Cato and Cato (No. 2)
[2012] FamCA 769
FAMILY COURT OF AUSTRALIA
| CATO & CATO (NO. 2) | [2012] FamCA 769 |
| FAMILY LAW - PROPERTY– Application by the wife for property orders – Where the wife was self-represented – Where the wife argued that funds existed which were unaccounted for – Where there the wife’s argument failed – Whether funds should be notionally added back to the property pool – Where there is no principled basis for doing so – Assessment of the contribution of the parties – Initial contributions – Contributions favour husband 56 per cent compared to wife’s 44 per cent – Consideration of factors under s 79 and s 75(2) of the Family Law Act 1975 (Cth) – Where husband has significant earning income – Where husband’s application that wife take a portion of her entitlement in superannuation refused - Where an adjustment pursuant to s 75(2) of 14 per cent to the wife is appropriate. |
| Family Law Act 1975 (Cth): ss 79; 75(2); 79(4) and 79(2) |
| Bell & Bell [2000] FamCA 1301 Cerini [1998] FamCA 143 Farmer & Bramley (2000) FLC 93-060 In the Marriage of Lee Steere and Lee Steere (1985) FLC 91-626 In the Marriage of Ferraro (1993) FLC 92-335 In the Marriage of Clauson (1995) FLC 92-595 Kelly & Kelly(No. 2) (1981) FLC 91-108 Kowaliw & Kowaliw (1981) FLC 91-092 Marker& Marker[1998] FamCA 42 Norbis v Norbis (1986) 161 CLR 513 Pierce & Pierce (1999) FLC 92-844 Tomasetti & Tomasetti (2000) FLC 93-023 Townsend & Townsend (1995) FLC 92-569 Waters & Jurak (1995) FLC 92-635 |
| APPLICANT: | Ms Cato |
| RESPONDENT: | Mr Cato |
| FILE NUMBER: | SYC | 7191 | of | 2008 |
| DATE DELIVERED: | 7 September 2012 |
| PLACE DELIVERED: | Sydney |
| PLACE HEARD: | Sydney |
| JUDGMENT OF: | Ryan J |
| HEARING DATE: | 2-5 July 2012 |
REPRESENTATION
| ADVOCATE FOR THE APPLICANT: | Ms Cato appeared in Person |
| COUNSEL FOR THE RESPONDENT: | Mr Schonell SC |
| SOLICITOR FOR THE RESPONDENT: | Abrams Turner Whelan |
Orders
That by way of final property settlement, pursuant to section 79 of the Family Law Act 1975 (Cth):
(a)That within three months of the date of these orders, Mr Cato (“the husband”) shall pay Ms Cato (“the wife”) the sum of $1,001,850.00.
(b)That contemporaneously with the husband’s compliance with Order 1(a) of these orders, the husband and the wife shall do all acts and things and sign all documents and the husband shall pay all monies necessary to obtain a discharge of the registered mortgage in favour of the Commonwealth Bank of Australia secured on the title to the former matrimonial home and numbered …51 (“the Property M mortgage”).
(c)That contemporaneously with the husband’s compliance with Orders 1(a) and 1(b) of these orders, the wife shall do all acts and things and sign all documents necessary to:
(i)transfer to the husband the whole of her right, title and interest in the former matrimonial home known as Property M, being the whole of the property contained in Certificate of Title Folio Identifier …015 (“Property M”);
(ii)transfer to the husband the whole of her right, title and interest in any shareholding of Cato Pty Limited (“the company”);
(iii)resign all offices held by her in the company;
(iv)give effect to the assignment to the husband of the whole of her right, title and interest in and to any sums due to her from the company; and if required by the husband, sign a Minute of a Shareholding Meeting amending the Articles of the company to permit it to be a one shareholder and one director company;
(v)resign as an Appointor of the Cato Family Trust (“the Trust”);
(vi)transfer and assign to the husband the benefit of any beneficiary loan account or other sum owing to her by the Trust.
(d)That the husband shall indemnify the wife and keep the wife indemnified from and against:
(i)all monies due in respect of statutory and consumable utilities in respect of Property M, including but not limited to council rates, water charges, insurance premiums, electricity and telephone services;
(ii)all amounts due in respect of the Property M mortgage;
(iii)all claims, actions, suits or demands arising out of or in connection with her having been at any time a director and/or shareholder of the company and in respect of any amounts owing by her to the company as may be reflected in the loan accounts of the company;
(iv)any liability to pay income tax referable to any dividend, income or other benefit paid to the wife or deemed to have been received by the wife from the company;
(v)all claims, actions, suits or demands arising out of or in connection with her having been at any time an appointor and/or beneficiary of the Trust and in respect of any amounts owing by her to the Trust as may be reflected in the loan accounts of the Trust; and
(vi)any liability to pay income tax referable to any distribution from the Trust.
(e)That forthwith the husband shall be restrained from doing any act or thing that causes:
(i)the payment or deemed payment to the wife of income or dividend from the company; and
(ii)the distribution of any monies to the wife from the Trust.
(f)That contemporaneously with the husband’s compliance with Orders 1(a) and 1(b) of these orders he assign to the wife his interest in Bank B account #416 (“the account”) in the amount of seven hundred and fifteen dollars ($715.00) which is to then be closed.
(g)That otherwise than as provided for above, the husband and the wife shall be solely entitled to the exclusion of the other to all property and chattels of whatsoever nature and kind in the possession, ownership and control of each party as at the date of these orders.
Pending compliance by the husband with Order 1(a) of these orders he shall continue to pay spousal maintenance in accordance with Order 1 dated 29 February 2012.
Upon compliance by the husband with Order 1(a) of these orders, Order 1 of 29 February 2012 is discharged.
Pending payment by the husband of the amount due pursuant to Order 1(a) of these orders, he shall pay as and when they fall due mortgage payments, council and water rates and utilities in relation to Property M.
In the event that the husband fails to make the payment due to the wife pursuant to Order 1(a) of these orders within the appointed time, interest calculated in accordance with the Family Law Rules 2004 is payable on the balance outstanding from the due date. However, if in order to receive her property entitlement Property M is sold interest does not accrue.
That if either party refuses or neglects to sign any document necessary to implement these orders, that a registrar sign the necessary document on behalf of the defaulting party pursuant to section 106A of the Family Law Act1975 (Cth).
Subject to any application for costs, all outstanding applications are dismissed.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Cato and Cato has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
| FAMILY COURT OF AUSTRALIA AT SYDNEY |
FILE NUMBER: SYC 7191 of 2008
| Ms Cato |
Applicant
And
| Mr Cato |
Respondent
REASONS FOR JUDGMENT
These are proceedings for property settlement pursuant to s 79 of the Family Law Act 1975 (Cth) (“the Act”).
Ms Cato (“the wife”) commenced these proceedings by her application filed 4 December 2008. Depending upon the value of the parties’ home at Property M and the husband’s interest in a suite of private family companies (Z Pty Ltd, B Pty Ltd and M Pty Ltd) the net asset pool, according to the wife, is approximately $3.6 million or, according to the husband, $1.6 million. There are significant issues in relation to the inclusion of notional funds, particularly whether funds paid by the husband to the wife should be treated as spousal maintenance or partial property and whether he has failed to account for $760,000.00 borrowed with his brothers. However the net asset pool is constructed, the wife claims 60 per cent. Although she contends for a finding that the parties’ contributions were equal and a ten per cent s 75(2) adjustment in her favour, in the event that there is a contributions finding other than equality she seeks whatever adjustment is required to receive 60 per cent.
Mr Cato (“the husband”) claims contributions at 70 per cent with a 10 per cent s 75(2) adjustment in the wife’s favour. On the basis of what he contends is the value of the net asset pool (albeit calculated on the basis that he would receive 62.5 per cent) he seeks that the wife receives $170,000.00 and a superannuation splitting order in the amount of $150,000.00 of his interest in First State Superannuation. The wife is in a difficult financial situation and wants her adjustment paid from non-superannuation assets.
The parties agree that the wife will transfer to the husband her interest in their home at Property M and that he will secure a discharge of the Commonwealth Bank mortgage secured thereon. It is also agreed that she will transfer her interest in Cato Pty Ltd (“the Company”) to him and resign as appointor of the Cato Family Trust (“the Trust”). She will assign her interests in the Trust and the husband will indemnify her for any liabilities she may have in relation to assets retained by him. The parties will otherwise each retain assets in their sole names with the central questions relating to the formulation of the property pool and the adjusting amount which the husband is to pay the wife.
It will be apparent that there is a significant divergence in the outcome which each party claims is just and equitable. This brief introduction masks the wife’s unhappiness about the husband’s control over their assets and her suspicion that in the years following separation he arranged their financial affairs to his advantage. Thus, in effect, she attempted to undertake an audit. Because of her concerns and the manner in which the hearing was conducted, it is necessary to discuss the operation of individual accounts in some detail.
Agreed Facts
There is a quantity of agreed facts. Those that relate to events will be recorded under the heading background facts. Those which relate to the formulation of the property pool will be recorded separately albeit items which it is agreed have no value and the proceedings rendered irrelevant will not be mentioned.
Otherwise it is appropriate to record here that is it agreed that the parties two children, both of whom are over the age of 18 years “have had some health issues, and reside substantially with the husband, spending limited time with the wife”.
It is also agreed that during the course of the relationship, the wife was the primary homemaker and parent in relation to the care of the children.
It is common ground that in addition to the husband’s initial contribution (which is discussed later) the parties had the benefit of the following contributions by the husband:
a)Rental income from the properties owned by him at the commencement of cohabitation which was contributed to the parties living expenses;
b)During the course of the marriage, the husband’s father provided funds and benefits to the parties. Those benefits were applied as set out in the husband’s counsels case outline document and comprise the proceeds of sale of Unit C totalling $86,666.00, a gift of $80,000.00, a gift of a motor vehicle of $10,000.00 in 1993 and a further payment of $100,000.00 in May 2002 used by the husband in debt reduction. Thus, the husband directly received gifts totalling $276,666.00 during the course of the marriage.
Background Facts
Throughout these reasons contentious findings of fact will be determined upon the balance of probabilities (s 140 Evidence Act 1995 (Cth)).
The husband was born in 1960 and is 52 years.
The wife was born in 1963 and is 48 years.
The parties commenced cohabitation in 1985, married in 1986 and separated on 12 December 2007. The period of cohabitation was approximately 22 years. At the commencement of cohabitation the wife was qualified in the education field and the husband was a graduate and in his practical year of training as a health care professional. He obtained a training position at Hospital R and Hospital V as a consequence of which the parties moved from Sydney to Canberra. During the approximate 12 months that they lived in Canberra, the wife obtained full-time work in the education field in Canberra and surrounding area.
Indeed, there is no issue that throughout the relationship the husband was continuously employed as a health care professional and that in addition to specialist practice, he is currently employed as a senior health care professional in an educational organisation.
At the commencement of cohabitation, the wife had no assets of value and no liabilities.
At the commencement of cohabitation, the husband’s assets comprised:
·a one-third interest in a property at H worth $15,000.00;
·a one-third interest in a property at U worth $11,333.00;
·an interest in the companies Z Pty Ltd, B Pty Ltd and M Pty Ltd.
In relation to the husband’s interests in the companies these comprised:
·five “C” class shares in M Pty Ltd;
·50 “C” class shares in Z Pty Ltd;
·500 “C” class shares in B Pty Ltd.
These are family companies respectively established by the husband’s parents in 1970, 1962 and 1966. In relation to each company the husband, his brothers and mother are the directors. There is an issue about whether “D” class shares purportedly allotted to the husband’s parents in 1998 were validly made. There is no issue that in relation to M Pty Ltd and B Pty Ltd Properties there are no signed minutes of the purported resolutions and in relation to all companies there is no record on the register maintained by ASIC of the issuance of “D” class shares to the husband’s parents. The effect of this, according to the wife, is that in relation to M Pty Ltd and Z Pty Ltd neither the husband’s father’s estate nor his mother have held or hold shares which entitle them to receive dividends. To the extent it is alleged by the husband and his family that this is merely an oversight, it is the wife’s contention that this is evidence of their conspiracy to defraud her. As will be discussed later, the wife made serious allegations of fraud by the husband and his immediate family which lacked foundation.
Ms DB, who is a Fellow of the Institute of Chartered Accountants and the Principal of Accounting Firm F, was appointed to value the husband’s interest in the companies. She correctly opined that the “D” class shares had not been validly issued to the husband’s parents, the effect of which is that they only held voting shares. On the basis of the documents produced to her no other conclusion was available. As will be discussed later, the husband and his families insistence that the “D” class had issued (see affidavit of Mr W) fuelled the wife’s suspicion that the husband and his immediate family engaged in subterfuge in order to minimise his asset position. Had company documents produced during this hearing (Exhibits “S”, “T” and “U”) been provided earlier, this troubling issue may have been resolved without the distress it obviously caused the wife. Indeed the climate of suspicion that permeated the wife’s case, may have been avoided. In the event undertakings were obtained from the husband and his mother which will rectify the oversight and register with ASIC that from 1996 (Z Pty Ltd) and 1998 (M Pty Ltd and B Pty Ltd Properties) the husband’s mother and her late husband’s estate each owned “D” class shares and are entitled to receive differential dividends. So it is clear the “D” class shares do not entitle those shareholders to receive a share in capital on the company being wound up. There is an allied issue about the value of the husband’s minority interest in these companies which will be discussed later.
Returning to the chronology, after the parties returned to Sydney the wife obtained casual work in the education field until, in May 1986, she secured a full-time position in Southern Sydney. She remained at there for about two years and then moved to Eastern Sydney where she worked for about 15 months. It is whilst the wife worked in Eastern Sydney that she was first diagnosed with a depressive illness as a consequence of which she stopped paid work. The wife has not worked in the education field since.
In early 1987, the parties purchased for $170,000.00 and moved into a unit at Suburb I (“the Suburb I Unit”). Including acquisition costs, the property was funded as follows:
·$80,000.00 gift from the husband’s parents;
·$17,000.00 joint savings;
·Commonwealth Bank mortgage in the amount of $85,000.00.
J was born in August 1991.
Following J’s birth, the wife suffered post-natal depression in relation to which she consulted a psychiatrist, Dr Y, who treated her on and off for the following decade.
In late 1991, the parties relocated to the United Kingdom so that the husband could take up a position at Town A. The Suburb I Unit was rented out and they lived in rented accommodation. Whilst there both parties worked part-time in a clinic. In relation to the husband, this was in addition to his full-time appointment. In relation to the wife, she worked a couple of shifts each week for about two to three months.
In June 1993, the parties returned to Sydney and moved back into the Suburb I Unit. The husband took up a position as a Staff Specialist in a large hospital, Hospital X . He was also appointed as a Director of a specialised health area at Hospital X and commenced part-time teaching at an educational organisation.
In 1993, they established a clinic at Suburb D. A company named “E Pty Ltd” was incorporated with the parties its sole directors and equal shareholders. E Pty Ltd established an overdraft facility with St George Bank, being account #809. The overdraft was advanced as an executive mortgage account and ultimately had a $161,000.00 limit. The overdraft was advanced to the parties personally. As will be discussed later, the overdraft was paid out in March 2005 with $120,000.00 the husband borrowed from the Commonwealth Bank. This forms part of a series of transactions which troubled the wife.
In any event, after the clinic was established the wife worked there part-time until its sale in 2002. The husband’s role in the clinic’s day to day operations is unclear.
On 25 November 1993 the Cato Family Trust was established (“the Trust”). Cato Pty Ltd, of which the parties are the sole directors and shareholders, is the trustee. The parties, their children and any grandchildren comprise the classes of beneficiaries of the Trust. From establishment, the husband directed his income earned from private practice, medico-legal fees and speaking engagements to the Trust. Income from hospital practice and university appointments was not directed to the Trust. Although it was suggested by the wife that the existence of the Trust evidenced fraudulent tax evasion by the husband this allegation was appropriately withdrawn.
As well as comprising an effective tax minimisation arrangement through which the husband’s income was distributed to the parties, the Trust invested in listed shares and, prior to separation, two ventures known as the O Unit Trust and the L Group. These ventures were not successful and were subjected to careful scrutiny in this hearing. Simply put, the wife views these transactions with suspicion and until closing addresses asserted that they constituted part of the conspiracy to defraud her. Her suspicions were fuelled by the husband’s failure to answer her and the Single Experts requests for the O Unit Trust and L Group documents. So that it is clear although the husband provided documents which track the receipt and disposition of funds which, it is said, were paid into these ventures no source documents were provided by the O Unit Trust or the L Group which establish that the O Unit Trust and the L Group actually received the funds borrowed for these ventures. Essentially the wife raised the possibility that the funds may have been used for other, profitable purposes, and thus the liabilities which arose and are reflected in the parties’ mortgage liabilities should be the husband’s responsibility. It seems that the wife disregarded that the parties were small investors in much larger investment schemes managed and controlled by others. As will be discussed later, it is clear that the funds borrowed by the parties and invested through the Trust for the O Unit Trust and L Group ventures were repaid, albeit because of losses not fully. Ultimately the evidence sits comfortably with these being no more than investment strategies which did not live up to expectation.
N was born in March 1994. Again, the wife suffered post-natal depression and, for a period during 1994, she stopped work at their clinic.
In 1995, the parties purchased Property M for $630,000.00. They contributed $63,000.00 savings and borrowed $755,000.00 from St George. The additional funds were applied to the Commonwealth Bank mortgage and transaction costs. The parties continued to reside at the Suburb I Unit until, in about December 1995 when it was sold.
The Suburb I Unit was sold for $325,000.00. The Suburb I Unit sale proceeds were applied to the parties’ mortgages, the effect of which was the Commonwealth Bank mortgage obtained to acquire the Suburb I Unit was fully discharged and the Property M mortgage was reduced to approximately $440,000.00. It follows that about $315,000.00 was paid onto the mortgage secured against Property M. Thus, the parties had two remaining loans, being the Property M mortgage and the St George E Pty Ltd overdraft.
As was earlier referred to, in late 1995, the husband sold to his brothers his one-third share in an apartment at C which had been gifted to him and his brothers in equal shares by their father. The husband’s brothers each paid $43,333.33. The $86,666.66 was deposited into the Property M mortgage which was reduced to about $353,000.00.
In 1996/1997 the husband was appointed as a private specialist at Hospital X.
In 1997, the wife established herself as an artist. For about 12 months, on average, once a week she conducted classes. There is no doubt that the wife is a gifted artist and held a number of exhibitions. Notwithstanding her talent, it does not appear that this work provided or is likely to provide reliable income.
In 1999, the husband was promoted to a senior teaching position at the educational organisation.
E Pty Ltd closed its clinic in 2002 and ceased to trade. Thereafter the wife did not have paid employment.
During 2002 the husband’s father gave him $100,000.00 which was paid onto the Commonwealth Bank mortgage secured against Property M. With this payment the Property M mortgage was paid out. Thus, their only liability was the E Pty Ltd St George overdraft (account #809).
The husband was promoted to a Director of a major department of Hospital X in 2004, he has held this position ever since. This was and is in conjunction to his role as Director of a specialised health area. The following year he was appointed to a senior role at the educational organisation, he has since continuously held this post.
During 2005, the wife obtained part-time employment as a retail sales assistant. In this position she worked an average 10-15 hours per week for about 10 months. Family pressures resulted in her decision (with which the husband agreed) to stop paid work and for her energies to be devoted to her role as a homemaker and parent and to the welfare of the family.
The husband’s brother, Mr B Cato, is an agent who owns and operates an agency known as Agency T. In addition to his work with the agency, Mr B Cato invests in the property industry. In about September 2004, he invited the husband and their brother, Mr J Cato to participate in the acquisition of Property G, Sydney. This is the O Unit Trust venture. Although the husband and Mr J Cato required persuasion to embark upon this venture, they were persuaded it should be profitable and joined. The husband discussed this with the wife and, notwithstanding her clearly communicated misgivings, they agreed to proceed. Although the wife initially denied advance knowledge and participation in the O Unit Trust venture, she ultimately agreed that before he proceeded, she and the husband discussed it and that she permitted the loan of $400,000.00 advanced by the Commonwealth Bank to the husband in his sole name (account #218) for this purpose to be secured against Property M.
To advance their investment the Trust acquired 500,000 “A” class units in the O Unit Trust. The O Unit Trust was established in 2005 with O Pty Limited its corporate trustee. O Pty Limited was incorporated in December 2004 in relation to which Mr B Cato and a third party each has a 50 per cent interest. So that it is clear, neither the husband nor the wife had a personal shareholding or became directors or officeholders in any of the O Unit Trust entities. The effect of these transactions, however, is that through their Trust, the parties acquired a 2.92 per cent shareholding in the O Unit Trust for which they paid $500,000.00 and a further $20,000.00 for stamp duty. From the husband’s Commonwealth Bank Viridian Line of Credit account #996, he withdrew $116,000.00 which, along with $4,000.00 in savings, comprised the deposit paid to the O Unit Trust in January 2005. As was mentioned earlier, the $400,000.00 balance was borrowed from the Commonwealth Bank (account #218) and paid to the O Unit Trust in two tranches; namely $249,370.84 on 4 March 2005 and $159,429.16 on 7 March 2005. To ensure that the issue is not overlooked, at the same time the husband withdrew $10,629.00 from the Viridian Line of Credit. Asked to explain the withdrawal he says he cannot remember. Given the size of the withdrawal and that it occurred well prior to separation, his lack of recall is accepted and nothing turns on it.
Settlement of the purchase of the hotel to which the O Pty Ltd investment was applied was completed on 4 March 2005 (three years before separation) for $39.5 million. As intended, KO Pty Ltd took over operation of the hotel. It was a requirement of the O Unit Trust Deed that the hotel be sold within 6 years, which it was on an arms length basis, for $39.5 million on 31 August 2010 (about two years after separation).
On 21 September 2010, Mr B Cato, as Director of O Pty Ltd, forwarded to the husband the Trust’s share in the initial distribution of the O Unit Trust, in the amount of $292,056.08. On 22 September 2010, the husband’s former solicitors wrote to the wife’s former solicitors under cover of which a copy of the contract for sale of the hotel was provided. On 28 September 2010, the husband’s former solicitors wrote to the wife’s former solicitors who they provided with copies of correspondence from O Pty Ltd explaining and paying the initial distribution (Exhibit “H”).
Relevantly, the following day the wife’s former solicitors responded as follows:
This letter serves to confirm that our client requires that all monies/distributions payable to the parties, the [Cato] Family Trust (or any of the relevant entities in relation to the parties) in respect of the sale be secured on behalf of both parties and that none of the monies in question be utilised without the prior written consent of both parties.
Our client accordingly proposes that the monies in question be paid into a controlled monies account on behalf of the parties pending further agreement between the parties, settlement of the Court proceedings, alternatively further order of the Court. Alternatively, should your client prefer, our client would be agreeable to the monies in question being held in an interest bearing account in the name of both of the parties (which account must require the signature of both parties to operate), once again subject to no funds then being drawn from the account without the prior written consent of both parties. (Exhibit “I”)
In the meantime, from the initial O Unit Trust distribution, on 23 September 2010, the husband withdrew $70,092.00 from the Trust which he deposited into Commonwealth Bank account #408.
Commonwealth Bank account #408 was established in February 2005 (in the three brothers’ names) as a joint borrowing in the amount of $760,000.00 by the husband and his brothers from the Commonwealth Bank. This advance was secured against the H, U and C properties. Of the funds advanced to the husband and his brothers pursuant to the #408 loan, by agreement between them, he received and was responsible for $120,000.00. With the $120,000.00 and a further $30,000.00 savings on 4 March 2005, the husband paid out the St George E Pty Ltd overdraft. Although this did not reduce the parties overall indebtedness, the effect of the transaction was that their borrowings were now with the same lender. In relation to the #408 account the husband and his brothers each paid interest on their share of the funds received.
Returning to the disposition of the O Unit Trust dividends, the wife correctly points out that the #408 loan had no direct connection to the O Unit Trust investment. She is suspicious about why this O Unit Trust dividend was not paid into loan #218, being the loan used to fund the O Unit Trust investment. She is particularly concerned that by paying loan #408 the husband reduced a loan secured against his interests in U and H but not M. However, in circumstances where there is no doubt that the husband was liable to repay the $120,000.00 #408 loan, it follows that by paying $70,092.00 into that loan, he reduced the parties’ indebtedness. Although the wife regards his actions in so doing with suspicion, the transaction is not colourable. Lest this be misunderstood, had the husband paid this amount into loan #218 and remained liable for the #408 loan, that liability clearly would have been taken into account as a joint matrimonial liability in the formulation of the property pool.
Further O Unit Trust dividends were received on:
·27 December 2010 in the amount of $131,425.23;
·December 2011 in the amount of $87,616.82; and
·Also in December 2011 a final payment of $6,936.33.
Thus, for an initial cost of $500,000.00, the O Unit Trust investment produced $518,034.46. When stamp duty and five years interest on the $500,000.00 advance is taken into account, the O Unit Trust produced a modest loss.
In any event, the parties agreed that the O Unit Trust funds would be held in trust which, pursuant to consent orders made 14 December 2010, resulted in the balance which then remained ($181,625.84) being secured in a controlled monies account, the proceeds of which could only be disbursed by agreement. The balance deposited into the controlled monies account comprised the initial O Unit Trust distribution minus the following:
·$70,092.00 paid to Commonwealth Bank loan #408;
·$12,798.25 by agreement paid to the wife’s former lawyers on 21 September 2010;
·$5,350.59 paid by agreement to the wife’s former lawyers on 25 October 2010; and
·$22,113.00 paid to RH School for N’s 2011 school fees on 7 December 2010.
From the balance of the O Unit Trust dividends, by agreement, the following payments were made:
·$50,000.00 to the wife on 20 December 2010, the character of which is to be determined in these proceedings (orders 14 December 2010);
·$30,000.00 to the wife on 19 August 2011 to be characterised in these proceedings;
·$14,800.00 to the wife on 1 December 2011 to be characterised in these proceedings.
As further O Unit Trust distributions were received, other than the amounts set out below, they were deposited into the controlled monies account. By agreement the O Unit Trust funds which were not deposited into the controlled monies account were applied as follows:
·$50,000.00 to the husband on 24 December 2010 from which, by agreement, he paid ($49,908.00) into Commonwealth Bank account #408;
·$87,616.82 into the Commonwealth Bank account #218; and
·$6,936.33 remained in the Trust Commonwealth Bank account.
The balance of the funds in the controlled monies account have been fully expended, with further agreed payments made as follows:
·$80,076.83 to the wife’s former solicitors;
·$44,800.00 to the husband’s solicitors;
·$35,915.32 to the single expert (Accounting Firm F);
·$7,986.90 to a mediator retained in relation to these proceedings.
The wife sought to impugn payment of all the O Unit Trust distributions other than those deposited in Commonwealth Bank account #218. She variously claimed that the husband acted unilaterally or his actions were colourable and designed to promote his interests ahead of hers. Time and again she questioned why it was that only a portion of the funds were applied to Commonwealth Bank account #218. Of course, the answer to this question is that in accordance with her solicitor’s letter of 28 September 2010 and orders made by consent, the funds were secured and applied by agreement. In short, the husband has fully accounted for the receipt and disposition of the O Unit Trust dividends. Although it is accepted that the wife wished to review Commonwealth Bank account #408 and related records before she agreed to payments into that account and would have preferred that a greater amount was paid into Commonwealth Bank account #218, having agreed to the transactions it was wrong of her to now challenge the integrity of the dispositions.
Turning then to the L Group joint venture. L Group was a similar investment to O Unit Trust, albeit undertaken through L Group Ltd and not a unit trust. Again, this investment was undertaken prior to separation and conducted through the Trust and not by either party in their personal capacity. It was intended that L Group would purchase Property MH. Although the wife was uneasy about it, the parties agreed to proceed and, in August 2007 (prior to separation), the husband borrowed a further $500,000.00 from the Commonwealth Bank account #218. These funds were advanced to the Trust and, in turn, paid to L Group in August 2007.
As it transpired, the purchase was delayed as a consequence of which, on 18 September 2007 L Group refunded the $500,000.00 advance to the Trust. The $500,000.00 was again paid to L Group (on 3 October 2007) following which contracts were exchanged. A short time later L Group rescinded the contract and commenced proceedings in the Supreme Court of New South Wales against the vendor.
On 14 October 2008 (after separation), L Group refunded $375,000.00 to Cato Pty Ltd (as trustee for the Trust). About five weeks later, this and an additional $5,000.00, was paid into Commonwealth Bank account #218. L Group retained the remaining $125,000.00 (of the original investment) which was secured as part of a total deposit of $1.82 million held in the trust account of Colin Biggers & Paisley pending resolution of the L Group litigation. Ultimately L Group was unsuccessful and the $125,000.00 lost.
Questions were put to the single expert about the value of the O Unit Trust and L Group capital losses, including whether these would provide tax offsets which the parties, or either of them, might utilise in the future. Simply put, it is the single expert’s evidence that the Trust has quarantined capital losses of $84,577.00. It is her evidence that the net capital losses incurred by the Trust are only of benefit in the event that the Trust derives a future capital gain. She points out that the Trust has no other assets which are likely to crystallise a future capital gain which could be offset against the capital losses. On that basis, she explained that the capital losses are quarantined in the Trust and of no value to the parties or any other beneficiary (Exhibit “X”). However, there is no doubt that should the husband in the future profitably invest through the Trust and achieve a consequential capital gain, the capital losses would remain available. Pursuant to s 75(2)(o) this is a factor which will be taken into account in the wife’s favour.
The parties separated on 12 December 2007. Although it was the wife’s preference to remain in their home, she considered this untenable if the husband continued in occupation, and thus she moved in with her mother. The children remained with the husband for the first two to three months, during which for they travelled abroad for six weeks. After they returned and the mother obtained rental accommodation the children lived week about. From February 2009 J began attending the wife’s home every second weekend and N also gradually reduced the amount of time he spent with her. In 2009, N spent approximately 47.5 per cent of his time in the wife’s care and in 2010 this reduced to 40 per cent. N’s time in the wife’s care has reduced even further and presently, contact between them is infrequent.
It is the wife’s position that as at the date of separation the parties’ assets were worth $3.743 million (Exhibit “FF”). However, the values attributed to items in Exhibit “FF” include real estate valued at the date of hearing, for which there is no valuation evidence, without distinction between trust and personal assets, superannuation valued as at the date of hearing and, for the companies as at the date of hearing and without the “D” class shares taken into account. The O Unit Trust and the L Group are valued on the basis of the initial investment and $1.02 million is allocated to unspecified investments. In short, the wife’s Exhibit “FF” calculation is flawed. In circumstances where she does not take liabilities into account, her assertion that her calculations represent the parties’ net assets, renders her calculation even more unreliable.
A more accurate picture emerges from the husband’s affidavit and equivalent exhibit (Exhibit “Y”) which is set out below. However it will be apparent that because values of the majority of the parties’ valuable assets are not identified caution in relation to the overall position is required. In relation to the parties assets the Exhibit “Y” table is most useful for identification of the nature of their assets and cash at bank. In relation to savings and shares valued within a few months of the parties separation these are accepted as a useful guide to their values as at separation. So that it is clear, bank balances and the like are established in other evidence but summarised in the table. Liabilities and superannuation are also fairly reliable. With these comments in mind, the parties’ assets and liabilities at the date of separation were as follows:
ASSETS
Ownership Description Value
$
Joint [Property M] NK Husband CBA Account #856 Nil Husband SGC Account #841 20,654 Husband Union Bank of California Account #651 3,453
Joint [Bank B] Account #461 - £910 (1GBP = 1.48661 AUD) 1,006
Husband CBA Account #034 (15.9% of $3,519.15) 3,724
Husband CBA Netsaver Account #159 Nil Husband CBA Commsec Trading Account #281 NR Wife CBA #990 – March 08 (the balance at separation was $12,658.30) 6,797 Wife CBA Streamline Account #572 Nil Wife CBA Netbank Account #580 Nil Husband Old Mutual (UK) Bank Fund Management – Apr 08 8,527 Husband [Bank B] Global Wealth Core Fund (US$3,340) (USD = 0.937135 AUD) – March 08 4,521
Husband ATW Trust Account Nil Husband CBA Shares (sold 30.12.09) 60,234 Husband DJS Shares NK Wife [BT Shares] (sold 04.04.08) 31,641 Husband WBC Shares (sold 30.08.10) 19,007 Wife IAG Shares NK Joint [Cato] Pty Limited Nil Joint [Cato] Family Trust
- Cash at bank 46,634
- Debtors NK
- Public Company Shares & Unit
Trust (subsequently sold) 228,676
- Public company shares (retained) NK
- [O] Unit Trust (realised) 518,000
- [L Group] (realised) 375,000
- Office Equipment NK
1,168,310
1,168,310 Joint Net debt due by Trust and [Agency T] to parties Included in above entry Husband Net debt due by [Agency T] NK Joint [KO] Pty Limited Nil Joint Contents – [Property M] NK Wife Contents – wife’s residence NK Wife Jewellery NK Husband Jewellery NK Wife Ford [motor vehicle] NK Husband [Property H] (33.3%) NK Husband [Property U] (33.3%) NK Husband [Z] Pty Limited NK Husband [B] Pty Limited NK Husband [M] Pty Limited NK Husband [Agency T] NK Total $1,327,874
LIABILITIES
Description Value Husband CBA Mortgage #408 (December 2007) 120,000 Joint CBA Mortgage #218 (December 2007) 900,202 Husband CBA Viridian Loan (December 2007) 149,247 Husband CBA Mastercard (December 2007) 3,767 Total $1,173,216 NET ASSETS $154,658
SUPERANNUATION
Name of Fund Type of Interest Value Husband First State Super (December 2007) Accumulation 259,000 Wife REST Accumulation 1,490 Wife MLC Accumulation 10,648 Total $271,138 NET ASSETS AND SUPER $425,796
It can be seen that at separation the #408 loan was fully drawn down. In relation to loan #218 the amount outstanding solely related to the O Unit Trust and L Group ventures. The original Property M loan had been fully discharged and other than a small credit card liability, on the husband’s Viridian Line of Credit, about $150,000.00 was outstanding. In relation to the Trust, excluding the O Unit Trust and the L Group it owned shares and cash at bank worth about $280,000.00. Nothing remains of the Trust assets.
In March 2008, the wife secured full-time work as a retail sales assistant. Her employment is one of the pivotal reasons why the husband says payments made to her should be categorised as property rather than spousal maintenance. As will be discussed later at no time after separation has the wife earned anything like the income earned by the husband. The wife continued full-time work until she suffered a workplace injury in August 2008. She ceased work and in that month underwent surgery. The wife returned to work part-time, in September 2008.
Without the wife’s agreement for the financial year ended 30 June 2008, the husband directed that various payments he made to her be treated as Trust distributions. This put her in the highest tax bracket and made the payments taxable in her hands. Effectively this meant that she received $10.00 per day from her employer. Thus, on 7 December 2008, she stopped work and the following day commenced a Graduate Certificate in Business at a University in Sydney. Her actions were entirely reasonable.
These proceedings were commenced by the wife in December 2008.
In January 2009, the wife transferred to a Masters at the Sydney University. She was cross-examined in relation to representations included in job applications to the effect that she was enrolled in a Masters of Economics. This was said to impugn her credit and render her evidence generally unreliable. In circumstances where the wife was trying to establish herself in the paid workforce and keen for something more satisfying than retail sales, her misstatement is irrelevant. True it is that she sought to maintain, under oath, that her misstatements were not erroneous, in which respect her evidence was unreliable. However, this unreliability does not influence my assessment of her veracity on other topics.
In February 2009, the wife underwent surgery.
The parties divorced on 1 July 2010.
In October 2010, the wife graduated with a Masters Degree. Despite a concerted effort she failed to secure a position. Hopeful that she would shortly receive her property settlement and be in a position to purchase a small business, in February 2011, she commenced a small business management course through TAFE which she completed in July 2011.
With no end in sight for her property application, the wife enrolled in a Diploma in Business. Having discovered that the course was unsuitable, she withdrew and sought to enrol in a Masters in Dispute Resolution commencing 2011. Having missed the closing date, the wife commenced that degree at different Sydney University on 1 March 2012.
The wife’s most recent application for spousal maintenance and partial property settlement (to pay legal expenses for the final hearing) was determined on 29 February 2012. When regard is had to the facts explored here, it is difficult to comprehend how it was that the husband claimed she was unlikely to receive further property against which funds advanced could be reclaimed. In any event he was successful but was ordered to pay spousal maintenance in the amount of $1,000.00 per week. This was calculated by reference to the extent to which his income exceeded his expenses. He complied with this order, albeit the payment was made from the Trust assets and not income earned by him. This is a simple vignette of the husband’s post-separation approach. Namely that he used assets which existed at separation and to which she contributed (plus borrowed against Property M) to make payments to the wife (which he now says should be notionally added back) and his considerable income essentially remained at his disposal. Appropriately he conceded the obvious, namely that post-separation he maintained a pleasant and comfortable lifestyle. Of course, he paid Property M outgoings and loans, the significance of which is discussed later.
Notwithstanding that the wife had paid her then lawyers in the vicinity of $200,000.00, as they said they would, when her partial property settlement application failed, her former lawyers ceased to act. Although one cannot be certain about what had been involved, it is difficult to understand how that amount was insufficient to bring the matter to final hearing or why they could not see the matter through with the balance to be paid out of her property settlement. I expressed these sentiments before they ceased to Act.
Thus without access to the funds which even the husband now concedes the wife is entitled to receive, she prepared and conducted the final hearing without legal representation. Because of the complex factual and legal issues which arose, I was concerned about the wife’s ability to adequately conduct her case. Thus, on the first morning of the hearing, I indicated that I would entertain an application for an adjournment so that armed with at least the cash payment ($170,000.00) which the husband proposed, she could obtain representation. It is not difficult to understand her decision to proceed.
General principles for the adjustment of matrimonial property
The approach to the determination of an application under s 79 of the Act is well established (In the Marriage of Lee Steere and Lee Steere (1985) FLC 91-626; In the Marriage of Ferraro (1993) FLC 92-335; In the Marriage of Clauson (1995) FLC 92-595). The process ordinarily involves a four step procedure. Firstly, identifying the property, liabilities and financial resources of the parties at the time of the hearing. Secondly, evaluating the contributions made by the parties as defined in s 79(4)(a), (b) and (c) and the effect of any proposed order upon the earning capacity of either party. I must then evaluate the matters contained in s 75(2) insofar as they are relevant, including any other order made under the Act affecting a party or child and any child support under the Child Support (Assessment) Act 1989 (Cth) (“CSAA”) that a party to the marriage is to provide, or might be liable to provide in the future, for a child of the marriage.
Lastly, in determining what orders should be made the Court must be satisfied in all the circumstances that it is just and equitable (s 79(2)). It is the justice and equity of the actual orders that the Court must consider: Russell v Russell (1999) FLC 92-877.
Assets, liabilities and financial resources at the date of hearing
The parties reached agreement as to the value of most assets and liabilities.
The value and identity of the parties’ property, liabilities and financial resources at the date of hearing are as set out in the table below.
ASSETS
Description Agreed Value Joint [Property M] Not agreed 1.7 million Husband CBA Account #856 Agreed 7,635 Husband SGC Account #841 Agreed 6,039 Joint [Bank B] Account #461 Agreed 715 Husband CBA Account #034 Agreed 556 Husband CBA Netsaver Account #159 Agreed 5,357 Wife CBA Account #990 Agreed 144 Wife CBA Streamline Account #572 Agreed 274 Wife CBA Netbank Account #580 Agreed 7,338 Husband Old Mutual (UK) Bank Fund Management Agreed 9,464 Husband [Bank B] Global Wealth Core Fund Agreed 3,370 Husband ATW Trust Account (02.07.12) Agreed 45,083 Husband DJS Shares Agreed 4,585 Husband WBC Shares (23 @ $20.92) Not agreed 481 Wife 2,386 IAG Shares Not agreed 9,585 Joint [Cato] Pty Limited Agreed Nil Joint [Cato] Family Trust
- incl. The [O] Unit Trust
- incl. The [L Group] Venture
- incl. shares and unit trusts
- incl. monies held in respect of [L Group] Venture
- incl. cash at bank
Agreed Nil Joint Net debt due by Trust and [Agency T] Agreed 52,291 Joint [KO] Pty Limited Agreed Nil Joint Contents - [Property M] Agreed 8,384 Wife Contents - wife's residence Agreed 5,712 Wife Jewellery Agreed 4,700 Husband Jewellery Agreed 30 Husband [Property H] Agreed 158,333 Husband [Property U] Agreed 93,333 Husband [Z] Pty Limited Not agreed 1 Husband [B] Pty Limited Not agreed 1 Husband [M] Pty Limited Not agreed 1 Husband [Agency T] Agreed 11,000 Total $2,134,412
SUPERANNUATION
Name of Fund Type of Interest Agreed Value Husband First State Super Accumulation Agreed 334,540 Wife REST Accumulation Agreed 1,455 Wife MLC Accumulation Agreed 12,912 Total $348,907 ADDBACKS
Description Agreed Value Wife Funds advanced to wife by way of partial property settlement Agreed 143,000 Wife Funds advanced to wife for legal fees Agreed 199,245 Husband Portion of legal fees paid on behalf of the husband other from income. Agreed 211,687 Husband Monies not accounted for by husband to [Accounting Firm F] Not agreed NIL Husband Trust assets sold to comply with 2012 spousal maintenance order Not agreed 16,000 Total $569,932 TOTAL ASSETS $3,053,251
LIABILITIES
Description Agreed Value Joint CBA Mortgage #408 Agreed Nil Joint CBA Mortgage #218 Not agreed 515,432 Husband CBA Viridian Loan Not agreed 157,225 Wife 2008 tax liabilities Agreed 9,767 Wife CSA debt Agreed 4,960 Total $687,384 TOTAL NET ASSETS $2,365,867
The parties were unable to agree about items included in the joint balance sheet, (Exhibit “C”), which are set out below. Where item numbers are included these relate to Exhibit “C”.
Firstly, the value of the parties’ home at Property M. It is the wife’s contention that Property M is worth $2.1 million. The husband says it is worth $1.7 million, that being the opinion expressed by the property expert, Mr CY. The wife questioned the property expert about his possible relationship to the husband’s family, in particular Mr B Cato’s partner, Ms MN. His evidence that he worked with her about 15 years ago and had spoken to her twice since then is accepted. It would seem that the wife also accepted his evidence on this matter and she formerly withdrew any allegation of impropriety against him.
Essentially, it is argued by the wife that there is the potential to subdivide the land upon which the home is situated. Published for consideration is a Local Environment Plan (“LEP”) which, relevantly, reduces the minimum subdivisible land area to 400 m2 and minimum frontage to 15 m. There is no issue that the property is larger than 400 m2 and that the frontage is 15 m. Prima facie, if ratified, the effect of the draft LEP is that the property could be subdivided.
It is the husband’s contention that even if the LEP is ratified, access to the property is problematic and can only be achieved across a storm water easement which runs the length of the right boundary. His point being, although the property may theoretically become subdivisible, the position of the house and the storm water easement makes subdivision highly unlikely. Thus, it is argued, that not only is there no evidence that the subdivision potential would increase the value of the property by the $400,000.00 asserted by the wife, the prospect of subdivision being achieved is too remote to warrant rejection of the property expert’s opinion.
When the property expert undertook his first valuation in November 2009 he analysed the subdivision potential by reference to clause 30 of the operative LEP. The operative LEP requires at least 900m² before a zone 2(a) property could be subdivided. Thus, he determined that the property has no subdivision potential. Reference was made to a new draft LEP which, at that stage, was not due for public exhibition until 2011. This is the draft LEP relied upon by the wife. She has undertaken her own research and believes that if the draft LEP is ratified the property can be subdivided. With respect to the access difficulties raised by the husband, the wife said could be addressed by completion of an underground garage and access to a subdivided back lot in effect, via the garage. The wife identified a number of neighbouring properties where access difficulties had been resolved in the manner she described albeit it was unclear whether these properties were affected by a stormwater easement. In addition, she conceded, that a portion of the home may need to be demolished so as to create a second block. Costs of a potential subdivision had not been undertaken nor were draft plans provided for consideration by the property expert. The $400,000.00 increment was according to the wife’s informed estimate.
Whether or not the draft LEP is ultimately registered in its current form, cannot be known. Although it may be, that possibility is no more than speculation and did not result in the property expert changing his opinion about the value of the property. On balance, although the wife established that the zoning requirement may change in the foreseeable future, she did not establish this was sufficiently certain that the value of the property as at the date of hearing was more than opined by the property expert. Nor did she establish that, if ratified and the property was improved along the lines outlined, any increase in value was likely to exceed overall costs.
Item 14. This is the amount held by the husband’s solicitor in trust for legal expenses. The husband’s evidence that the amount of $45,083.00 is held by his solicitors on trust is accepted and the amount is included in the property pool.
Item 17, being BT Shares in the husband’s name which he said he sold in March 2012 for $16,176.72. The husband’s evidence was ultimately accepted by the wife and this amount is not specifically included in the asset pool.
Item 19. The wife’s 2,836 IAG shares were valued by her at $9,245.00 or, according to the husband, $9,926.00. The difference would appear to be the time at which they viewed the share price on 28 June 2012. In these circumstances, the difference will be split and the shares included at $9,585.00.
Item 21. It is the husband’s contention that the Trust has a no value. At the commencement of the hearing the wife argued the Trust was worth $191,169.00 which contention she ultimately abandoned. This figure comprised a complicated calculation based on the disposal of shares offset against losses (on L Group and O Unit Trust) and then treated as having been taxed at the husband’s marginal tax rate. In circumstances where the contention is abandoned it is unnecessary to give this further consideration. However, her argument highlighted how important it is to look at how the used Trust assets post separation as well as that he used his considerable (non Trust) income earned post separation (to which during cohabitation the wife contributed in a significant manner) as he chose and it would seem, to a reasonable extent for his benefit. It is an approach that weighs in favour of the contentious advances made to the wife being treated as spousal maintenance rather than property.
Items 22 and 23 constitute debts due by the Trust and [Agency T] to the parties. This matter was considered by the companies’ expert and addressed in her letter of 27 June 2012 (Exhibit “D”). Relevantly, as a consequence of the husband meeting his obligation to pay $1,000.00 per week spousal maintenance to the wife for the period 11 March 2012 to 30 June 2012 from the sale of Trust assets, the amount owing to the parties fell to $52,291.00. So that it is clear the wife did not abandon her argument that although disposed of, this amount should not be notionally added back. Whether or not it should be will be discussed later. In relation to [Agency T] $1,456.00 is owed to the husband. This evidence is accepted and those items are included in the property pool.
Items 30 – 34 respectively relate to the husband’s minority interests in Z Pty Ltd, B Pty Ltd Properties and M Pty Ltd. Depending upon whether the husband’s mother and his late father’s estate hold “D” class shares, the companies’ expert and Ms PC (who is an expert called in the husband’s case) are in essential agreement about value. Calculated on the basis that the “D” Class shares have not issued, the experts agree that the husband’s pro rata interest less a minority shareholder discount of 35 per cent is as follows:
·M Pty Ltd $29,055.00
·Z Pty Ltd $61,100.00
·B Pty Ltd Properties $334,083.00
·Total $424,238.00
Without a minority discount, on this basis, his interest would be:
·M Pty Ltd $44,700.00
·Z Pty Ltd $94,000.00
·B Pty Ltd Properties $513,974.00
·Total $652,674.00
The experts agree that the value of the husband’s shareholding is nominal if:
a)the “D” class shares were issued to the husband’s parents;
b)it is probable that the husband’s mother will distribute the retained earnings of the respective companies and/or realise assets held by them so as to pay dividends on the “D” class shares (where relevant “B” class shares held by the husband’s mother and her sister) to fund living expenses or otherwise to the exclusion of the “C” class shares held by the husband; and
c)the potential inheritance of an interest in the “A” class shares by the husband is uncertain or should not impact on the current value of his shareholding.
Neither of the husband’s fellow shareholders expressed an interest in acquiring his shareholding and, indeed, disavowed any desire to do so. There is no basis to conclude they might.
As was mentioned earlier, although there is no doubt that the Memoranda of Association indicates that “D” class shares were created ASIC does not identify that the “D” class shares were issued. Over the nine years to 30 June 2010, B Pty Ltd Properties paid no dividends, M Pty Ltd last paid a dividend in 2003 and Z Pty Ltd has paid dividends not exceeding after tax profit in recent years. This capital preservation approach weighs in favour of the proposition that the capital value of the companies is unlikely to be eroded.
Mr W is a chartered accountant who, since 1974, has acted for the husband’s mother and her late husband. He is also the husband’s accountant as well as being the accountant for the Trust. In relation to M Pty Ltd it is his evidence that the “D” class shares were allotted to the husband’s mother and late father, pursuant to a resolution of shareholders in 1998. He acknowledged administrative omissions to the extent that the Resolution and Minutes were not signed by directors and the “D” class shares were not registered with ASIC. To this end, he produced an unsigned Minute of a Meeting of Directors convened in 1998. A copy of a Resolution signed by the husband’s late father in relation to Z Pty Ltd dated 1996 was produced but again, administrative oversight in relation to registration is acknowledged. The situation in relation to B Pty Ltd Properties is the same as for M Pty Ltd. Files produced by him (Exhibits “S”, “T” and “U”) comprise company records of obvious antiquity which contain for all companies a variety of documents that record the issuance of “D” class shares to the husband’s mother and his late father.
Although the evidence of the annual general meeting of the various companies said to have been convened on 21 June 2012 at a restaurant was not as comfortably consistent as might have been anticipated it is sufficiently probative to establish that the husband, his mother and Mr B Cato, resolved to rectify any deficiency in relation to the issuance of the “D” class shares and for steps to be taken which will result in amendments to the ASIC register as far back as 1996. When this evidence is considered in the context of the husband and his mother’s undertakings to the Court (Exhibit “AA”), the husband established the issuance of the “D” class shares to his mother and late father and thus their entitlement to differential dividends, as well as their “A” class share entitlement to determine dividend policy.
The husband’s mother gave evidence, the gravamen of which is that she intends in the future to live off her interests in the companies and, as far as possible, avoid distribution (of income or capital) to relevantly “C” class shareholders. Where in those companies reference is made to the estate of the late Mr Cato Senior it must be understood that the husband’s mother is his sole beneficiary and thus estate assets belong to her. The company expert valued these entities using a net asset basis which shows that whether as a result of loans payable to her (and her late husband’s estate) and her shareholding in B Pty Ltd Properties, through those interests alone the husband’s mother has considerable assets. In addition, the effect of her evidence is that she has considerable wealth beyond her interest in the companies. She pointed out she has recently given one of the parties’ sons a motor vehicle and will shortly do the same for the other. In relation to this point, there is no suggestion she directed that dividends issue in order to do so.
If the husband’s mother’s evidence is accepted, she would adopt an approach to the companies different to that historically taken. Namely rather than reinvestment of income and maintenance of capital, as far as possible this would be distributed to her. Thus, a question which requires consideration is whether she is likely to adopt the course outlined in her evidence or, as time passes decide to maintain the effective intergenerational asset structure she and her late husband established many years ago. On balance, is accepted that even if for a period she does direct that dividends issue to non “C” class shareholders, in the long term, the approach taken historically is likely to prevail.
The husband’s mother cannot make distributions to his brothers without oppressing him. She has testamentary capacity and what she might do in relation to disposition of her “A” class shares in her will is too uncertain to be taken into account. The point being, it would be unsafe (legally and factually) to proceed on the basis that eventually she will bequeath an interest in the “A” class shares to the husband. The effect of these matters is that the husband does not and it cannot be found ever will influence dividend policy (by virtue of inheritance of a portion of the “A” class shares or any other reason) or be able to force liquidation. Nor is there evidence that other shareholders or anyone is likely to seek to liquidate the companies. The effect of the husband’s brother’s evidence is that they will not purchase his shareholding. Of course, any putative purchaser would only acquire the same limited rights that the husband has. Given the lack of negotiability and lack of control I am satisfied that there is no apparent market for the husband’s interests in these companies. Although in the family law context this is not determinative, in assessing the reality of the situation in this case, it is a matter of some note. Particularly in circumstances where the husband’s shareholding has produced no tangible benefits; not even access to loan accounts or even a limited management role.
It follows that the factors which underpin the value attributed to the husband’s shareholding at $424,238.00 have not been established. However, it is accepted that the husband’s mother is unlikely to entirely deplete the capital value of the companies. As to the long term, when, if and in what amount, the husband might receive dividends or access to capital is full of uncertainty. The effect of these uncertainties is that his shareholding is best taken into account pursuant to s 75(2) as a financial resource of modest value. Kelly and Kelly (No. 2) (1981) FLC 91-108.
As was mentioned earlier, both parties contend for the notional inclusion in the property pool of amounts utilised by the other. Before the facts are canvassed, it is appropriate to set out the principles by which notional assets may be included in the property pool.
In Kowaliw (1981) FLC 91-092, Baker J, as a statement of general principle, said that financial losses incurred in the course of a marriage, whether or not a joint liability, should be shared except in the following circumstances:
i) where one of the parties embarked upon a course of conduct designed to reduce or minimise the effective value or worth of matrimonial assets, or
ii) 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.
If the losses were suffered in the course of the pursuit of the objectives of the marriage, for example gaining income or property, then such losses should be shared, although not necessarily equally.
The issue of whether lost funds should be notionally added back into the property pool, constitute a s 75(2) factor or should be dealt with another way is quite complex but ultimately discretionary. In Townsend (1995) FLC 92-569 the Full Court determined that the sale proceeds of a taxi should be notionally added back. Simply put, after separation the husband sold a taxi, which had been the parties’ most valuable asset. The husband had the benefit of the sale proceeds, none of which remained. His sale of the taxi was found to be a premature distribution of property which was brought into the property pool on a notional basis and a distribution made accordingly.
In Bell & Bell [2000] FamCA 1301, the Full Court made it clear that notional adjustments are not limited to wasted assets but may also include identified items of property that have been disposed of bona fide. In addition, that “(i)t may also be appropriate, depending on the circumstances, to notionally include in the pool of assets items of property in respect of which no or no reasonable explanation has been given for the assertion that they no longer exist or never existed”. It is also well established that the Court generally does not notionally add back monies which existed at separation that have been spent on reasonably incurred living expenses. The point being that parties are entitled to continue to provide for their own support: Marker [1998] FamCA 42. In Cerini [1998] FamCA 143, the Full Court determined that where the monies have been shown to have been disposed of reasonably, the notional add back approach should be the exception and not the rule.
Essentially, the addback dispute relates to three matters. The wife argues for the inclusion of $760,000.00 and $158,399.00 as the husband’s assets (items 54 and 57). The latter relates to the children’s school fees he paid after separation. The former relates to the $760,000.00 which the husband borrowed with his brothers in February 2005. The other category comprises funds advanced post-separation to the wife either pursuant to orders or by agreement, in relation to which categorisation as either spousal maintenance or property is to be determined in this hearing (item 49). For his part, the husband asserts that these advances should be categorised as property, whereas it is argued by the wife that they constitute spousal maintenance.
The wife’s argument in relation to the $760,000.00 can be dealt with in short compass. As has already been discussed, the husband has accounted for his portion of the $760,000.00 and there is no principled basis upon which funds borrowed by his brothers and used for their purposes in relation to which the parties have no liability should be brought to account as the husband’s notional asset.
In relation to the children’s school fees, the wife explained she never wanted them to attend Jewish or private schools. However, because the husband’s parents regarded attendance at Jewish schools as important, her views did not carry the day. Essentially, it is the wife’s contention that the property pool would be greater had funds not been diverted to school fees and HECS. HECS payments do not comprise part of the item under consideration. In circumstances where the husband did no more than continue to pay expenses for the children to attend schools of an ilk which during cohabitation they attended, his expenditure was not wasteful and was reasonably incurred. Thus, in relation to school fees, the wife’s argument will fail.
So that the point is not overlooked, it is also argued by the wife that because the parties accommodated her former parents-in law desires that the children attend Jewish schools, the significance of funds advanced by them is diminished. In other words the payment by the parties of the children’s school fees has the same significance as the parents’ gifts. Post separation expenditure of school fees indicates that in total the parties almost certainly paid more in school fees than the husband’s parents advanced. However, there was no collateral obligation which required that they accede to the children’s grandparents’ wish and they took steps which ultimately they wished to take. Although the husband’s parents would have been gratified by the educational and other benefits which the parties bestowed on the children, the benefits were all one way; namely to the parties and the children. The wife’s argument is not persuasive.
Turning then to the funds which the husband seeks to include as the wife’s property. He advanced the following amounts pursuant to orders:
·9 March 2009 CBA home loan #218 – redraw $25,000.00
·4 August 2009 CBA home loan #218 – redraw $19,000.00
·5 November 2009 CBA home loan #218 – redraw $19,000.00
·8 February 2010 from the husband $19,000.00
·3 May 2010 from the Trust (sale of shares) $35,000.00
·20 December 2010 from the Trust (O Unit Trust) $50,000.00
Total$167,000.00
It can be seen that excluding the payment made on 8 February 2010 all payments were made from assets that existed at separation or through increases in borrowings against Property M which is included in the property pool as the parties’ liability.
The husband also seeks to add back funds advanced to the wife that they agreed would be categorised at the final hearing. These comprise:
·$30,000.00 paid from the O Unit Trust return on 19 August 2011.
·From the same source $14,800.00 paid on 1 December 2011.
Rounded out, it is the husband’s contention that $211,800.00 is to be characterised as the wife’s property.
It will be recalled that following separation the husband remained in the family home and the wife needed to rehouse. She did not have paid employment and, following a short period during which she lived with her mother, she moved into rented accommodation.
By agreement, for four months following separation the wife had ongoing use of a Mastercard in the husband’s name and her Commonwealth Bank streamline account #990. At separation, account #990 had a credit balance in the amount $12,658.38 and a debit balance on the Mastercard she used in the amount of $3,546.87. Given that the wife managed the home, her Mastercard debt is a joint liability and that it was paid by the husband post-separation is irrelevant to her post-separation support and use of matrimonial funds.
In any event, in the four months following separation, the wife spent approximately $51,500.00. Statements for account #990 and her credit card are attached to the husband’s affidavit. These demonstrate unremarkable expenditure for a person without independent income establishing a new home. Interestingly, on the wife’s Commonwealth Bank account #990 there is a series of overseas withdrawals made in January 2008. It was the husband who was overseas and these withdrawals demonstrate that although the account was in the wife’s name, he too withdrew from it. In any event, in the same period, the husband deposited $48,817.44 from his hospital salary into the wife’s account #990. A further $13,000.00 was transferred from the Trust savings account. In relation to that account, as was mentioned earlier, at separation, there was a credit balance of $46,634.38. In the period to 27 April 2008 the husband deposited into the Trust savings account approximately $36,000.00 consulting income, $2,000.00 from his personal savings account, refund of $5,000.00 and from the sale of shares (Platinum International Investment Fund investments) which the Trust owned at separation, $51,955.67.
In addition to these funds, in the period until late April 2008 the wife withdrew $45,306.10 from the joint CBA account and the husband paid a further approximate $8,600.00 for her credit card. The source of the funds were:
·His wages $48,817.44
·The Trust $13,000.00
The wife used these funds as follows:
·Rental and utility bonds $4,000.00
·Rent $10,000.00
·Furnishings $10,000.00
·Medical and legal $5,000.00
·Living costs $20,000.00
·Other $2,500.00
Total $51,500.00
On 25 April 2008 the husband paid $50,000.00 to the wife. This amount constituted $31,692.23 from shares owned by the wife but apparently controlled by him (BT Share Fund) and $18,307.77 from the Trust. Because of the earlier payments and a few weeks later the wife commenced work this payment was given particular emphasis by counsel for the husband.
It is accepted, that post separation the wife variously sought paid work and to acquire qualifications with a view to establishing a career in human resources, small business or dispute resolution. Although there is no evidence about the income she earned in retail sales, the nature of her work suggests that it was modest and insufficient to establish a standard of living, which in the context of this marriage, was reasonable. Having given up work in the education field so many years ago, it was common ground she would need to retrain before she is eligible to work in the field. The wife has no desire to return to the education field and in circumstances where she essentially stopped to care for the children and the family, thus freeing up the husband so that he could pursue a career of his choosing it would not be proper to assess her right to maintenance (s 72) on the basis that she is able to work in a menial capacity or must resume a brief career abandoned so long ago.
As was mentioned earlier, distributions by the husband to the wife through the Trust meant that in retail sales, she worked for effectively $10.00 per day. Her decision to relinquish that position was thus reasonable. So too was her decision to pursue further studies which, it is accepted, have been undertaken to obtain employment which she hopes will be satisfying and provide her with an adequate income.
Lest there be any doubt that the wife required a reasonably significant amount in order to re-establish herself and acquire a standard of living that was in all the circumstances reasonable, comparison to the husband’s standard of living and income is illustrative. Post separation, from his personal income tax and trust tax returns his income was approximately:
·30 June 2008 $395,000.00
·30 June 2009 $329,000.00
·30 June 2010 $310,000.00
·30 June 2011 $323,000.00
·30 June 2012 $395,000.00
Even when she had paid employment the wife had nothing like this amount of money on which to live. Taking into account that the husband paid mortgage and loan repayments and overall the children spent more time with him, on balance, I am satisfied that the proper application of ss 72 and 74 is that the contentious payments are categorised as spousal maintenance. There is thus no principled way for these amounts to be notionally included as the wife’s property.
It will be recalled that the husband was ordered to pay periodic spousal maintenance in the amount of $1,000.00 per week in March 2012. Rather than pay from income, which he was able to afford, he sold trust shares for about $16,000.00 which as trustee he has distributed to the wife in the amount ordered. Thus, the wife contributed to the asset which he sold. His misuse of the parties’ assets in this manner constitutes a premature distribution which will be added back as his property.
The wife challenged the extent to which the mortgage liability and Viridian Line of Credit balance were included. There is no doubt that the amounts referred to above are the amounts outstanding. The question to be answered is whether the husband manipulated the various loan accounts so that the balances are now larger than should be the case. This issue is connected to the wife’s argument that he misused the O Unit Trust and L Group dividends as well as the $760,000.00 borrowed with his brothers. As has been discussed the wife failed to establish that these transactions are in any way colourable. Later in these reasons the disposition of assets owned at separation is discussed as is the husband’s management of the parties’ liabilities. In short, I am satisfied that the loan balances reflect the parties legitimate liabilities and should be taken into account to the full extent. For the same reasons, her arguments that there are funds which are unaccounted have not been shown to have a proper evidentiary foundation and that argument also fails.
Finally, there is a minor issue about payment of the wife’s tax penalties for the 2008 tax year. After separation the husband had his accountant prepare the wife’s taxation return which saw Trust distributions included as her income. When the husband sent the return to the wife he offered to pay her tax. She refused to sign the return which was eventually redone by her accountant. As I understood the evidence, the husband remains willing to pay the assessed liability but not penalties. In circumstances where it was reasonable for the wife to be concerned about how he used and applied their assets after separation, a not insignificant tranche of which involved transactions undertaken without reference to her, the position she adopted about her 2008 tax return is not unreasonable. Justice and equity dictates that the penalties are treated as a joint liability.
Section 79(4) – Evaluation of contributions and other factors
The submissions were made of the basis that contributions should be assessed globally which approach will be adopted. Norbis v Norbis (1986) 161 CLR 513.
Section 79(4) requires that the Court looks at the entirety of the contributions, both financial and non-financial, to the welfare of the family, as well as to the acquisition, conservation and improvement of assets. Contributions are not required to be tied to the acquisition, conservation or improvement of a particular asset and are to be taken into account generally as contributions in a total sense: Farmer & Bramley (2000) FLC 93-060. In Ferraro, the Full Court highlighted the difficulty involved in evaluating and balancing fundamentally different contributions. It also reinforced that the Court’s task includes evaluating the significance of the various contributions, the weighing of which is ultimately a matter for the Court.
The evaluation of financial contributions is more complex than the mere calculation of the funds introduced by each party. This point is reinforced by the often quoted comments in Pierce & Pierce (1999) FLC 92-844 where, in relation to initial contributions, the Full Court said [28]:
In our opinion it is not so much a matter of erosion of contribution but a question of what weight is to be attached, in all the circumstances, to the initial contribution. It is necessary to weigh the initial contributions by a party with all other relevant contributions of both the husband and the wife. In considering the weight to be attached to the initial contribution, in this case of the husband, regard must be had to the use made by the parties of that contribution.
Findings have already been made in relation to initial contributions. In this regard, there is no doubt that at the commencement of cohabitation the wife had no assets of value or liabilities.
The husband had a one-third interest in properties at H and U respectively worth $15,000.00 and $11,333.00. His interests in these properties are unchanged and have a combined value of approximately $250,000.00. Throughout cohabitation the properties provided rental income and before tax, together presently return $121.00 per week. Given that from the outset they were unencumbered it would seem likely that once rates and the like are taken into account the return was fairly small.
The husband also introduced his interest in M Pty Ltd, Z Pty Ltd and B Pty Ltd Properties. As has already been mentioned, his shareholding will be treated as a financial resource as the date of hearing. Consistency means a similar approach is applied to these interests as at the commencement of cohabitation. Thus, it is accepted that in relation to the companies, the husband introduced a financial resource from which no tangible benefits were received. It is appropriate to observe that had the husband’s shareholding been categorised as an asset of some value, my conclusion would have been that this was a contribution made solely by the husband.
From when the parties commenced cohabitation there is no doubt that the husband earned far more than the wife and contributed his income to the family. The magnitude of his financial contribution is supplemented by funds advanced by his father, the details of which have already been discussed. Rounded out, the husband’s father advanced $270,000.00 which variously was applied towards debt reduction, family expenses and, in relation to $10,000.00, received as a car. These advances were made over time and were of real benefit to the parties, particularly in relation to the acquisition of the Suburb I Unit and debt reduction. For example, the $100,000.00 payment advanced in May 2002 enabled a significant reduction to the mortgage with consequential savings of commercial interest. When regard is had to the husband’s mother’s evidence and the manner in which the husband’s father structured various family companies, it is inferred that these advances were made because of the husband’s relationship with his father and are contributions made on the husband’s behalf.
The submission made on the husband’s behalf that significant weight should be attached to the husband’s initial and advances made by his father is accepted. Even at current dollar values these comprise a significant component of the asset pool. It is also accepted that in addition to income earned as a medical practitioner in various guises, the husband invested in shares as well as the joint ventures which were the focus of so much attention. Some investments were fruitful whereas others incurred losses. In this regard the losses were part of a legitimate wealth creation strategy which, on occasion, went sour. A comparative analysis of investment gains compared to losses was not undertaken. Given the intricate analysis by the wife of those transactions which resulted in overall losses, it is reasonable to infer that the preponderance of investments resulted in gains. As a consequence, the unsuccessful ventures have no impact on the overall significance of the husband’s financial contributions.
There is no dispute that the husband worked hard to advance his career or that during cohabitation he has sought and taken the opportunity to secure senior professional and academic positions. He has established a career with private and public hospitals which includes a significant private practice and as a teacher. One only has to have regard to the large volume of publications and their nature to appreciate the extra effort he made during cohabitation to advance his career. There is also no doubt that post separation, the benefits of his pre-separation commitment to his career continues to bear fruit. In this regard, his evidence about the opportunities afforded to him to travel internationally at the expense of host organisations demonstrates how his long-term efforts continue to his benefit.
Post-separation financial contributions by the husband require close attention. Summarised the effect of my findings as to the property pool and post separation distributions is that about $840,000.00 of property that existed at separation (including the O Unit Trust and the L Group) has been distributed. Those distributions have been accounted for; either as payments to loans, distributions to the parties now included in the property pool or spousal maintenance. As can be seen from the two tables, since separation excluding the capital payments made on the #218 and #408 loans from the O Unit Trust and the L Group distributions, liabilities are roughly equivalent to separation. This takes into account the $63,000.00 loan withdrawals made in 2009 and paid to the wife (which have been categorised as spousal maintenance). That the parties were able to draw down on the mortgage and still have an equivalent balance now as at the date of separation suggests that between separation and 2009 the husband paid more than minimum payments. In other words, for some time at least his loan repayments must have comprised principal and interest. The same cannot be said about the Viridian Line of Credit, the current balance of which is slightly more than at separation.
A guide to the magnitude of his payments can be established from his financial statement. Presently, each week he pays $723.00 on loan #218 and $227.00 on the Viridian Line of Credit. It follows that from income, post separation he paid a considerable amount towards the various loans. No payments were made by the wife. Lest it be overlooked, until the O Unit Trust and the L Group dividends were received the loan balances were much greater and it is inferred his loan repayments larger again. Thus although the husband’s financial statement evidences a considerable capacity for discretionary expenditure, there is no doubt that after separation he also paid considerable joint liabilities. However, the question which needs to be answered is whether this warrants an adjustment in his favour. In circumstances where it is accepted that the wife contributed in a real way to his earning capacity, little weight is attached.
When he was not working, the husband also contributed as a homemaker and parent. He is a devoted father who contributed as a homemaker and parent in the manner set out in his affidavit. However, there is a chasm between his contributions in this regard compared to the wife’s. It is only after separation that his contributions as a homemaker and parent were greater than hers. In this regard, at separation the children were 17 and 14. It was only after J turned 18 that he spent more time with the husband than the wife. For N this dynamic commenced in 2009. It follows that the period during which the husband’s care for the children was greater than the wife’s was reasonably short. Even with this period taken into account, his contribution as a homemaker and parent is modest.
The wife’s financial contributions are comparatively modest. Essentially, she contributed her income from paid employment and it is inferred, through the clinic. She played a valuable financial role as co-borrower and permitting assets in which she had an interest to be used as security for significant borrowings. In addition, she co-operated with beneficial income distribution strategies, such as the Trust.
However, it is as the homemaker and parent and to the welfare of the family that the wife’s contributions acquire real significance. Her commitment to this role meant that the husband could pursue his career, confident that his home life and parental responsibilities were competently met by the wife, which they were. In other words, without her the husband would have needed to compromise his commitment to his career and earning capacity in order to fulfil his parental responsibilities. There is no doubt that following the children’s births her contributions in this regard were all encompassing. For example, in furtherance of the husband’s career she willingly moved countries. Plainly for many years in this role she contributed to the husband’s ability to advance his career in a manner which continues to be of real benefit to him. Post-separation, her contributions as a homemaker and parent diminished and in that period are less significant than those made by the husband. However, overall, in these capacities her contributions greatly exceed the husband’s and warrants significant weight.
The orders will not affect either party’s earning capacity.
The husband paid child support from the date of separation until 1 July 2011.
When one stands back and evaluates the significance of these contributions, a number of factors stand out. Namely that throughout their marriage the parties filled different key roles and together worked hard to advance their families financial interests and their and their children’s welfare. Their efforts bore fruit and notably resulted in property acquisition, a comfortable standard of living, a successful ongoing career for the husband and children and a home that were well cared for. In the different ways already discussed, these contributions continued after separation. Two factors however, favour the husband. Namely his initial contribution and the funds advanced by his father. As was mentioned earlier in dollar terms these are equivalent to a considerable component of the property pool. There is no doubt that these advances made it easier for the parties to acquire the Suburb I Unit which in turn produced an early capital gain that flowed into the acquisition of Property M. The May 2002 advance resulted in a significant reduction in the Property M mortgage and no doubt the parties paid less in interest than would have been the case. There can be no doubt that these were valuable contributions made by and on the husband’s behalf. When these matters are weighed with all other relevant contributions and factors discussed above, expressed as a percentage of the net value of the parties’ assets as at the date of hearing, is that the husband’s contributions and other factors favour him 56 per cent compared to the wife’s 44 per cent.
Section 75(2)
It was conceded by the husband that an adjustment in the wife’s favour pursuant to s 75(2) is warranted. Essentially, this concession is made on the basis that he accepts that there is a significant income and earning capacity disparity. In circumstances where he has an income of approximately $400,000.00 per annum compared to what he contends is the wife’s earning capacity in the education field, he says this warrants a 10 per cent adjustment in her favour. In broad terms, this is less than one year of his gross income. It is the wife’s contention that provided the property pool is constructed as argued by her (which has not occurred) and contributions were assessed as being equal (which has not happened) she was entitled to a 10 per cent adjustment. However, if she failed to achieve these findings, the wife sought an adjustment sufficient to achieve a 60 per cent outcome in her favour.
The husband is 52 years and the wife is 48. He is in good health whereas the wife has health issues which require consideration. Essentially, she has been treated for depression on and off for many years, albeit post-separation she has enjoyed good mental health. Twice the wife has required surgery which has caused her a degree of difficulty with heavy lifting and, for example, meant that she was unable to continue a position in a retail shop. The situation now is that she feels well and is physically well. That said, her history of depression indicates that she may be vulnerable to future depression. However, while this appears to have influenced her decision to work in the education field it has not otherwise compromised her ability to function. In these circumstances, an adjustment in relation to health issues in the wife’s favour is not warranted.
I have already made findings about the parties’ property and liabilities. In addition, the wife has approximately $50,000.00 outstanding for legal fees whereas the husband (apart from amounts paid from realised assets) has been able to pay the shortfall of approximately $41,000.00 from income. The wife was not in the position to do the same and a small adjustment in her favour is thus appropriate.
It is common ground that the husband’s greater income warrants an adjustment in the wife’s favour. Presently her sole income is spousal maintenance which it is agreed will shortly come to an end. As was mentioned earlier, post-separation the husband has maintained a significant income and this year will earn in the vicinity of $400,000.00. The husband holds senior positions in his chosen field and it is clear that he will continue to earn significant income for years to come. The wife, on the other hand, has a variety of professional qualifications but either lacks experience in the particular field or abandoned the profession (education) in the context of her role as a homemaker and parent and becoming depressed. While it is accepted that she could retrain and seek to re-enter the education field the wife’s clear evidence is that she strongly resists resumption of a career she looks back on with unhappiness. In relation to her education career, the totality of the evidence indicates that even if she returned to the education field it is far from clear that she has a sustainable education career ahead of her. Otherwise, she has valiantly sought work for which she has academic qualifications as well as of a menial nature. Counsel for the husband skilfully teased out minor discrepancies in her evidence about these matters but did not establish that she is a dilettante interested only in academia. The wife spoke with quiet dignity about her genuine desire to work and the barriers she perceives she faces at her age after so many years out of meaningful full-time paid work. Whether perception is reality has not been established. However, the wife has established that she has made genuine and significant efforts to secure paid employment with little success.
Although her current studies may result in an opportunity for a career in dispute resolution, again she is likely to face similar difficulty. Namely, qualifications but no relevant experience. In short, there is real uncertainty about whether the wife will secure anything other than occasional work in the future. If she pursues her desire to acquire a small business, property acquisition may be unattainable. What is certain is that she will never earn anything like the income achieved by the husband. This is a factor which weighs heavily in favour of a significant adjustment to the wife.
Both children are over the age of 18 and although the husband contributes to their support, he has no duty to do so. Thus the parties’ commitments are to their own support, the details of which are set out in their respective financial statements. They are both entitled to enjoy a reasonable standard of living, which thus far each has been able to do. Because the husband’s greater capacity to do so is inextricably linked to his earning capacity, which has been taken into account, this factor does not warrant an adjustment in the wife’s favour.
Neither party is in receipt of a pension or benefit, albeit there is a possibility that the wife may become eligible at some future time. This factor does not warrant an adjustment in the wife’s favour.
The wife was questioned at length in relation to a male friend. The questions went to whether they cohabited and if so, the financial circumstances of cohabitation. In short, the wife does not cohabit albeit she and her male friend spend nights together at each other’s homes. The extent of her friend’s contribution to her household is that extra grocery expenses incurred because of his presence are paid by him. There is thus no financial benefit to the wife as a consequence of her relationship.
Section 75(2)(n) achieves a cross-referencing between s 75(2) and s 79(4). The outcome of the assessment of contributions and other factors has resulted in the husband receiving 56 per cent of the assets compared to the wife’s 44 per cent. These findings do not warrant further adjustment.
There are a number of factors to be considered pursuant to s 75(2)(o). As was mentioned earlier the Trust has $84,577.00 capital tax losses. The wife has agreed to transfer her interest in the Trust to the husband in relation to which he will thereafter to continue to use it much as he has to date. Although it is accepted that presently there are no capital gains against which the losses can be offset, these losses will endure. The husband’s interest in investment via the Trust is also likely to endure. In short he is likely to be able to use the tax offset, most probably in the reasonably distant future. A small adjustment in the wife’s favour is warranted.
The husband seeks a split of superannuation, the effect of which would be that the parties would essentially receive assets with similar characteristics. The wife wants her adjustment in non-superannuation assets. Essentially she argues that she needs her property settlement in tangible assets so that she can establish herself and acquire property. The wife’s need is accepted, albeit this will mean she does not reach retirement age with superannuation of any value. In circumstances where the husband has demonstrated a capacity to service significant borrowings and presently has significant discretionary expenditure it is not accepted that justice and equity requires that the wife receives a portion of her entitlement by splitting his superannuation. However, this will mean that the husband takes a significant component of his property settlement in superannuation assets which he cannot immediately access whereas the wife’s assets are tangible and immediately available. As it is likely that he will continue to work for years to come, these factors warrant an adjustment in his favour.
Based on my earlier findings in relation to the husband’s interests in the companies an adjustment is made in the wife’s favour, albeit because of the associated uncertainties, of modest dimension.
There are no additional factors which require consideration.
Having regard to all of the s 75(2) factors, it is appropriate that there is a 14 per cent adjustment in the wife’s favour. This reflects the cumulative outcome of the findings made pursuant to s 75(2) Tomasetti & Tomasetti (2000) FLC 93-023. To test the measure of that assessment, it should be viewed in monetary terms Waters and Jurak (1995) FLC 92-635. This adjustment puts in the wife’s hands a further $331,221.38. This is a significant amount but nonetheless affords appropriate recognition to the husband’s superior earning capacity in the overall context of my s 75(2) findings.
The husband will, therefore, be entitled to a property settlement of 42 per cent or $993,664.00 compared to the wife’s 58 per cent or $1,372,201.00.
Section 79(2)
Because the Court must consider the actual orders, not just the percentage distribution, under s 79(2) justice and equity in cases like this requires that the Court stands back and looks carefully at the outcome of the s 79(4) and s 75(2) process. It is at this stage that the Court considers the actual structure of the orders. I will not repeat the findings made thus far. It is sufficient to refer to those which relate to the quantum and nature of the husband’s greater initial contribution and the gifts made by his father. Also that thereafter and for a long time both parties contributed in a real way in their respective roles. Also, that there are weighty considerations which s 75(2) required to be considered in the wife’s favour; particularly the husband’s greater income and career stability. Although this outcome will see the husband take a significant component of his property in superannuation whereas the wife will have assets which are immediately available, this factor has been taken into account as a matter of some significance.
In short, I am comfortably satisfied that an outcome which distributes the assets 42 per cent to the husband and 58 per cent to the wife is just and equitable.
The combined effect of the parties’ agreement about how assets will be received and my findings are that the wife’s property settlement will give her the following assets:
·Bank B account #471 $715.00
·CBA account #990 $144.00
·CBA account #572 $274.00
·CBA account #580 $7,338.00
·IAG shares $9,585.00
·Household contents $5,712.00
·Jewellery $4,700.00
·REST superannuation $1,455.00
·MLC superannuation $12,912.00
·Partial property settlement $143,000.00
·Paid legal fees $199,245.00
Total $385,080.00
Less
·2008 tax liability $9,767.00
·CSA debt $4,960.00
Total Net Assets $370,353.00
The effect of the property settlement orders is that the wife will receive $1,372,203.00 overall, which means a balancing amount of $1,001,850.00 is to be paid to her.
Calculated on the same basis the husband will receive:
·Property M $1,700,000.00
·CBA account #856 $7,635.00
·SGC account #841 $6,039.00
·CBA account #034 $556.00
·CBA account #159 $5,357.00
·Old Mutual UK $9,464.00
·Bank B Global Wealth $3,370.00
·ATW Trust Account $45,083.00
·DJS shares $4,585.00
·WBC shares $481.00
·Cato Pty Ltd Nil
·The Trust Nil
·Debt due by Trust and Agency T $52,291.00
·KO Pty Ltd Nil
·Contents – Property M $8,384.00
·Jewellery $30.00
·Property H $158,333.00
·Property U $93,333.00
·The companies $3.00
·Agency T $11,000.00
·First State Super $334,540.00
·Paid legal fees $211,687.00
·Trust assets - sold as per balance sheet $16,000.00
Total $2,668,171.00
Less
·CBA Mortgage #218 $515,432.00
·Viridian Line of Credit $157,225.00
Total Net Assets $1,995,514.00
The effect of this is that to give effect to my findings, the husband is required to pay the wife the adjusting amount referred to above. By way of cross-check $1,995,514.00 less $1,001,850.00 is $993,664.00.
These funds are not immediately available and although the husband proposed that he pays the wife within six weeks, he is required to pay considerably more than he sought. Thus it is appropriate that he has three months within which to rearrange his financial circumstances in order to make the payment. Although the wife would wish to receive the payment sooner, it is necessary to strike a just balance between her entitlement to promptly receive the adjustment with affording the husband a proper opportunity to reorganise his financial circumstances and raise that amount.
Pending receipt by the wife of her entitlement pursuant to these orders, because her financial circumstances are unchanged, she is entitled to continue to receive spousal maintenance pursuant to the order made 1 March 2012.
In the event that the husband fails to make the payment within the designated timeframe interest on the amount which remains outstanding calculated in accordance with the Family Law Rules 2004 will be payable by him.
Neither party sought orders by way of enforcement in the event of non-compliance. In these circumstances, none will be made and, if enforcement is required, proceedings can be commenced in the usual way.
So as to protect the property pool pending compliance with these orders, the parties shall be restrained from charging, mortgaging, or otherwise encumbering Property M to a greater extent than as at the date of hearing without first obtaining the written consent of the other party. Upon payment of the adjusting amount by the husband that order is discharged. In a similar vein, the husband shall continue to pay the mortgage, rates and utilities in relation to the Property M.
I certify that the preceding one hundred and sixty eight (168) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Ryan delivered on 7 September 2012.
Associate:
Date: 7 September 2012
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