Bernard and Bernard and Anor
[2017] FCCA 2197
•20 September 2017
FEDERAL CIRCUIT COURT OF AUSTRALIA
| BERNARD & BERNARD & ANOR | [2017] FCCA 2197 |
| Catchwords: FAMILY LAW – Property – Where the husband and wife agree on the pool but disagree about the assessment of contributions and s.75(2) matters – where a significant issue in dispute is whether there should be an adjustment in the wife’s favour because of the financial impact on the parties of a company which the husband controlled after separation failing to thrive and eventually going into liquidation – where the liquidators of the company claim that equipment disposed of by the husband and the wife after the company went into liquidation was the property of the company and that the money in trust from the sale of the equipment should be paid to the liquidators – where the husband and wife claim that the equipment was the property of another company which habitually hired it to the first company – where the liquidators alternatively claims that if this is the case then upon the first company going into liquidation the equipment became the property of the liquidators pursuant to the provisions of Personal Property Securities Act because the second company did not have a registered security interest and the equipment was in the possession of the first company on the day it went into liquidation. |
| Legislation: Corporations Act 2001 (Cth), s.474 |
| Cases cited: Antmann & Antmann (1980) FLC 90-908 Richard Albarran and Blair Alexander Pleash as receivers and Managers of Maiden Civil (P & E) Pty Limited & Ors v Queensland Excavation Services Pty Ltd & Ors [2013] NSWSC 852 Stanford & Stanford (2012) FLC 518 |
| Applicant: | MS BERNARD |
| First Respondent: | MR BERNARD |
| Second Respondents: | MR TUCKER & MR KELLY AS JOINT AND SEVERAL LIQUIDATORS OF (BUSINESS OMITTED) PTY LIMITED |
| File Number: | NCC 408 of 2013 |
| Judgment of: | Judge Terry |
| Hearing date: | 29 August 2016 |
| Date of Last Submission: | 10 November 2016 |
| Delivered at: | Newcastle |
| Delivered on: | 20 September 2017 |
REPRESENTATION
| Counsel for the Applicant: | Mr Boyd |
| Solicitors for the Applicant: | Ferrys Law Firm |
| Counsel for the Respondent: | Mr Levick |
| Solicitors for the First Respondents: | Richardson Legal |
| Solicitors for the Second Respondents: | JHK Legal |
ORDERS
The wife shall within 60 days of the date hereof:
(i)Pay to the husband the sum of $2,047.00.
(ii)Refinance into her sole name the loans from (omitted) Bank secured over Property A being the whole of the land contained in Folio Identifier (omitted) (“the property”).
Contemporaneously with the wife complying with Order (1) the husband shall sign all documents and do all acts and things required to transfer to the wife at the expense of the wife the whole of his right title and interest in the property and the wife shall indemnify the husband and keep him indemnified from liability for all rates, taxes and outgoings owing in respect of the property.
If the wife fails to comply with Order (1) the parties shall do all acts and things required to sell the property and for that purpose:
(i)The property shall be listed for sale by private treaty with a real estate agent agreed between the parties and failing agreement as nominated by the President of the Real Estate Institute of NSW.
(ii)The listing price shall be the amount agreed between the parties and failing agreement as nominated by the agent.
(iii)The sale price shall be as agreed between the parties and failing agreement as nominated by the agent.
(iv)The parties shall co-operate in every way with the agent in making the key readily available and allowing inspection of the property at all times reasonably requested by the agent.
(v)Upon agreement being reached for sale of the property the parties shall execute the contract of sale and all other documents necessary to complete the sale including all transfer documentation forthwith upon its submission to them by the agent or their solicitor.
The proceeds of sale shall be utilised:
(i)To pay the costs, commissions and expenses of sale including any rates adjustments.
(ii)To pay (omitted) Bank the amount owing pursuant to the mortgages registered on the property.
(iii)To pay the balance as to 70% plus $62,625.50 to the wife and 30% less $62,625.50 to the husband.
Pending the sale of the property:
(i)The wife shall have the sole right to occupy the property.
(ii)The wife shall pay the outgoings on the property including rates, water rates and mortgage payments as they fall due.
The husband is declared the owner to the exclusion of the wife of the amount of $66,916.00 held in the Trust Account of Ferrys Law Firm and the wife shall authorise Ferrys Law Firm to do all acts and things required to pay the money to the husband.
If any amount is held in excess of $66,916.00 because the money has been invested the additional amount shall be paid as to 70% to the wife and 30% to the husband.
Each party is otherwise declared the owner of all assets and superannuation in their possession or under their control.
In the event that either party refuses or neglects or is unable to execute any instrument or document being an instrument or document the execution of which is provided for in these orders or is necessary to put into effect the provisions of these orders then at the request of the other party the Registrar of the Federal Circuit Court of Australia is hereby appointed pursuant to Section 106A to execute any such instrument or document in the name of the party refusing or neglecting or being unable to so execute the instrument or document.
The application of the Second Respondent is dismissed.
IT IS NOTED that publication of this judgment under the pseudonym Bernard & Bernard & Anor is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT NEWCASTLE |
NCC 408 of 2013
| MS BERNARD |
Applicant
And
| MR BERNARD |
First Respondent
And
| MR TUCKER & MR KELLY AS JOINT AND SEVERAL LIQUIDATORS OF (BUSINESS OMITTED) PTY LIMITED |
Second Respondents
REASONS FOR JUDGMENT
Introduction
These are property proceedings which originally involved only the husband and wife but expanded toward the end to involve the liquidators of a company. The liquidators claim that $66,916.00 held in the wife’s solicitors trust account, being the proceeds of sale of certain equipment, should be paid to them, either because the equipment was the property of the company when it went into liquidation or because it was in the possession of the company when it went into liquidation and vested in the liquidators by virtue of s. 267 of the Personal Property Securities Act.
The asset pool is modest and principally consists of the heavily encumbered former matrimonial home and if the liquidators claim is unsuccessful the money in trust.
The wife’s proposal was that she should receive 95% of the pool; 85% for contributions and 10% for s. 75(2) matters because of her primary care of the parties’ child.
This would involve the wife receiving:
a)The former matrimonial home subject to the mortgages registered over it.
b)The money in her solicitors Trust Account.
c)A superannuation splitting order.
It would leave the husband with almost nothing.
It was the wife’s case that this was fair because the (business omitted) business the parties operated during their relationship failed after separation, due to the fault of the husband and the husband should be held responsible for the financial consequences of that failure.
The husband proposed a 50/50 division on the basis of contributions and a 10% adjustment in the wife’s favour for s.75(2) matters. It was his case that it was not his fault that the business failed and that the parties should share the loss (if indeed there was one) arising from that.
The evidence
The husband relied on his affidavit and financial statement filed on 1 October 2015 and the affidavit of his mother Ms I also filed on 1 October 2015.
The wife relied on her affidavits filed on 23 September 2015, 8 July 2016 and 26 August 2016 and her financial statement filed on 22 September 2015.
The liquidators relied on an application in a case filed on 18 April 2016 and the affidavit of Mr Tucker filed on 8 July 2016. They also sought leave to rely on the affidavit of Ms K filed on 19 September 2016. The only purpose of this affidavit was to put before the court a company search of (business omitted) Pty Ltd and it will not cause any unfairness for the husband and wife if this affidavit is received.
The litigation history
The wife filed an application for a property settlement in February 2013 and for a series of reasons the matter has taken a long time to resolve.
The parties spent two years arguing about issues of valuation and disclosure.
The wife wished to have (business omitted) Pty Ltd ((business omitted)) and the (business omitted) Trust ((business omitted)) which were the entities associated with the (business omitted) business valued. Various orders were made for the husband to bring the financial accounts and taxation returns for the entities up to date to enable valuations to be done but he did not make any satisfactory progress with this.
On 5 December 2013, the wife out of frustration filed an application for the winding up of (business omitted) Pty Limited but she subsequently withdrew it.
Late in 2014, when it had become clear that the valuation process was going nowhere, the wife changed tack and began a campaign to get equipment habitually used by (business omitted) which she asserted was owned by (business omitted) sold.
On 7 November 2014, an order was made requiring the husband to prepare a list of the equipment and to deliver the equipment to (omitted business) for auction when requested to do so. He did not prepare the list nor was the equipment delivered to (omitted business) and on 10 April 2015 the wife sought and obtained an order appointing her trustee for sale of the equipment and it as subsequently delivered to (omitted business).
In the meantime, on 11 March 2015, an order had been made in the Supreme Court of Queensland placing (business omitted) into liquidation but this did not have any immediate impact on the litigation in this court.
The property proceedings were listed for final hearing on 12 & 13 October 2015. All of the available evidence was taken on those days but the hearing had to be adjourned because the equipment was still unsold.
On 21 December 2015 the equipment was auctioned and $66,916.00 net was realised and was placed into the wife’s solicitor’s trust account.
At or about this time however the liquidators of (business omitted) notified the parties that they claimed that the equipment belonged to them and in April 2016 they filed an application in a case seeking to intervene in the proceedings and an order was made joining them as the second respondents.
Further evidence was taken on 29 August 2016 and an order was then made for the parties to file written submissions. The last written submission was received on 10 November 2016.
I apologise to the parties for the delay in delivery of this decision, for which I can offer no excuse other than a choice to prioritise completing certain decisions over others.
Background
The parties’ commenced a relationship in late 2000, began living together in 2001, married on (omitted) 2002 and separated either on 26 August 2012 according to the wife and in January 2012 according to the husband. I prefer the wife’s evidence because in the husband’s 2012 income tax return he declared that he had a spouse for the full year 1 July 2011 to June 2012.[1]
[1]B 26 to the wife’s affidavit filed on 23 September 2015
The parties had a relationship/marriage of about 12 years and they have one child, X, who was born on (omitted) 2005.
When the parties met the wife owned Property A subject to a mortgage. After the parties commenced their relationship the husband paid a lump sum to reduce the loan secured against the property and it was transferred into joint names.
The wife was a self-employed (occupation omitted) throughout the relationship. She traded under the name “(omitted business)”.
The husband was working in his family’s (omitted) business as a store manager when the relationship commenced and he continued to do so for the next few years. However he was also in a band and in 2003 he commenced (business omitted) ((omitted)) with a view to providing (business omitted) for his band. In 2005 he left his employment with (business omitted) to devote himself full time to the business which had expanded to providing (business omitted) for a range of clients.
From its inception (business omitted) used the same ABN as (omitted business) and the evidence of both the husband and the wife was that equipment purchased for use by (business omitted) was purchased in the wife’s name and was hired by the wife to (business omitted) using an unregistered business name “(business omitted)”.
In 2008 (business omitted) Pty Limited ((business omitted)) was incorporated with the husband as the sole director and the husband and wife as shareholders. The evidence of both the husband and the wife was that after (business omitted) was incorporated the wife hired the equipment she owned to (business omitted).
In 2010 (business omitted) Pty Limited was incorporated as trustee of the (business omitted) Trust, a discretionary trust set up by a Deed dated 11 June 2010. The husband is the sole director and shareholder of (business omitted) Pty Ltd and is the Appointer of the Trust. The beneficiaries are the husband, the wife and their children.
The evidence of both the husband and the wife was that the wife transferred ownership of the (business omitted) equipment to the Trust and that thereafter (business omitted) hired the equipment from the Trust. It also hired equipment from other suppliers as needed.
Prior to the parties’ separation in 2012, the husband and wife were both involved in the (business omitted) business and they received a dividend from (business omitted) each financial year after it was set up.
Following separation the husband left Property A and began living at (omitted), variously described as his work premises or “the factory”. He continued to operate (business omitted) and he controlled the assets of (business omitted). The wife remained involved in the financial side of the businesses until about July 2013 when the husband shut her out of access to bank accounts.
It is unclear when (business omitted) ceased to trade but after it went into liquidation in March 2015, the husband obtained work in Sydney as an (occupation omitted).
The wife has lived in Property A since the parties separated in August 2012. She continues to work as a self-employed (occupation omitted) from a (business omitted) which was built at the home early in the parties’ relationship.
X has lived primarily with the wife since separation but has spent regular time with the husband and final parenting orders were made on the first day of the hearing regularising this arrangement.
The assets and liabilities
The husband and wife were largely agreed about the composition of the pool.
They agreed that the assets were as follows:
Description
Ownership
Value
Property A
Joint
$485,000.00
Proceeds of sale of (business omitted) equipment held in the wife’s solicitors Trust Account
Joint
$66,916.00
1632 (omitted) shares[2]
Wife
$8,470.00
Mitsubishi Motor Vehicle
Wife
$7,500.00
Trailer
Wife
$1,000.00
Household Contents
Wife
$10,000.00
Jewellery and camping equipment
Wife
$5,000.00
Mercedes (omitted)
Husband
$12,000.00
Total
$595,886.00
[2] Referred to by the parties as “Dividend Reinvestment Plan” but see wife’s Financial Statement part 38.
It was not suggested that the wife’s (omitted) business had an independent value.
The husband incorporated (business omitted) (NSW) Pty Limited on 19 September 2015. It was his case that this company had never traded and had no assets and it was not suggested that his shares in this company were an asset which should be included in the pool.
There was a dispute about the liabilities but I am satisfied that they are as follows:
Description
Ownership
Value
(omitted) Bank Home Loan
Joint
$62,859.00
(omitted) Business Loan
Joint
$206,566.00
Total
$269,425.00
The husband’s counsel submitted that two additional liabilities should be included: a debt of $6,425.64 which the husband owed to his parents and an amount of $16,292.00 owing on a (omitted) Bank Visa card.
The debt the husband allegedly owes to his parents is made up of $4,368.64 which his parents provided to enable him to complete payments in respect of a contract with a business called (omitted) and an amount of $2,057.00 they provided so that he could pay legal fees associated with a dispute over (omitted) equipment. The money was provided post-separation but the husband’s counsel said that this did not matter because the money was provided in connection with keeping the business going.
The wife’s counsel submitted that the debt was a post-separation debt and should not be included as a liability in which the wife must share.
I do not intend to include this alleged debt if for no other reason than because it is not clear to me on the evidence that the husband will be required to repay the money to his parents. I will however consider it again when making findings about s. 75(2) matters.
The husband’s counsel submitted that the amount owing on the (omitted) Bank credit card should be included because although the card was in the name of (business omitted), the court could take judicial notice of the fact that the husband had a potential (his word) liability with respect to the card as a result of the standard guarantee form which banks require directors to sign when giving credit cards to corporate entities.
The wife’s counsel submitted that the debt to (omitted) Bank should not be included as the card was in the name of (business omitted) and the debt would be dealt with in the liquidation.
I cannot include this debt in the pool on the flimsy evidence put forward by the husband and it is not even a matter I can take into account pursuant to s.75(2) given the nature of the submission and the non-existence of evidence in support of the contention that the husband might be pursued by (omitted) Bank.
The husband and wife agreed that the superannuation was as follows:
Description
Ownership
Value
(omitted) Super
Wife
$11,962.00
(omitted) Super
Husband
$29,377.00
Total
$41,339.00
On these figures the parties have net non-superannuation assets of $326,461.00 and superannuation of $41,339.00, a total of $367,800.00.
The liquidators claim
The liquidators claimed that the $66,916.00 in Ferry’s Trust Account, or alternatively the proportion of it attributable to the sale of some (business omitted) equipment, belonged to them.
There is no evidence of how much of the total amount received at the auction related to the (business omitted) equipment, as the equipment was sold as one lot but the Liquidators said that if their claim for the entire amount was unsuccessful they should be given the opportunity to put evidence before the court about the value of the (business omitted) equipment.
The liquidators put their claim on these bases:
i)The equipment sold on 22 December 2015 either in whole or as to the (business omitted) equipment was the property of (business omitted) and therefore upon the company going into liquidation, the equipment as a whole or alternatively, the (business omitted) equipment became the property of the liquidators by virtue of s.474 of the Corporations Act 2001 (Cth).
ii)To the extent that any of the equipment was owned by (business omitted) rather than by (business omitted), it was in the possession of (business omitted) on the day it went into liquidation pursuant to a hire agreement between (business omitted) and (business omitted). (business omitted) had not registered its security interest under the Personal Property Securities Act 2009 (Cth) and therefore pursuant to s. 267 of the PPSA on the day (business omitted) went into liquidation, the equipment became the property of the liquidator.[3]
[3] As discussed in Maiden Civil (P & E) Pty Limited & Ors v Queensland Excavation Services Pty Ltd & Ors [2013] NSWSC 852 the effect of this section is that where an owner fails to register a security interest a liquidator or a trustee in bankruptcy can end up with rights to property greater than the company in liquidation or the bankrupt had in it.
The liquidators said that they had considered the claim by the parties that all of the equipment was owned by (business omitted) but said that (business omitted) Pty Limited was deregistered on 2 November 2014 and that if it turned out that the equipment had previously been owned by (business omitted), then it had vested in ASIC as a result of the company being deregistered.
This argument does not of course assist the liquidators.
The wife’s counsel submitted that the equipment was owned by (business omitted) and that the liquidator’s claim should be dismissed. He submitted that the liquidators had not discharged the onus of establishing that a security interest attached to the equipment and that therefore their claim to the proceeds of sale of that equipment under the PPSA must fail.
The husband’s counsel submitted that save for the (business omitted) equipment, the equipment was owned by (business omitted). He submitted that the claim that (business omitted) owned the (business omitted) equipment was difficult to resist but that the claim should be dismissed as there was no evidence of the value of this equipment.
The husband’s counsel did not address the issue of whether the equipment was caught by the PPSA.
Finding about ownership of the equipment prior to 11 March 2015
Both the husband and the wife asserted that after (business omitted) was established in 2003, equipment was acquired in the wife’s name and the wife used an unregistered business name (business omitted) to compartmentalise ownership of the equipment from the day to day operation of (business omitted) and that (business omitted) hired the equipment from (business omitted).
The husband and wife both said that the husband initially purchased equipment using credit cards and money received for work done by (business omitted) but this does not undermine their claim that the equipment became the wife’s property; the business was operating under the wife’s ABN and the parties were husband and wife and in any event the liquidator’s solicitor tacitly accepted by the questions he asked the wife in cross-examination that the wife used the unregistered business name (business omitted) to hire equipment to (business omitted).
At some point the parties took out a business loan which was secured by a second mortgage over Property A which was drawn upon to purchase equipment and after (business omitted) was incorporated in July 2008, the wife put $80,000.00 which she had brought into the relationship into the (business omitted) business although exactly how it was used was not made clear.
The fact that there was no written hire agreement between (business omitted) and the wife does not detract from the case of the husband and wife that the wife owned the equipment. It is not uncommon in a family business to find that paperwork is absent and even in other work spheres there is not always a written agreement. Maiden Civil and QES, the protagonists in a case to which the liquidator’s Solicitor referred me in support of his claim that the PPSA applied, did not have a written lease agreement in respect of the Caterpillar owned by QES and hired to Maiden Civil.[4]
[4] Richard Albarran and Blair Alexander Pleash as receivers and Managers of Maiden Civil (P & E) Pty Limited & Ors v Queensland Excavation Services Pty Ltd & Ors [2013] NSWSC 852
The husband and wife said that after (business omitted) was incorporated in 2008, the same arrangement applied, with the equipment being owned by the wife and (business omitted) paying a hire fee.
The wife said that in 2010 she transferred ownership of the equipment to (business omitted). She could not produce a signed copy of the agreement but she produced an unsigned copy which she said and I accept was drawn up by her solicitor (who is also her solicitor in the family law proceedings). I am satisfied that her explanation for why a signed copy could not be located (that it was signed at the parties accountant’s office and that the accountant retained the document and had now ceased trading and the document could not be located) should be accepted.
That this transaction occurred is corroborated by the fact that the financial statements for (business omitted) for the 2011 and 2012 financial years show ownership of property to the value of $151,928.00 and $135,739.00 respectively. The (business omitted) accounts for 2011 and 2012 in contrast show ownership of plant and equipment worth $5,696.00 and $3,987.00 and in the depreciation schedule these are referred as being software and electrical equipment.
The wife was not paid for the equipment but the (business omitted) accounts show an amount of $149,774.00 owing to the wife as at 30 June 2011 and $169,773.00 as at 30 June 2012.
The (business omitted) financial statements for 2011 and 2012 show that it paid hire fees of $152,050.00 and $95,000.00 respectively to (business omitted). They also show that it paid hire fees to other suppliers.
The wife’s behaviour throughout the family law litigation prior to (business omitted) going into liquidation is consistent with her position that the equipment which was sold at auction was owned by (business omitted). On 12 July 2013, for example, an order was made by consent on her instigation that the husband be restrained from in any way dealing with the assets of (business omitted). No restraint was made in respect of (business omitted). On 13 February 2014, the husband was ordered to ensure that insurance was taken out for the equipment owned by (business omitted) and on 7 November 2014, an order was made that the parties arrange the sale of equipment owned by (business omitted).
During cross-examination on 29 August 2016, the solicitor for the liquidators asked the wife if she had copies of invoices confirming purchase of equipment in the name of either her business or (business omitted). The wife said that she did not have them with her but had them at home.
The liquidators’ solicitor was critical of the wife for not producing supporting documents at the hearing on 29 August 2016 but the wife exhibited to her 2015 trial affidavit and to her 25 March 2015 affidavit a list many pages long of the equipment which she said had been purchased and she included dates of purchase and the cost of items large and small which makes clear that source documents for the purchase of the equipment did exist.
The solicitor for the liquidators was aware of those affidavits prior to 29 August 2016. If he had wanted to investigate whether some name other than (business omitted) appeared on the documents, he could have issued a Notice to Produce prior to 29 August 2016 and he did not do so.
I do not consider that the wife’s failure to bring the source documents to court on 29 August 2016 should give rise to a suspicion that they show some other entity as purchaser rather than (business omitted).
I am conscious of the fact that in the first year after the equipment was transferred to (business omitted), the wife as (business omitted), continued to claim depreciation on the equipment or at least some of it but this does not undermine the case of the husband and wife that the equipment was not owned by (business omitted).
During cross-examination on 29 August 2016, the solicitor for the liquidators repeatedly put to the wife that the source of funds to purchase the equipment was (business omitted). The wife was firm in her evidence that (business omitted) generated the money yes but did not purchase the equipment and that (business omitted) paid a hire fee to (business omitted).
The wife’s evidence was that the amount (business omitted) paid by way of a “hire fee” was the amount required to meet the repayments on the second mortgage registered over Property A but that does not discredit the wife’s claim that (business omitted) did not own the equipment. In the Maiden Civil case, the payments Maiden Civil made to QES for the hire of earthmoving equipment was the amount that QES had to pay the supplier of the equipment plus a margin of 10%.
The wife agreed that (business omitted) paid to insure the equipment but this alone does not detract from the claim that (business omitted) was the owner of the equipment nor does the fact that there was no written hire agreement.
There is simply no evidence that any of the equipment which was purchased prior to the date of separation was owned by (business omitted).
After separation, the parties continued to cooperate to a degree in the operation of the businesses but the husband ran the businesses from the “factory” premises and had control of the money. He made decisions about the purchase of equipment and the situation becomes a little murkier in respect of equipment acquired after separation.
There was certainly evidence in the wife’s affidavit filed on 22 September 2015 of the purchase of equipment in the name of (business omitted) after separation. On 14 November 2012 an agreement was entered into between (omitted) a division of (omitted) Pty Ltd and “(business omitted). (omitted)/as (business omitted) Pty Ltd.” The last page of the document is a direct debit request. The name of the company authorising the request is given as (business omitted) Pty Limited and the account to be debited is an account in the name of (business omitted) Pty Ltd.[5]
[5] Annexure B 11 to the wife’s affidavit filed on 22 September 2015. The date of 2014 on the 1st page of the agreement appears to be in error.
In the trial affidavit which he filed well before the liquidators advised that they were making a claim to the equipment sold at auction, the husband refers to this purchase and refers to it as a purchase by (business omitted).[6]
[6] Husband’s affidavit paragraph 44
The liquidators’ solicitor submitted that regardless of anything else there was clear evidence that (business omitted) was the owner of equipment purchased in late August 2012 known as “(business omitted) and (omitted).” It was listed as Lots 7 & 8 in the (business omitted) Auction Catalogue.
In support of this claim, the liquidator said that there was an invoice for $27,500.00 from (omitted) indicating that the equipment had been sold to (business omitted), and this equipment is listed in the depreciation schedule attached to (business omitted) Financial Statements for the year ending 30 June 2013 which were tendered at trial by the wife’s solicitor and are also attached to Mr Tucker’s affidavit.
The situation is by no means uncomplicated, however, because on 20 March 2013 a $1,000.00 part payment was made to (omitted) from the (business omitted) account. No other payments were made to (omitted) in respect of this equipment.
Given the pattern of the parties purchasing equipment in the name of (business omitted), both prior to and after separation and given that the only evidence of any payment for the (omitted) equipment is a payment from the (business omitted) account, I would not be satisfied on the basis of the invoice alone that this equipment, alone of all the other equipment, was purchased by (business omitted).
However on 4 September 2013, the husband was instrumental in a Deed of Settlement being entered into between (omitted) and (business omitted) in which (business omitted) agreed to pay (omitted) $26,500.00 for this equipment. The husband paid this amount partially utilising a loan from his mother.
I do not see how I can go behind this Deed and find that the (business omitted) Equipment was owned by (business omitted).
The preponderance of the evidence causes me to be satisfied on the balance of probabilities, that the equipment which was sold on 22 December 2015 save for the (business omitted) equipment, was owned by (business omitted). The fact that (business omitted) advertised the equipment as belonging to (business omitted) when promoting the auction (not, I note, (business omitted)), could as well be a marketing tool as a reference to ownership if it was not a misunderstanding, and the fact that the husband had a document prepared by Liquid Asset Management in February 2015 called “Summary of Values” which refers to the equipment he decided to include in the list as belonging to (business omitted), does not undermine this conclusion. Absent the (business omitted) equipment, none of the equipment ever appeared on any depreciation schedule for (business omitted).
What to do about the (business omitted) equipment
The wife alleged that on the basis of depreciation, the (business omitted) equipment was worth between $3,719.00 and $6,109.00 at time of sale. She also submitted that its write down value was in the vicinity of $8,500.00. Even if this is treated as some evidence of value because it is an admission against interest, it does not provide evidence of the market value of the (business omitted) when it was sold.
The husband’s counsel submitted that the liquidators’ claim in respect of the (business omitted) Equipment must fail because the liquidators put forward no evidence about the value of the equipment.
In the second respondent’s written submissions, the solicitor for the liquidators said that if the court decided that only the (business omitted) equipment had vested in the Second Respondents, a formal valuation could be obtained from an independent valuer to determine the market value of the equipment.
However there is a very exact description of the (business omitted) equipment in the material and the liquidators could have obtained evidence of its market value to put before the court at the hearing on 29 August 2016. They had no reason to believe as a result of any order I made that they would be able to place further evidence before the court about the value of the equipment if they did not do so by 29 August 2016 and in my view as a result the liquidators claim must fail.
The claim under the Personal Property Securities Act
The liquidators solicitor submitted that even if the court was satisfied that the equipment was owned by (business omitted), it was in the possession of (business omitted) pursuant to a hire agreement on the day (business omitted) went into liquidation and therefore on that day pursuant to s.267(2) of the PPSA the equipment vested in the Liquidators.
The difficulty for the liquidators is that they made absolutely no effort to establish that as at 11 March 2015 the equipment was in the possession of (business omitted) as opposed to (business omitted).
In the case of Maiden Civil the equipment in question was being used by Maiden Civil on a work site. QES, an unrelated company, went to the site after the day on which Maiden Civil went into liquidation and took possession of the equipment but it had clearly been in the possession of Maiden Civil on the day Maiden Civil went into liquidation.
In the case before me the husband controlled both (business omitted) and (business omitted) and operated them both from the same premises. No attempt was made by the solicitor for the liquidators to examine who had possession of the equipment on 11 March 2015. The solicitor for the liquidators did not require the husband for cross-examination and the wife was not asked how the hire agreement had historically worked. It might have been the case for example that the equipment was in the possession of (business omitted) until (business omitted) required it for a job and that once the job was done the equipment was brought back and was then in the possession of (business omitted) until next required for a job. It might have been that there was no precise delineation of what occurred but I do not know because nobody asked the questions.
It was important for the solicitor for the liquidators clarify this issue because in his affidavit filed on 1 October 2015 the husband said as follows:
By October/November 2014 it had become obvious to me that there was no point trying to save the business, and that the better course of action, rather than obtain the valuation, would simply be to sell the plant and equipment and wind up (business omitted). This proposal was put to Ms Bernard’s solicitors on 3 November 2014 and an order made accordingly on 7 November 2014.[7]
[7] Husband’s affidavit paragraph 54
The 7 November 2014 order required the husband to prepare an inventory of all equipment in the possession of the husband or (business omitted) Pty Ltd and when required deliver it to (business omitted) for Auction.
It is not clear on the state of the evidence that (business omitted) was still trading on 7 November 2014 or on any later date prior to 11 March 2015 or that it had any of the equipment in its possession on the day it went into liquidation. A bare assertion by Mr Tucker in an affidavit is not evidence that (business omitted) had the equipment in question in its possession on 11 March 2015.
The liquidators have not discharged the onus of establishing a claim under the PPSA.
For the above reasons I intend to dismiss the liquidators claim and the amount of the amount of $66,916.00 will remain in the pool available for distribution between the husband and the wife.
The applicable law
S.79 (1) of the Family Law Act 1975 empowers the court to make such orders as it considers appropriate altering the parties’ interests in property.
S.79 (2) provides that the court shall not make an order under this section unless it considers that it would be just and equitable to do so.
In Stanford & Stanford[8] the High Court stressed that when an application for a property settlement was made the court must first identify the parties interests in property and then consider whether it was just and equitable to make an order altering those interests. It stressed that this question could not be answered simply by considering whether a party had made contributions as set out in s. 79(4) of the Family Law Act.
[8] Stanford & Stanford (2012) FLC 518
Both parties asked the court to make orders adjusting their interests in property and it is just and equitable that I do so. The parties are separated and can no longer jointly enjoy the use of the former matrimonial home or any other assets.
I intend to take the usual steps to resolve the question of what particular alteration of interests would be just and equitable and those steps are:
i)to assess the contributions of the parties under s79(4)(a), (b) and (c) and to express those contributions as a percentage;
ii)to consider the matters in s.79(4)(d), (e), (f) and (g), which includes the matters in s.75(2) so far as they are relevant, and determine whether any adjustment should be made as a result to the contribution based entitlements;
iii)to consider the effect of those findings and resolve what orders are just and equitable in all the circumstances of the case.
Contributions
Basis of the assessment
The parties have superannuation and non-superannuation assets. Both counsel made submissions on the basis that there should be a global assessment of contributions.
I agree that this is appropriate. The superannuation comprises only about 10% of the pool and there is very little evidence about the acquisition of superannuation as a separate item. The husband said that he had superannuation when the relationship commenced but he did not know how much and there was no evidence about post-separation acquisition of superannuation.
Initial contributions
At the commencement of cohabitation the wife owned Property A subject to a mortgage and it had equity of $17,000.00 according to the husband and $27,000.00 according to the wife. She also owned a motor vehicle and had $80,000.00 from the proceeds of an earlier property settlement.
The wife was trading as “(omitted business)” but did not assert that the business had a value as such.
At or about the commencement of cohabitation the husband had $75,000.00 from the sale of a property. By agreement between the parties he used this to reduce the mortgage secured over Property A and on 22 November 2001 Property A was transferred into joint names.
The husband said that he also had superannuation but put “NK” next to that item in his affidavit.
The parties used the additional equity created by use of the husband’s $75,000.00 to pay for renovations and improvements to Property A including the construction of a (business omitted).
The wife worked as a self-employed (occupation omitted) throughout the relationship. She also worked as a (occupation omitted) at a (employer omitted) for two years.
The husband worked at (business omitted) as a store manager for the first four years of the relationship. However he was also in a band “(omitted)” and in 2003 he commenced (business omitted) with a view to providing (business omitted) for his band. As noted above, I accept that the equipment was purchased in the wife’s name and hired to (business omitted).
In 2005 the husband left (business omitted) and for the remainder of the marriage he was engaged full time in operating (business omitted) and later (business omitted). The business provided (business omitted) for (omitted).
At some time after (business omitted) commenced the wife took control of the money side of the business.
At the inception of (business omitted) the husband used income from the band and credit cards to purchase the equipment. However in due course the parties took out a second mortgage on Property A which was used to fund the purchases.
In 2010, (business omitted) Pty Limited was incorporated as trustee for the (business omitted) Trust. In 2010 the equipment owned by the wife was transferred to (business omitted).
When the parties separated in 2012, they were both involved in (business omitted). The husband was doing the day to day work of providing and setting up equipment at sites and the wife did the books.
In her affidavit the wife alleged that the husband made irresponsible decisions about purchasing equipment during the relationship but she was fully involved in the joint enterprise. She agreed to the 2nd mortgage being registered over the home and her counsel conceded in submissions that she could not now complain about the husband’s actions during the relationship.
In his trial affidavit the husband said that in 2009 he received an inheritance of $20,000.00 upon the death of his grandfather which he used to buy the Mercedes (omitted) which is in the pool. The wife’s counsel did not refer to this in submissions but there was nothing to suggest that it was in dispute.
The wife did not address in her affidavit the issue of who carried out parenting and homemaker tasks. The husband said that the duties were shared more or less equally.
In cross-examination, the husband agreed that he was sometimes away from home in connection with work or performing with his band and his mother Ms I also gave evidence to this effect. The wife worked from home and I am satisfied on the balance of probabilities that she carried out the majority of the homemaking and parenting tasks.
Post Separation Matters
The wife remained at Property A after separation and made the payments on the first mortgage. She does not get credit for that because she also had occupation of the property to the exclusion of the husband.
The husband continued to operate (business omitted) and the expectation was that he would pay the second mortgage which secured the business loan. He was not reliable in doing so and on 12 July 2013 an order was made that he meet the repayments for the second mortgage until further order. He made some payments but ceased doing so on 22 February 2014.
The wife thereafter made the payments on the second mortgage as well as the first.
This is a relevant matter but I prefer to consider it in the context of determining what to do about the whole issue of the failure of (business omitted) which I will do when considering whether there are any relevant s.75(2) matters.
A post-separation matter which is relevant is that the wife had the primary care of X and from August 2012 to March 2014 the husband did not pay any child support. Between April 2014 and September 2015 he paid $1,097.00, the equivalent of $14.80 per week.
When the trial commenced he was assessed to pay $21.00 per week.
The wife said that the husband had also failed to stand by an agreement to pay half of the child’s orthodontic fees of $9,000.00 and fees for extra-curricular activities.
The husband has spent time with X since separation but the financial support of the child has fallen either exclusively or to a very large extent on the wife and in my view this is something which must be taken into account in assessing contributions.
Conclusion about contributions
The husband’s counsel submitted that contributions should be assessed as equal. He submitted that there was little difference in the party’s initial contributions, that weight must be given to the husband’s inheritance and that there were no relevant post-separation matters.
The wife’s counsel submitted that contributions should be assessed as 80/20 or 85/25 in the wife’s favour.
He submitted that contributions to the date of separation favoured the wife. He said that the wife had assets to the value of $120,000.00 at the commencement of cohabitation and the husband had $75,000.00 which meant that initial contributions favoured her and that she should receive credit for her superior home-maker and parenting contributions which justified a 10% adjustment on their own.
He submitted that the wife’s post-separation care of X and her payment of the second mortgage should result in a further adjustment in her favour.
There are flaws in this argument. There is merit in the submission by the husband’s counsel that when the husband’s inheritance is added into the mix the overall “special” monetary contributions by the parties are not disparate, and although it is likely that the wife did more of the homemaker and parenting tasks the situation was no different to that in many relationships where each party did more than the other in a particular sphere based on their aptitudes and availability. Finally as indicated earlier I do not intend to take the wife’s payment of the second mortgage into account as a contribution matter.
The wife’s financial responsibility for X post-separation is a relevant matter. She is not a high income earner and she assumed financial responsibility for X for three years post-separation with either no or limited assistance from the husband. It cannot however justify a 30 or 35% adjustment in the wife’s favour.
The pool is worth $367,800.00. I assess contributions as 55% by the wife and 45% by the husband. A 5% adjustment gives the wife an additional $18,390.00 ($6.000.00 a year and little enough).
This would entitle the wife to assets to the value of $202,290.00 and the husband to assets to the value of $165,510.00.
S. 79(4) (d) (e) (f) and (g) matters
I am required to consider the matters in s. 79(4) (d) (e) (f) and (g) of the Family Law Act.
The wife operates her (omitted) business from home and if the home has to be sold because the wife cannot refinance the mortgages she will lose her (business omitted). However the wife did not mention this or put forward any evidence about the impact of this on her earning capacity and s. 79(4) (d) is therefore not relevant.
S.79(4)(f) is not relevant and as for s.79(4)(g), I have taken past payment of child support into account in assessing contributions and will consider the issue of future child support pursuant to s. 75(2)(na).
The only relevant subsection is (e) which requires me to have regard to the matters in s.75(2).
S.75(2) matters
The wife is 46 and did not suggest that she had any health issues.
The wife is a (occupation omitted) by occupation and as at 23 September 2015 claimed that she was earning $20,072.00 per annum.[9]
[9] In her financial statement the wife said that her income was $270.00 per week and the business was paying outgoings of $116.00 per week.
The husband’s counsel submitted that the wife was in receipt of income of $707.55 per week or $36,792.00 per annum but this is the total income she declared including government benefits of $321.55.
The husband alleged that the wife had historically received cash from the (business omitted) business which she did not declare to the ATO. On the state of the evidence, I cannot determine that this is correct and even if I accepted it as a broad general proposition, there was no evidence which would allow me to estimate how much additional income the wife might be receiving now. The husband gave evidence about cash in an envelope but even if it was open to me to find that this existed during the relationship the parties operated more than one business and it does not help me fix on the income for the (omitted) business.
The husband’s counsel submitted that I could take into account that the wife’s identified expenditure exceeded $700.00 per week which must mean that she was earning more than $700.00 per week but he did not refer to evidence in support of this submission.
I cannot find that the wife is receiving undeclared cash but at the same time it is not clear on the evidence why a person of the wife’s age and with the wife’s energy and qualifications should be limited to earning $20,000.00 per annum. I cannot accept that this is the limit of her earning capacity.
On the basis of contributions the wife is entitled to assets to the value of $202,290.00.
The wife does not have any other assets. She may well have unpaid legal fees.
There was no evidence that the wife had re-partnered.
Pursuant to parenting orders made by consent on 12 October 2015, the wife has the primary care of X who is 12. X spends time with the husband each alternate weekend, each Wednesday overnight to Thursday and for half of the school holidays.
In October 2015 the husband was still only paying $21.00 per week child support. This should have improved now as a result of the husband’s employment but if he is still earning $60,000.00 it is likely that the wife continues to be responsible for considerably more than 50% of X’s financial needs.
The husband is 46. He did not suggest that he had any health issues and there was no evidence that he had re-partnered.
The husband is employed by (employer omitted) as an (occupation omitted) and in September 2015 he was earning approximately $60,000.00 per annum. He said that he had been working in this position for 6 months which would mean that he commenced it at the same time that (business omitted) went into liquidation.
On the basis of contributions the husband is entitled to $165,510.00.
The husband does not have any assets not included in the pool but he does have a potential liability. On 24 September 2015 just before the hearing commenced he entered into a loan agreement with his parents to repay $71,190.00 and any future advances they made to him. The debt is repayable on demand.
Ms I said in her affidavit that she and her husband had advanced the husband $39,258.56 to pay legal fees in respect of the family law matter as well as money to pay business debts and living expenses.
There is no clear evidence about if and when the husband’s parents will require repayment of the debt. The mere fact that a loan agreement has been drawn up (especially one hastily drawn up days before a hearing) does not establish that repayment will be required. The husband’s mother said that she and her husband were self-funded retirees and needed and expected to be repaid but it is a family debt and there was no evidence of pressing need.
I could not have regard to the majority of this alleged debt as something sounding in the husband’s favour in assessing s.75(2) matters in any event because it relates either to legal fees or to living expenses including payment of rent, toll fines and other fines. The wife has her own legal fees and has had to pay her own living expenses since separation and there is no reason why she should indirectly contribute to the husband’s by way of his debt to his parents being taken into account as a s.75(2) matter.
The only potentially relevant part of the alleged debt is the money the husband’s parents advanced to help him pay the debts of (business omitted) and whether that is taken into account depends on an assessment of whether the parties should share in the consequences of the failure of (business omitted).
S.75(2)(o) requires me to take into account any matter which the court considers the justice of the case requires be taken into account and the wife asked me to take into account that under the husband’s watch (business omitted) began to be chased by creditors, failed to generate sufficient income to pay the second mortgage and ultimately went into liquidation and was rendered worthless.
The husband’s counsel referred me to Browne & Green[10] in support of the proposition that the parties should share the consequences of the failure of (business omitted) equally but the facts in Browne & Green are very different to the facts in this case. In Browne & Green a business which the parties operated together failed during the relationship. The Full Court held that it would be unjust if the loss which resulted fell solely on the husband who was the primary driver of the business.
[10] Browne & Green (1999) FLC 92-873
(business omitted) did not fail until well after the relationship ended and it failed when it was in the husband’s hands.
In Antmann & Antmann the husband was held responsible for losses associated with the closure of a business after separation but the evidence in that case established that the business had been operating profitably prior to separation and that the husband closed the doors post-separation in a fit of pique and commenced running a similar business in his own name.
Nothing so stark happened in this case but other conduct can lead to one party bearing the consequences of monetary loss to the exclusion of the other. In Kowaliw & Kowaliw Baker J said as follows:
Marriage is for most couples an economic partnership. Married couples live together and work together with the ultimate object of purchasing a home, paying it off, acquiring other assets with the overall object of attaining a higher standard of living. The reported decisions in respect of applications for settlement of property under sec. 79 of the Act are unanimous that both parties should share the economic fruits of a marriage, having regard to the provisions of sec. 79(4) and sec. 75(2), although not necessarily equally.
Is not, however, the converse equally sustainable? In other words, should not financial losses incurred by parties to a marriage or either of them, whether incurred jointly or severally, be shared by them in the same manner as the financial gains?
As a statement of general principle. I am firmly of the view that financial losses incurred by parties or either of them in the course of a marriage whether such losses result from a joint or several liability, should be shared by them (although not necessarily equally) except in the following circumstances:
(a) where one of the parties has embarked upon a course of conduct designed to reduce or minimise the effective value or worth of matrimonial assets, or
(b) where one of the parties has acted recklessly, negligently or wantonly with matrimonial assets, the overall effect of which has reduced or minimised their value.
Conduct of the kind referred to in para. (a) and (b) above having economic consequences is clearly in my view relevant under sec. 75(2)(o) to applications for settlement of property instituted under the provisions of sec. 79.[11]
[11] Kowaliw & Kowaliw (1981) 91-092
I need to carefully consider the evidence to decide whether the husband’s conduct in this case has implications for the overall outcome.
After the husband left the former matrimonial home he continued to run (business omitted) as he had before but the wife also continued to have a role. She had access to the bank accounts of the two companies and she continued to pay suppliers and pay wages. There is evidence in emails she attached to her affidavit of her complaining that there was not sufficient money to pay amounts required.
In about June 2013 however the husband ceased using the previous bank accounts and opened accounts only he could access.
The wife said that examination of the bank statements indicated that prior to March 2013 some money was going into the (business omitted) account but that then ceased. She said that normally about $35,000.00 per month would be banked but after April 2013 no money was paid into the (business omitted) and (business omitted) bank accounts.
The wife asserted that normally there would have been sufficient money going into the accounts to pay the (omitted) Bank business loan and to pay the debts owed for equipment which had been purchased. I have no reason to doubt this evidence; there was nothing to suggest that prior to separation (business omitted) or the parties were in financial difficulties.
However after separation the husband was chased by creditors and eventually ceased paying the second mortgage.
On 12 July 2013 the husband was ordered by this court to pay the instalments of $1,392.00 for the second mortgage as they fell due. Between the date of that order and January 2014 taking into account both payments and withdrawals he paid net $258.00.
In September 2013 the husband was pursued by (omitted) over payment for some equipment and he had to borrow money from his mother to settle the debt.
By late 2014 on the husband’s own evidence he had given up on making a success of (business omitted) and in March 2015 it was placed into liquidation.
As well as being aggrieved about what happened to the business post-separation, the wife is also aggrieved about the husband’s co-operation with disclosure and valuation.
On 10 December 2013, the husband was ordered to provide documents to the accountant by 10 December 2013 to allow preparation of financial statements and tax returns for the companies. He did not comply with the order.
On 13 February 2014, the matter was adjourned to 21 March 2014 noting that the husband still had not complied with the order.
In the end, an order for the valuation of (business omitted) and (business omitted) by (omitted) Forensic Accounting could not be carried out because information was missing including value of the equipment. Only a portion of the fees paid to (omitted) Forensic Accounting by the parties was returned to them.
On 7 November 2014, the husband was ordered to provide an inventory of equipment stock fittings and fixtures owned by or in control of (business omitted) or (business omitted). He did not provide an inventory until 19 March 2015 (after the date on which (business omitted) was placed into liquidation) when he provided a report by Liquid Asset Management which the wife said and I accept was an incomplete list of the equipment.
The husband’s case was that he was not to blame for the failure of (business omitted). He said that after separation the wife did not attend to payment of accounts and was generally difficult about financial matters. He said that as a result at the beginning of June 2013 he opened a new bank account for (business omitted).
The husband alleged that he had difficulty running the business properly because of interference by the wife in not re-directing mail, not co-operating so that he could obtain an updated console from (omitted) and obtaining orders from the court which meant that he could not replace old stock with new stock.
The husband said that he did not promptly provide information to the accountant as required by court order because he was stressed and busy and also because he was a novice at doing this because the wife had historically attended to financial matters.
The husband said that he had difficulty complying with the order about compiling an inventory of the equipment in 2014 because it was a time consuming task and he was busy. He also said that he was suffering from anxiety for which he sought counselling.
Some of the husband’s conduct such as not providing information by the dates required by court orders necessitating repeated mentions will be a matter for a costs application if one is made. However I do not consider that the situation is one where the only implication of the husband’s post-separation conduct is a potential costs order. I am satisfied as a broad general proposition that the husband’s conduct in respect of the business is a relevant s. 75(2) (o) matter.
The husband had control of the business from separation and he did not keep the wife informed about what was happening with it. Had he complied with orders about providing information for the preparation of tax returns and financial statements then the wife would have been aware at a much earlier stage of the state of the business and about whether it was in financial difficulties and she could have taken appropriate steps. As it was the husband dragged out the provision of information until the company went into liquidation.
When the 2013 financial statements and returns were finally produced it transpired that (business omitted) made a loss of $78,000.00 in the 2012-2013 financial year. This was in stark contrast to the years from 2009 to 2013 inclusive when it either made a very small profit or a very small loss. The wife attached to her 23 September 2015 affidavit the financial statements and tax returns for (business omitted) for 2010, 2011 and 2012 and the financial statements include the 2009 figures. (business omitted) made a loss of $4,734.40 in 2009, a profit of $3,771.60 in 2010, a profit of $318.00 in 2011 and a loss of $2,209 in 2012.
The wife’s actions in seeking court orders restraining the husband from disposing of assets and requiring provision of information ought not in themselves to have led to the failure of (business omitted). Orders such as these are commonly made after parties separate and orders are usually made so as to allow a business to continue to operate but also protect the other party from dissipation of assets. If the husband felt that the orders made in this case were unduly restrictive, he could have negotiated through his solicitors to resolve the situation. There was no evidence to support a finding that the wife interfered in other ways with the running of the business.
There was no evidence that the husband had hidden assets, in other words that he had syphoned off money from the business, and there was no evidence that he deliberately ran the business down. However he took control of it to the exclusion of the wife, he shut the wife out of the business bank accounts so that she could not see what was going on and take remedial steps if appropriate and he failed to keep the returns up to date thus also hiding from the wife what was going on with the business.
In my view the husband’s conduct is a matter I should take into account as a s.75(2)(o) matter but to determine how to do so I need to carefully consider what the consequences of the failure of (business omitted) were.
There is nothing to suggest that at the time of separation it is likely that (business omitted) had an independent value as a going concern. People can derive benefits from companies which are not always apparent from looking at the financial statements but an accountant asked to value the company would have looked at the financial statements and the parties’ received distributions from (business omitted), and after it was created in 2010 from (business omitted) Trust, in the vicinity of $40,000.00 each at best on the papers I have and $11,000.00 and $15,000.00 respectively.
(business omitted) did not have a patent or any special expertise and there was no evidence that the value of its name in its chosen marketplace might have made it a saleable entity.
It is possible that the parties lost money as a result of the (business omitted) equipment being sold at auction following the failure of (business omitted), in effect by a forced sale, but there is no evidence which allow me to confirm this or quantify the loss.
The business loan is certainly large but at separation it already stood at over $200,000.00. While the parties were together and (business omitted) was running smoothly, the parties were meeting the second mortgage repayments but there is nothing to suggest that if (business omitted) had continued to trade after separation as it had in the past that this debt would have magically gone away or been substantially reduced.
The husband has already borne some of the consequences of the way he managed the business after separation in that he had to borrow money from his parents to pay a debt. The wife was not required to contribute to that.
However the wife has undoubtedly suffered a loss as a result of the failure of (business omitted).
After the end of the 2012 financial year the wife did not get any return on her contribution to the operation of the business while she continued to be involved in it or from the use of the equipment owned by (business omitted) as she had in previous years. I cannot quantify this loss but I can have regard to the fact that the wife received a distribution of $41,643.00 from the Trust in 2011 and received a distribution of $11,360.00 in 2012. Averaging these amounts in order to do the best I can the wife could potentially have received $79,500.00 return on her investment if the husband had continued to work the business as it had been worked in the past.
However the wife received no distributions and she was left to primarily support X on a much reduced income.
As a result of the decline and fall of (business omitted), the wife was left with the responsibility to pay the second mortgage. She said that she had made payments totalling $33,000.00 to the commencement of the hearing in August 2016.[12] She did not address the issue of the extent to which she used the $10,000.00 lump sum which the husband paid into the mortgage in early 2014 which she promptly withdrew to help her make these payments and in the absence of the wife clarifying this I need to reduce her direct mortgage payments to $23,000.00.
[12] Wife’s affidavit paragraph 36
The wife was also instrumental in arranging for the sale of the equipment. She was not challenged about her evidence that she spent 92 hours cataloguing the equipment and travelled to and from the premises of (business omitted) to prepare for the sale and assist in the compilation of an inventory list.
Conclusion about s.75(2) matters
There is no doubt that there should be an adjustment in the wife’s favour for s.75(2) matters. The relevant matters are the disparity in the parties’ income earning capacity, the wife’s care of X and the s.75(2)(o) finding.
The decided cases make it clear that ordinarily there should be a global adjustment for s.75(2) matters and not an adjustment for various s.75(2) matters which are then added together. However in this particular case, I consider that I need to deal with the quite disparate issues of the income earning disparity and the care of X on the one hand and the s.75(2)(o) matter on the other separately although of course, I will need to step back at the end and ensure that the overall outcome is just and equitable.
In respect of the s.75(2)(o) issue, I am satisfied that taking into account matters I can put a dollar figure on and matters I cannot and bearing in mind the size of the pool and the need for proportionality, that there should be a 10% adjustment in the wife’s favour.
This gives the wife an additional $36,780.00 and creates a disparity of $73,560.00 between the parties which is well justified by the loss of return on her investment in the equipment from 2013 to 2015, the second mortgage repayments she made and the effort she put into preserving and selling the equipment when the husband sat back and did little.
This entitles the wife to assets to the value of $239,070.00 and the husband to assets to the value of $128,730.00 and it is against this background that I need to consider whether there should be any further adjustment because of the remaining s.75(2) issues which favour the wife, the disparity between the parties incomes and the wife’s care of X.
There is undoubtedly an income disparity between the parties. The wife should be capable of earning more income than she declared she was earning in September 2015 but there was no historical evidence which suggested that she was likely to earn as much as the husband in the future. She will feel the loss of the (business omitted) business, which provided her with an additional income stream, much more keenly than him.
The wife also has the primary care of X. He is 12 and the wife could have a further 6 plus years care of him before he finishes school. Even if the husband is now paying a more reasonable level of child support, the following passage from Clauson & Clauson is relevant:
In this case the husband is paying substantial child support and there is no suggestion that he will not continue to do so. It is thus a significant factor which the Court should take into account in favour of the husband.
But the other section 75(2) factors are significant. In addition, it should not be forgotten that the payment of child support in no way compensates the custodial parent for the loss of career opportunity, lack of employment mobility and the restriction on an independent lifestyle which the obligation to care for children usually entails: see Langford (16 January, 1995, Full Court, not reported). [13]
[13] Clauson & Clauson (1995) FLC 92-595
The husband proposed a 10% adjustment for non-75(2)(o) matters which creates a differential of $73,614.00 between the parties’ entitlements but this was on the back of an equal finding about contributions and no adjustment arising out of the husband’s conduct of the business.
The pool is modest and I am not comfortable with making a further 10% adjustment which will leave the husband with little in addition to his superannuation. The parties had a 12 year relationship and they each worked hard within that period and it is just and equitable that the husband should emerge with something from those years of effort.
I intend to make a further 5% adjustment in the wife’s favour which will result in her receiving 70% of the pool or $257,460.00 overall and the husband receiving $110,340.00.
The wife will receive the following:
Description
Value
Property A
$485,000.00
(omitted) Shares
$8,470.00
Mitsubishi Motor Vehicle
$7,500.00
Trailer
$1,000.00
Household Contents
$10,000.00
Jewellery
$5,000.00
(omitted) Super
$11,962.00
Less mortgages secured over the home
($269,425.00)
Payment to husband
($2,047.00)
Total
$257,460.00
The husband will receive:
Mercedes (omitted)
$12,000.00
(omitted) Superannuation
$29,377.00
Money in trust
$66,916.00
Payment from wife
$2,047.00
Total
$110,340.00
I am conscious of the fact that the husband will not be left with much out of these proceedings except for superannuation if he chooses to repay his parents and I am conscious of the fact that he is receiving a slightly larger percentage of his entitlement as superannuation than is the wife but I am satisfied for all of the reasons outlined above that the outcome is just and equitable.
In his Amended Response filed on 1 October 2015 the husband sought an order that he wind up (business omitted) Pty Limited and that the money in trust be used to pay the costs of the winding up. No information was provided about what those costs were likely to be.
I do not intend to make that order. If the husband wishes to wind up (business omitted), that is a matter for him and he will have to bear the costs.
The husband is the sole director and shareholder of (business omitted) Pty Limited and if there are any issues with the ATO because of loan accounts or other activities of the company then he will have to accept responsibility for them.
In written submissions, the wife’s counsel flagged that the wife intended to apply for costs given the husband’s conduct during the proceedings and that she intended to pursue an order for her costs in respect of seven court events where her costs were reserved.
The issue of costs can only properly be dealt with after the wife provides detail of the amount she is seeking and both parties have an opportunity to make submissions. I do not intend to make an order for costs at this point but under the Federal Circuit Court Rules the wife has 28 days to make an application.
For all of the above reasons the orders of the court will be as set out at the beginning of this judgment.
I certify that the preceding two hundred and twenty (220) paragraphs are a true copy of the reasons for judgment of Judge Terry
Date: 20 September 2017
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