURCES 25 Balance of Bardes Family Trust 62,294.87 62,294.87 26 Applicant’s Bank Balance 3,001.43 6,856.00 27 Respondent’s Bank Balance Unknown 550.81 Total 65,396.30 69,701.68
In addition, if orders are made for the business to be sold the court must factor in the CGT and the business broker’s fee.
It will be necessary for the court to make findings as to the value of each asset/liability and addback in dispute. The only values that are agreed are the debt secured to the Motor Vehicle 1, the wife’s HECS debt in the sum of $16,757, the parties’ respective superannuation interests, the balance of the Bardes Family Trust and the parties’ financial resources as held in their bank accounts.
The significant issue of dispute, however, is the value of the husband’s business interests.
The husband’s business interests – items 1 - 4 on the joint balance sheet
The single expert’s report has the two parts of the business at a combined value of $786,172[2]. This is by far the most significant asset in the matrimonial asset pool.
[2] Affidavit of Mr R filed on 15 March 2023 at 2.1 on page 13 of 113.
The valuation is to the effect that the partnership and the company are separate from each other and the values of same are also separate and do not constitute one consolidated entity. I have however combined the figures simply for mathematical ease. A detailed analysis of the business entities and their history was undertaken in the process of preparing the valuation.
The legislation provides for obtaining and managing expert evidence. In particular, Chapter 7 of the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (“the Rules”). Rule 7.02 sets out the purpose of Pt 7.1 of the Rules deals with expert evidence.
Division 7.1.6 of the Rules provides for clarification of a single expert witness report through a conference or the delivery of questions. Neither party sought to take this step. Rule 7.09 of the Rules provides for cross examination of a single expert witness. This inherently acknowledges that the evidence of a single expert is subject to challenge through cross examination in the usual way.
Although there is a single expert opinion as to the valuation of those business interests, the husband disputes that value. In her financial statement so does the wife although on the balance sheet and at the trial she accepts the value as it stood in the report.
The husband’s position is that the valuation should be reduced to reflect the following:
(a)that he is a minority shareholder and partner,
(b)that the provisions of the shareholders and partners agreements require first offer to go to his partners and neither wants to buy him out; and
(c)that while he can sell to a third party that person must be approved by the partners – that in effect they have a right to veto and neither of them wants a new partner/shareholder in their business.
The husband’s position is that whilst the court can make orders for the sale of the business, to bring it to practical fruition may be difficult if not impossible (without litigation) given the opposition of the other two shareholders and partners. His position is also however that the business must be sold if the single expert’s opinion is accepted as he simply has no money and cannot obtain finance to pay out the wife.
I cannot accept the husband’s guesstimate as to value because regardless of his qualifications, he cannot be the expert in his own matter. There is a single expert in the matter and that expert had considered the factors the husband raised.
Whilst I am aware of the much lesser valuation prepared by T Company, that was undertaken in 2021 for a very different purpose. The single expert was also aware of this valuation.
The wife’s initial position was that the distributions made by the business should be added to the value. She struggled to see that this was illogical thinking. I cannot accept her increased value as there is simply no basis in fact or law to do so. Even on the Balance Sheet the wife provided figures that were different from the single expert valuation undertaken.
The single expert was cross examined and remained firm in his estimate of the value, stating that it was his estimate of the current market value. He acknowledged that there was some fluidity to the discounts he had applied for marketability and a minority shareholding but otherwise was unmoved in cross examination.
His evidence was that the valuation of the business is based on its future capacity to earn, taking into account the risk factors. Therefore, the wife’s efforts to add on to the valuation, the income produced by the company/partnership, regardless of how those funds are funnelled to the parties must fail.
I also accept his evidence to the effect that if the business cannot be sold in accordance with the partnership and shareholder’s agreement, that the business partners may end up in the State Court seeking remedies to dissolve the partnership and company entities and distribute the assets. Litigation in the State Court would involve further legal fees and an uncertain result, including as regards the value of the business.
But the issue is that the valuer had considered all the negatives as well as the positives and his valuation was based upon a thorough consideration.
I accept the single expert valuation for those reasons.
The former matrimonial home – B Street, Suburb C
The wife lives in the home post separation. The husband paid the mortgage post separation until about December 2020, from the joint account for three months and then from his own account. Since then, the wife has been responsible for the payments, and she has placed the mortgage into hardship on three occasions.
As to the value, the wife obtained a valuation from S Company in 2021 but each party acknowledges that is well out of date. That valuation placed the value at $425,000.
The husband obtained his evidence as to value on 20 March 2022 being an appraisal with his estimate being the average of the range provided. He concedes that there may have been some change as to values however there is no evidence as to what if any change has occurred.
The wife’s estimate as to the current value is the value listed online in March 2023. That is more recent however it is simply an online amount with no indication as to the basis of the estimate. Further it offers a free appraisal. I can therefore place no weight on this document and prefer the appraisal obtained by the husband.
I find the value of the former matrimonial home to be $535,000.
The Motor Vehicle 1
The husband’s evidence is that his estimate of value is based upon an internet search – a car sales search.
The wife’s estimate is based on a Redbook search which gives a range of $36,300 to $40,700. The wife, however, estimates the value at $31,000 as there is work to be done on the car - which she says decreases its value. Under cross examination, her evidence was that the car is booked in to have that work done.
I prefer the Redbook valuation to an online search as the more reliable valuation.
I do not accept that any works to be done on the car would reduce its value beyond even the lowest point of the range provided by Redbook. This is particularly so when that work was about to be done. I accept however, that it may not be in prime condition, so therefore place the value at the midrange of the Redbook value being $38,500.
The Campervan
The husband’s evidence is that his estimate of value is based upon an internet search – a car sales search or similar. The wife’s evidence is that her estimate is based on a search online.
There is nothing to be said for either estimate above the other, both being based on online searches. I intend to take the average of the two and place the value at $19,000.
The Motor Vehicle 3
This vehicle was purchased by the husband post separation. His evidence is that it has been stolen. The wife had not accepted his evidence, however during the course of cross‑examination became satisfied that the husband’s evidence about the vehicle was correct.
I accept that it was uninsured not due to any wastage by the husband but simply because he had no funds to meet the cost in addition to the expenses that he already has to borrow to meet.
I accept that this asset has been written off and should be removed from the asset pool.
The Motor Vehicle 2
The husband accepts the wife’s estimate of value at $10,000.
Addbacks
The wife seeks a number of addbacks. Addbacks are the exception rather than the rule. They are often sought but rarely granted. An addback occurs where the court is asked to notionally add to the asset pool, the value of an asset which no longer exists. Whether the court chooses to do so, is a discretionary exercise.
In AJO v GRO (2005) FLC 93-218 at [30] the Full Court identified three clear categories where it may be appropriate to notionally add back assets that no longer exist to the pool of assets:
(1)where the parties have expended money on legal fees;
(2)where there has been a premature distribution of matrimonial assets; and
(3)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 has acted recklessly, negligently or wantonly with matrimonial assets, the overall effect of which has reduced or minimised their value.
Normal living expenses and necessary costs do not usually fall within a category of acceptable addbacks. Parties are not expected to “go into a state of suspended economic animation” after separation,[3] and are “entitled to reasonably conduct their affairs post-separation in a manner that is consistent with properly getting on with their lives”.[4]
[3] M & M [1998] FamCA 42.
[4] C & C [1998] FamCA 143 at [46].
The court will exercise its discretion to add back in exceptional cases where the circumstances of a case, and justice and equity requires it. In cases that are not exceptional, justice and equity can be achieved not by adding back but by taking the matter up as a relevant s 90SF(3) or s 75(2) factor. The Full Court has indicated that the latter course is technically more correct.[5]
[5] Trevi & Trevi (2018) FLC 93-858 at [28]-[30].
What the court will not do, is add back income that has been received and spent post separation. The wife’s claim for an addback of funds received by the husband post separation must therefore fail as she is seeking to add back income – regardless of the fact that it has been filtered through a family trust of which she is a beneficiary. Those funds have been used for living expenses including to pay school fees and other expenses for the children.
Likewise, the wife’s claim for an addback of mortgage and campervan repayments either paid or accruing post separation repayments must fail. The wife lives in the home to which the mortgage is secured. The husband met the mortgage repayments for a period of time post separation. The same is true of the campervan, as it has been in her possession post separation.
The wife seeks addbacks of funds held with Services Australia (for child-support), the Australian Taxation Office (for tax) and the children’s schools totalling $83,300. The husband’s evidence is that upon receipt of lump sum distributions or dividends he does the calculations as to what must be paid from those funds - what tax should be paid, what child-support is to be paid and upcoming school fees. He then allocates those funds and pays them in advance to those various entities.
I accept the husband’s evidence that those funds are properly allocated, and that they will in due course, be claimed by those respective entities. I accept that in the past he has been in error in his child support calculation, but I also accept his evidence that he has learned from that mistake. The fact that he is prudent with his financial resources is to be commended. I do not propose to add back those sums as I am satisfied that those are liabilities that currently or will shortly be real liabilities. If I add them back, then the husband must later find the funds for those taxes, school fees and child support from other income which will itself be subject to tax, child support and other imposts.
The joint NAB mortgage
I accept the wife’s evidence as to the current amount owing, as she is the person who has arranged hardship relief from time to time and has more recently been responsible for the payments.
Motor Vehicle 1 Liability
The parties are in agreement as to the liability owing.
The joint H Company loan secured to the Campervan
I accept the wife’s evidence as to the current amount owing as she is the person who has been responsible for payments.
An alleged joint unsecured home deposit loan in the sum of $50,000
There is no evidence of this debt other than a letter of demand from the wife’s parents. No affidavit was filed and no documentary evidence of the terms of the alleged loan exists.
The husband’s recollection is that this sum received in 2017 was a gift.
The wife’s evidence is that it was to be repaid from the sale of their previous home when there were insufficient funds to do so, that the debt was to be repaid from the sale of the current home.
Given the lack of documentary evidence and particularity, I find that this amount was intended to be a gift but is nonetheless a significant contribution on behalf of the wife which will be relevant to the consideration of contributions in the division of assets.
HECS/HELP Debt
The parties are in agreement as to the quantum of the liability.
An alleged loan from Ms J
The husband’s evidence is that he has loaned funds from his mother. That amount is unchallenged as the witness was not required for cross examination.
The loan for the car in the sum of $17,600 is conceded by the wife and I shall include it in the asset pool as accrued during the relationship as a joint debt.
The other liabilities were accrued by the husband post separation and used to meet legal fees school fees and so forth. They are not properly part of the pool as he chose to borrow those funds to meet those expenses. I will therefore not include in the pool available for distribution.
An alleged tax for the family trust in 2022 and 2023
I accept the husband’s estimates of tax. I found him to be a credible witness; he is highly qualified to make those estimates and I am satisfied that they are correct to the best of his ability.
The applicant’s credit card
I accept the husband’s evidence as to his credit card which was not challenged through cross examination.
An alleged loan from Ms K and Mr L, the wife’s parents, in the sum of $27,363.10
As this is a post separation loan incurred by the wife to assist her in meeting her expenses, this amount will not be included in the pool for distribution between the parties.
Each party has required financial assistance from their family. But that does not make those liabilities a matrimonial debt to be considered in the distribution between the parties. Each party is properly liable for their own post separation liabilities.
Superannuation
The parties agree as to the balances of their respective super funds.
Financial Resources – the Family Trust
The parties agree as to the value of this asset and that it is to be considered as a financial resource.
Financial Resources - the husband’s bank balance
I accept the husband’s evidence as to the balance of his bank account.
Financial Resources - the wife’s bank balance
Under cross examination, the wife conceded that she had $46,600. This includes a distribution paid from the family trust in the sum of $45,000, the majority of which has been placed in the bank account of an unnamed family member for some unnamed reason. That is however the amount that she concedes is her property.
Tax and Fee Consequence if the husband’s business interests are sold
There is a CGT assessment which is unchallenged. I accept that evidence – that if the business interests of the husband are sold for the single expert’s value, then there would be CGT of $69,900.
Asset pool for distribution between the parties
I am satisfied that the final asset pool available for distribution is as follows:
Ownership Description Value ASSETS 2 Applicant G Pty Ltd ATF Bardes Family Trust and F Partnership (a partnership) 786,172.00 5 Joint B Street, Suburb C Queensland – Matrimonial Home 535,000.00 6 Respondent Motor Vehicle 1 38,500.00 7 Respondent Campervan 19,000.00 8 Applicant Motor Vehicle 2 10,000.00 Total 1,388,672.00 LIABILITIES 13 Joint NAB Mortgage 315,093.31 14 Joint Motor Vehicle 1 17,600.00 15 Joint H Company– Campervan 9,942.23 17 Respondent HECS 16,757.00 18 Applicant Loans – Ms J 17,600.00 19 Tax Bardes Family Trust 2022 26,412.45 20 Applicant Tax Bardes Family Trust 2023 est 34,000.00 21 Applicant Credit Card 3,141.87 Total 440,546.86 SUPERANNUATION 23 Applicant Super Fund 1 295,903.55 24 Respondent Super Fund 2 66,719.37 Total 362,622.92 FINANCIAL RESOURCES 25 Balance of Bardes Family Trust 62,294.87 26 Applicant applicant’s Bank Balance 3,001.43 27 Respondent respondent’s Bank Balance 46,600 Total 111,896.30
If business is to be sold, then CGT and the broker fees must be included in this asset pool as liabilities, and the value of the business changed to the sale value, less sale costs including any legal fees.
The asset pool is therefore $1,310,748.06 and there are financial resources totalling $11,896.30.
Determining the Approach
I have considered the decisions debating the varying approaches to dividing an asset pool in terms of an asset by asset approach or global approach as referred in Norbis v Norbis (1986) 161 CLR 513; Cahill & Cahill (2006) FLC 93-253.
The global approach is generally adopted and involves examining the assets on a global view and determining an overall contribution of each party, as opposed to the asset-by-asset approach which involves determining the interests of each party in each asset or group of assets.
I am of the view that the global approach is more appropriate for the following collective reasons:
·This is long term relationship of about 20 years;
·There are three children of the relationship;
·Homes were jointly bought and sold during the relationship; and
·A business interest was obtained during the relationship in which the husband was a shareholder and partner. The wife worked for that business sat times.
Determining whether it is just and equitable to make orders
Neither party argued that it was not just and equitable to make property orders. I am satisfied it is just and equitable to make property settlement orders for the same reasons that I am satisfied that it is appropriate to use the global approach to the asset pool. At the current time, the most valuable asset of the relationship, being the business interests, are in the husband’s sole name.
Evaluation of section 79(4) - Contribution Issues
The husband proposes that the court view the parties’ contributions as equal. The wife proposes that there be a five percent adjustment in her favour, due to the fact that in the early years of the relationship she supported the husband while he completed his qualification.
The significant factors that I have considered include the following:
(a)This is a long term relationship;
(b)At the commencement of the relationship both parties were young and neither had significant assets;
(c)The wife worked while the husband completed his studies;
(d)The wife parents gifted them $14,000 to purchase their first home;
(e)The wife parents gifted another $50,000 to the parties in or about 2017. While the wife asserts that this is a loan there is no evidence from her parents and no documents to support this. Further there is no evidence of any details of the agreement, or any repayment made or foreshadowed on the alleged loan. I am therefore satisfied that it is a gift attributable to a contribution on behalf of the respondent wife;
(f)During the relationship, the husband’s mother loaned the parties money to buy a car;
(g)Post separation the wife has been the primary carer of the two eldest children and the parties have shared the care of the youngest child. The parties are working to repair the rift between the husband and the children;
(h)Post separation the husband paid the mortgage from joint funds for a period of about three months, then from his income for about six months. Since then, the wife has been solely responsible and that has required her to put the mortgage into hardship three times;
(i)The wife is responsible for the costs of the campervan and her vehicle, and both are in her possession and control;
(j)Post separation, the husband is paying child support in the vicinity of about $330 per week. He is also paying private school fees conceded by the wife to be about $17,000 per annum and contributes to extracurricular activities. I accept his evidence that he has borrowed money from his mother to ensure the children continue in their current schools. Whether he will be able to continue to do so is another matter, but he has made significant post separation financial contributions, borrowing from his family in order to do so;
(k)The wife is responsible for all other expenses relating to the children;
(l)There is no wastage argument in this matter. There is no suggestion for example, that the husband has been living the high life and dissipating assets and income to the detriment of the wife and children;
(m)Posts separation, the husband’s salary has been virtually halved. I accept however that this was through no fault of his own, but rather forced upon him.
(n)I also accept that in some years the husband received little or no distributions/dividends from the entities, although more recently there have been significant distributions made; and
(o)The husband has borrowed money to be able to continue to pay school fees, extracurricular activities and the like. Similarly, the wife has borrowed money to meet her living expenses.
I find, considering all those matters, that the contributions made by the parties were equal.
Evaluation of Section 75(2) factors – Future Needs
The husband proposes a 2% adjustment in the wife’s favour. The wife proposes a 10% adjustment in her favour.
The parties are of a similar age and in relatively good health.
The wife is currently the primary care giver of the two older children aged about 14 and 13. They are older children with 4, 5 and 7 years respectively until they turn 18.
The parties share the care of the youngest child. This is not because the husband chooses not to spend time with the older two, but because of a breakdown in their relationships which the parties are working to repair in accordance with court orders.
I am satisfied that, if he is able to do so, the husband will continue to pay the current level of child support or similar and to meet the children’s private school fees and extra-curricular activities. If the business is sold however that capacity will be significantly reduced.
Both parties are in the work force. There is however a disparity in income earning capacity, with the husband earning significantly more with dividends and distributions from the entities. If the business is to be sold, then that disparity will remain, although to a lesser degree.
There are financial resources to consider. The wife has about $46,600 in the bank mainly from a distribution from the Family Trust while the husband has a much lesser sum, although he had received a similar distribution. There is also over $60,000 in the Bardes Family Trust.
Counsel for the husband asked the court to consider the differential – that is that a five per cent adjustment to the wife meant that there was ten per cent difference in the settlement that each received.
Having considered those circumstances, I make a five per cent adjustment in favour of the wife for future needs.
I do not propose to make a further adjustment if the husband sells the business. If he retains the business, then he gets the distributions from the trust in addition to his wage. If he manages to sell the business, he will no doubt look for work in his field of expertise and be able to attain a higher salary to compensate for that loss.
Just and Equitable
I propose to make an overall distribution of 55:45 in the wife’s favour.
As to the assets each party currently holds that is as follows:
APPLICANT HUSBAND Assets G Pty Ltd ATF Bardes Family Trust and F Partnership (a Partnership) $786,172 Motor Vehicle 2 $10,000.00 SUBTOTAL $796,172.00 Liabilities Loans – Ms J $17,600.00 Tax Bardes Family Trust 2022 $26,412.45 Tax Bardes Family Trust 2023 est $34,000.00 Credit Card $3,141.87 SUBTOTAL $81,154.32 Super Super Fund 1 $295,903.55 TOTAL $1,010,921.23 RESPONDENT WIFE Assets B Street, Suburb C Queensland – Matrimonial Home $535,000.00 Motor Vehicle 1 $38,500.00 Campervan $19,000.00 SUBTOTAL $592,500.00 Liabilities NAB Mortgage $315,093.31 Motor Vehicle 1 $17,600.00 H Company – Campervan $9,942.23 HECS/HELP $16,757 SUBTOTAL $359,392.54 Super Super Fund 2 $66,719.37 TOTAL $299,826.83
In the event that the wife receives fifty-five per cent of the asset pool, then she is to receive $720,911.43, of which she already has of which she already has assets and liabilities in her control to the net value of $299,826.83 leaving $421,084.60 to be paid to the wife.
The husband seeks that, as much as possible be paid from his super funds to the wife. She objects to that on the basis that she needs money now. I see the force in both arguments; however, this is not a case where I propose to take a two-pool approach. Both parties are working, and both will continue to accumulate superannuation benefits. If the wife received an adjustment such that she received an overall fifty five per cent of the parties super, then that will be a super split to her of $132,723.24.[6] That leaves a cash adjustment of $288,361.36.
[6] Fifty-five per cent of $362,622.92 less $66,719.37.
At the end of the trial, the husband conceded that the wife needed money but submitted that he just does not know how to get it to her. The wife’s distrust of the husband had fallen away to the extent that she accepted the reality will most likely be instalment payments rather than the lump sum she naturally prefers.
The issue that the court is left with is what orders will achieve a just and equitable result between the parties.
The husband’s Outline of Case document proposes final orders, whereby the wife retains the home, and the husband pays her out as regards the business interests over time and by way of distribution from the trust with the wife to remain a beneficiary of the family trust. That proposal was premised on the business being valued at $350,000. With the husband’s evidence that he is unable to borrow funds to pay the wife a lump sum, those instalment payments would take place over five years finishing with the distribution on the 30 June 2028.
The husband ideally wants to keep the business, submitting that it is the only way that he can meet his obligations. However, at the end of the trial, with the single expert firm in his opinion as to value, the husband’s position changed. Due to the size of the asset pool, the husband made submissions that retaining the business was no longer an option for him. He submitted that instalment payments would need to continue to twice as long as he had envisaged and that was unworkable, particularly where s 81 of the Act requires the court to make orders that support the financial relationship between parties being finalised.
The husband’s position at the end of the trial was that an interlocutory order should be made, for an attempt to be made for the business to be sold. There is however no guarantee that the business can or will be sold. In fact, on the evidence before the court any such attempt will not succeed without state court proceedings to wind up the business, given that the partners have, in effect, a right of veto. The husband however sees no other way to pay the wife her entitlement.
The husband’s evidence is that he has been unable to borrow money; as a consequence of any final orders, he will not have any real estate registered in his name, and in any event the former matrimonial home, whilst in joint names, is heavily mortgaged and that mortgage has been placed in hardship three times since separation. It is not surprising that the husband’s own bank declines a loan.
I am not critical of the husband for not applying to variety of banks and other institutions. He has applied to NAB as the parties have banked with them for many years on both a personal and business basis. If the husband applied to variety of banks and was declined, as appears likely on the evidence before the court, this would further damage his and the wife’s credit rating and limit future opportunities.
So, the question is how to get money out of the business and to the wife. The husband submits that the only way to achieve that is to sell his interest in the business. If he can miraculously achieve that, he will no longer be a shareholder and partner. That means no more distributions and no more dividends. That means, a significant drop in his income and income earning capacity. The knock-on effect is that his ability to meet the expenses that he currently meets for the benefit of the children will be lost or at the very least significantly reduced; child support payments will be reduced, his ability to pay private school fees of $17,000 a year will be reduced or lost, as will his ability to contribute to the children’s extracurricular activities.
Ideally the husband wants to retain the business, which is no doubt in part why he fought to have a lower value attributed to it. It is the only way that he can come up with instalment payments for the wife, but he does not believe that he can do that on the asset pool as it stands.
In the wife’s Amended Response filed on 17 March 2023 she sets out detailed orders sought without stating the percentage property division of the quantum of the cash payment to be made to her. In the case outline, the wife simply proposes an overall seventy per cent property division, with what looks like a further five per cent adjustment in her favour due to justice and equity.
While the husband proposed orders for a significant superannuation split to the wife, in order to reduce the cash payment, the wife did not support such orders. She noted that, she would be unable to access those funds for about 20 years and she needs money now.
By the end of the trial and having accepted the evidence of the husband and the business partners, her position had softened, and she was prepared to accept instalment payments. She was still of the view, however, that the husband should have made more enquiries about finance to pay her out and argued that the court could not be satisfied that he could not borrow the funds. As discussed earlier, I do not agree.
The wife accepts that if she is unable to sell the home there must be a default clause. She realistically accepts that instalment payments may be necessary.
So, I must consider whether to make interlocutory orders and orders to provide for a triggering event or to make orders for instalment plan payments or simply order that the business be sold. And I must do so in circumstances where there are a number of uncertainties as outlined earlier in these Reasons.
ORDERS
Final or Interlocutory orders
The husband’s primary position was for the court to make interlocutory orders for him to sell his business interests. His secondary position is that if final orders are made, then he makes instalment payments to the wife over time, but in his view that would be dependent on the valuation of the business being less than the single expert’s opinion.
The husband’s view is that he must sell and therefore there is no known asset pool. He argues that in turn makes it impossible to assess the justice and equity of the order the court proposes to make. That is incorrect; there is a known asset pool, it is rather that the husband’s evidence is that he is unable to source the funds to pay the wife, and therefore he argues that the business needs to be sold or an instalment plan is necessary.
I was urged by the husband to consider that any default clauses should look at a percentage division rather than amounts where it was uncertain what the business could sell for and what the house could sell for.
As regards the possibility of payments via distribution from the Family Trust, the wife was opposed to that. She was opposed as she prefers to receive a cash sum without any “catch” submitting that if a distribution is made from the trust then two issues will arise:
(1)there will be tax payable – although the husband references providing franking credits that would obviate that issue; and
(2)child support would be reduced because the husband would have less distributions and therefore less income.
The wife was also concerned on the basis that the trust deed may enable the trustee to refuse to pay. If, however, an order is made requiring a distribution to be made the husband would be required to do so.
The Partnership Agreement and the Shareholders Agreement both allow for five years for payment in the event that the partners did buy out the husband, such that, even if they did soften their stance and agree to buy out the husband, the wife would receive instalment payments over five years.
Having considered those matters, I do not propose to make interlocutory orders. The parties have been separated for three years now and their financial relationship must be finalised, or at least the structure put in place that leads to finalisation as soon as possible.
I therefore propose to make final orders with default provisions. In the event that, compliance is not possible the structure will allow for the default provisions to be triggered. And in the event that, circumstances arise which make those orders inequitable or unworkable, then the legislation allows a pathway to bring the matter back before the court.
Transfer of the home
The parties agree that the wife will retain the home. In the event that she is unable to refinance the property into her sole name, then it will need to be sold. I propose that she be given until the end of the financial year to attempt to refinance. Given that the husband may have to pay by instalments, the wife should be given every opportunity to investigate if she can retain the home.
The wife’s proposal that the husband meet the mortgage repayments until such time as she does refinance disregards the financial realities of both parties. She is no longer pursuing a spouse maintenance claim, however the orders she proposes would be a form of spouse maintenance. I will not make such an order.
Cash Payment to the wife
I propose to make orders that provide firstly for a lump sum payment to the wife. If that is not possible, then the orders will default to an instalment payment plan and only if that is not possible will it then default to an attempt to sell the business.
In that consideration, the court is assisted by Kent J in the Full Court decision of Tomaras & Tomaras (2021) 64 Fam LR 237 at [208] (“Tomaras”)[citations omitted]:
As a general proposition an order cannot be made under s 79 requiring a party to create property where no property exists, to satisfy the order (for example by borrowing). However, it is well settled that an order can permissibly be made under s 79 which provides one party pay the other a lump sum cash amount even though property in that form does not currently exist. It is not permissible for that lump sum order to exceed identified, identifiable or quantified assets (or assets that would have existed had it not been for the actions of one of the parties) unless that inability to identify or quantify assets is brought about by a party’s non-disclosure.
The first and preferred outcome in any property matter is that a lump sum payment be made to the respondent and thus bring the matter to an end. If the husband is now able to borrow the money, then that will be the end of the matter so far as cash payments to be made.
In the event that the husband is unable to borrow the money then the instalments will be triggered. In many respects, instalment property settlements are contrary to the intentions and obligations set out in s 81 of the Act, which references the court’s duty to end the parties’ financial relationship as follows:
In proceedings under this Part, other than proceedings under section 78 or proceedings with respect to maintenance payable during the subsistence of a marriage, the court shall, as far as practicable, make such orders as will finally determine the financial relationships between the parties to the marriage and avoid further proceedings between them.
In this case, the evidence was to the effect that the husband cannot borrow money. If that remains the case, then the court needs to look at alternatives in the case of default.
Section 80(1) of the Act provides:
(1)The court, in exercising its powers under this Part, may do any or all of the following:
(a)order payment of a lump sum, whether in one amount or by instalments;
(b) order payment of a weekly, monthly, yearly or other periodic sum;
…
The court therefore has the power to make an order for instalment payments, particularly in circumstances where a lump sum payment may not be possible.
The Full Court in Paskandy & Paskandy [1999] FamCA 1889 (“Paskandy”) upheld an order to make payment to the wife by instalments, inferring that the primary judge was satisfied the husband did not have the capacity to pay the amount of the wife’s entitlement other than by way of instalments and he should be given that opportunity. The husband in that case sought orders for instalment payments so that he could retain assets that enabled him to earn an income. In this case, however, although the applicant husband had initially sought orders for instalment payments, he ultimately sought orders for the sale of the business.
I can find no authority, and none were put forward by counsel, that the court can require a person to retain a business when they do not wish to do so. In this case however, the husband does not want to sell his business; the submission was made that he feels that he has no other choice. If the husband retains the business, then he may be able to continue to support his children in the way that he wants and to meet his other obligations including payments to the wife of her property entitlement. So, the orders should start with the husband retaining the business and move through the alternate scenarios if he defaults.
I have also considered that the court cannot predict what the husband’s future income will be and whether he will have the capacity to meet whatever instalment plan the court may choose to impose. So there needs to be a further default position.
The Full Court in Aitken & Aitken [2023] FedCFamC1A 69 (“Aitken”) has guidance to offer. In that matter the main asset in dispute was a company valued at $45,514,742. The parties each had a fifty per cent shareholding. The trial judge rejected the husband’s submission that the company should be sold, and the net proceeds of sale divided equally between the parties. Instead, the husband was ordered to buy out the wife’s share. This was because there was a concern that the husband would not act in good faith. The court has no such concern in this case.
The Full Court in Aitken however was of the view that the trial judge had not adequately considered the husband’s capacity to make the payment, and, further, was of the view that to meet the payment plan, “[t]he husband necessarily had to access funds that did not exist as either his own property or jointly owned property. Nor was there any satisfactory evidence he could borrow the funds to make the required payment.” The Full Court also noted the failure of the trial judge to include a default provision that was triggered in the event that the husband was unable to meet the required payment.
There is much force in those principles, however against that, I must consider that the husband’s own evidence, and that of his partners and fellow shareholders. That evidence is that although the husband’s primary position at the end of the trial was to sell the business, the evidence is that his business partners will not support a sale and do not wish to buy him out. They hold, in effect, a right of veto. In summary, whatever the husband may want, having accepted the evidence of his business partners, the business is unsaleable. In the event that a sale is necessary then, as the single expert noted, it may end up in the state courts to force the husband’s exit from the business. As a consequence, I prefer to first give the parties the option of a lump sum payment, then in default an instalment payment plan and in the event that does not work the default clause will allow the husband to attempt the sale process.
If the husband is unable to sell his business interests, then no doubt this matter will make its way back to this court or to the State Court. In either case neither party – nor indeed the husband’s business partners - will be winners. In deciding what orders to make, this court is really caught between the devil and the deep blue sea. No order is guaranteed to bring about a payment to the wife to ensure that she receives a just and equitable outcome or bring finality to the parties’ financial relationship. This court can only do the best that it can on the evidence before it and trust that the goodwill that was tentatively re-established at trial will help the parties to work together so that the wife receives the cash payment ordered – by whatever means.
Turning to consider the quantum and term of instalment payments, clearly the shorter the time frame the better, but it also needs to be a time frame in which the husband can realistically have a chance of making the repayments. It is appropriate to review the distributions received in the last few years to give an indication of what may be expected in the future. The husband’s evidence is as follows:
(1)In the financial year ended 30 June 2020, the trust received a non-monetary distribution from E Pty Ltd in the amount of $11,000. No money was received. The transaction was completed purely by accounting treatment;
(2)In the financial year end of 30 June 2021 the trust received a distribution from E Pty Ltd in the amount of $100,000 plus franking credits;
(3)In the financial year and 30 June 2022, the trust received a distribution from E Pty Ltd in the amount of $100,000 plus franking credits;
(4)In the financial year ending 30 June 2023, the trust received a distribution from E Pty Ltd in the amount of $120,000 plus franking credits; and
(5)The current bank balance of the trust at 4 March 2023 was $62,294.87.[7]
[7] Husband’s trial affidavit filed on 16 March 2023 at paragraphs 210 to 214.
The husband has included in the balance sheet, the estimated tax payable for the year ended 30 June 2022 and 30 June 2023 and I have accepted those calculations as appropriate deductions. The court cannot ignore tax consequences of distributions.
In the husband’s trial affidavit, he sets out the distributions he had received from the family trust between 26 May 2021 and 17 January 2023.[8] In the affidavit of 2 August 2023, he gives evidence of dividends paid to the husband and the wife of $45,000 each subsequent to that.
[8] Husband’s trial affidavit filed on 16 March 2023 at paragraph 232.
The husband gave evidence that if distributions are made to the wife, for example of $100,000, then there could be tax savings of about $30,000. The husband’s evidence was however that the wife refused to accept that. Therefore, if distributions are used to fund instalment payments, the tax consequences must be considered in the pool. This is because, the husband is not paying the wife from an asset in the normal way, but rather from income yet to be achieved by an asset that currently exists. Therefore, in order to pay her the amount required by instalments the husband will have to pay tax. The court is not an accountant and cannot calculate tax. That will be a matter for the parties to calculate once all the necessary information is at hand.
I accept the husband’s evidence, that money received into the family trust as a distribution made from the company, is already taxed at the rate of 27.5 cents, and more recently 25 cents in the dollar. So in the event that the wife’s income was less than $45,000 she would pay 19 cents in the dollar for any amount between $18,200 and $45,000.[9] The wife’s financial statement reflects her total weekly income as $1,277 although her wage is $800, with the rest made up of Family Tax Benefits A & B and presumably child support; although that is not included on the document child support is $330 per week and that does bring her up to her estimated total income in the Financial Statement. It therefore appears to be a typographical error that the amount is not included in the form.
[9] Husband’s trial affidavit filed on 16 March 2023 at paragraph 259 to 260.
In the husband’s affidavit filed on 2 August 2023[10], the husband helpfully provided the relevant calculations for distributions from the partnership and dividends payable from the company where $100,000 was distributed from each source as follows:
[10] Husband’s affidavit filed 2 August 2023 at paragraphs 21 and 22.
21 [F Partnership]:
Distribution of taxable income from [F Partnership] for the financial year ended 30.06.23
Taxable income $100,000.00
Tax (45%) $45,000.00
Medicare Levy (2%) $2,000.00
Medicare Levy surcharge (1.5%) $1,500.00
Estimated Taxation $48,500.00
Child Support Estimate $24,000.00
Estimated Cash Remainder $27,500.00
22 [E] Pty Ltd:
Dividend – Cash $100,000.00
Franking Credits $33,333.33
Total Taxable Income $133,333.33
Personal Tax Rate (45%) $60,000.00
Medicare Ley (2%) $2,666.67
Medicare Levy surcharge (1.5%) $2,000.00
Franking Credits benefit -$33,333.33
Estimated taxation payable $31,333.33
Additional Child Support Estimate $10,400.00
Estimate Cash Remainder $58,266.67
I accept those calculations.
If indeed, the wife is to receive $288,361.36 by way of instalments, I accept that there will be tax consequences. Therefore, tax needs to be calculated and a determination made as to who bears that tax burden.
If the husband alone bears the tax burden, then the payments he makes to the wife will in reality be greater than the amount this court has deemed to be just and equitable. If however, the wife alone bears the burden then the amount she receives will be less than the amount this court has deemed to be just and equitable. I am of the view that it is neither party’s fault that the cash to pay the wife out is not readily available. I am in turn of the view that it should not be the burden of one party alone to meet the cost of obtaining those funds via income.
The options are therefore:
(1)to calculate the amount of tax payable, deduct that from the asset pool and recalculate the pool and the amount payable to the wife would be reduced accordingly as being a percentage calculated on a lesser asset pool; or
(2)to calculate the tax payable each year and for the parties to share that equally.
In either case the parties would need to ascertain the most tax efficient way of attending to the instalment payment and co-operate. I accept that in a perfect world a party should not have to pay tax on a property settlement entitlement. But sadly, the situation in which the parties find themselves is far from perfect and the court must do the best it can in the circumstances.
Given that the tax payable on the distribution may vary from year to year, I am satisfied that it is an amount that should be calculated each year. This is not an overly onerous task given the husband is eminently qualified to attend to that. I have no doubt that he would attend to that correctly and given that each party must share half of the tax burden I am satisfied that they will each be motivated to co-operate to ascertain the best method of distribution to maximise the benefit to each of them.
In ascertaining the quantum and time frame for the instalment payments, the court is also assisted by the evidence as to the husband’s taxable income over the last few years which is as follows:
409. Since buying into the [business], my income has been:
a 2014 - $115,913 (taxable income)
b 2015 - $177,877 (taxable income)
c 2016 - $181,633 (taxable income)
d 2017 - $143,086 (taxable income)
e 2018 - $156,227 (taxable income)
f 2019 - $148,996 (taxable income)
g 2020 - $171,738 (taxable income)
h 2021 - $297,820 (taxable income)
i 2022 - $191,099 (taxable income)
j 2023 – currently on a salary of $100,000 a year.
I propose to make orders that the husband pay to the wife the sum of $50,000 each financial year. In fixing upon this amount, I am conscious of the tax consequences and the obligations the husband has to support himself, to pay child support, and the efforts he is making to continue to meet private school fees and extra-curricular activities for the children. It means instalments over six years which is not ideal, but the court is attempting to ensure that the payments are achievable and realistic.
In the event that the husband is unable to meet an instalment payment then the next and final step is to attempt to sell the business. Unless both his business partners/shareholders change their minds, this will involve litigation in the State courts. However, if all else fails then this must be attempted, and I propose to make orders in terms as sought by the husband as a default provision.
In the event that the business has to be sold the asset pool must be recalculated – to use the actual sale price, to factor in sale costs including brokers fees and CGT and, in the event that litigation with his partners follows, to factor in those legal fees. In that case, the percentage division will remain unchanged, but the asset pool will change to reflect the sale price value of the business and to deduct those expenses outlined above.
The calculation of child support does not figure in all of this over and above the requirements of s 75(2) of the Act. Whether distributions are made to the wife directly from the Family Trust or via the husband will be dependent on the direct tax consequences not on the impact on the child support assessment. I am satisfied that whatever the outcome the husband will continue to use his best endeavours to ensure the children are able to maintain their current schools and interests.
Liberty to apply
I will provide liberty to apply to both parties in respect to the mechanics of these orders, noting their complexity, and in particular, if any issues arise as to the terms and conditions of sale of the business entities and application of the sale proceeds.
CONCLUSION
Having considered all the matters outlined in these reasons, I am satisfied that the proposed division and the orders set out at the commencement of these reasons are just and equitable.
I certify that the preceding two hundred and one (201) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Cope. Associate:
Dated: 29 February 2024
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