CHARLES & CHARLES
[2013] FamCA 842
•30 October 2013
FAMILY COURT OF AUSTRALIA
| CHARLES & CHARLES | [2013] FamCA 842 |
| FAMILY LAW – PROPERTY SETTLEMENT – Earlier binding financial agreement set aside by consent – significant time since separation – husband retaining post separation control of the majority of the parties’ assets and financial resources – substantial agreement as to the asset pool for division – legal costs paid to be added back to asset pool for adjustment purposes - determination as to contributions at separation – determination as to contributions post-separation to date of hearing. FAMILY LAW – SPOUSAL MAINTENANCE – Application for periodic order by the wife – consideration of principles to be applied – having regard to orders as to property application dismissed. |
| Family Law Act 1975 (Cth) ss 75(2), 79, 90C |
| Stanford v Stanford [2012] HCA 52 |
| APPLICANT: | Ms Charles |
| RESPONDENT: | Mr Charles |
| FILE NUMBER: | SYC | 5072 | of | 2008 |
| DATE DELIVERED: | 30 October 2013 |
| PLACE DELIVERED: | Parramatta |
| PLACE HEARD: | Sydney |
| JUDGMENT OF: | Foster J |
| HEARING DATE: | 9, 10, 11 and 12 September 2013 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr White SC |
| SOLICITOR FOR THE APPLICANT: | Michael Conley Lawyers |
| COUNSEL FOR THE RESPONDENT: | Mr Williams |
| SOLICITOR FOR THE RESPONDENT: | Meyer Partners Family Lawyers |
Amended pursuant to rule 17.02 of the Family Law Rules 2004
Orders
That within two months from this date the husband do all things necessary and sign all necessary documents so as to cause N Pty Ltd as trustee of the Charles Family Trust to transfer to the wife the real estate properties situate at Suburb L, Suburb W and Suburb B (“the trust properties”) unencumbered and that the husband indemnify the wife from all or any liability for income tax as a consequence of the transfer of the said properties to her either by way of personal income tax or capital gains tax provided always that in respect to the said transfers the wife shall pay any stamp duty payable to effect such transfers.
That pending the transfers provided for in the previous order the husband is restrained from doing any act or thing to interfere with the peaceful use and enjoyment and occupation by the wife of the property at Suburb L.
That the husband forthwith do all necessary things to cause N Pty Ltd as trustee of the Charles Family Trust to assign all of its right title and interest in the furniture furnishings and contents contained in the property at Suburb L to the wife.
That as and from the date of these orders the husband indemnify and keep indemnified the wife from all or any liability to or claim of whatsoever kind and whatsoever nature that may be made against her by the Charles Family Trust or its trustee including any liability that may accrue to the wife by reason of her having been a beneficiary of the said trust.
That a base amount of $250 000 is allocated to the wife out of the husband’s interest in the AMP Flexible Lifetime Superannuation Fund (“the Fund”).
That in accordance with section 90MT(1)(a) of the Family Law Act 1975:
a)The wife is entitled to be paid the amount calculated in accordance with Part 6 of the Family Law (Superannuation) Regulations 2001 using the base amount referred to above; and
b)The husband’s entitlement (and the entitlement of such other person to whom splittable payments may be made) to payments out of the husband’s interest in the Fund is correspondingly reduced.
That the trustee of the Fund shall do all acts and things and sign all such documents as may be necessary to:
a)Calculate in accordance with the requirements of the Family Law Act 1975 and the Family Law (Superannuation) Regulations 2001 the entitlement of the wife created by the previous Order; and
b)Pay the entitlement whenever the trustee makes a splittable payment out of the husband’s interest in the Fund; and
c)That this order has effect from the operative time and the operative time is 4 business days from the date of service of sealed orders on the trustee and the trustee shall be at liberty to apply to the Court in relation to these orders within that 4-day period.
That the husband pay to the wife the sum of $605 951 as follows:
a)The sum of $250 000 within 14 days from the date of these orders;
b)The further sum of $183 426.50 within three months from the date of these orders; and
c)The further sum of $172 524.50 within six months from the date of these orders;
and in default of payment by the due dates the due sums shall accrue interest at the rate prescribed from time to time by the Family Law Rules from the due date until date of payment of the sum due and any interest accrued thereon to the wife.
That the application by the wife for spousal maintenance be dismissed.
The Court otherwise declares that the parties have divided between themselves in specie all their other property including real property, superannuation, their furniture and furnishings, their jewellery and other personal effects, chattels, cash on hand and including their cash at bank and that they have no right title or interest in or to any such items presently in the possession of or under the control of the other.
That save for the issue as to costs otherwise all applications before the Court be dismissed.
Liberty to apply in relation to implementation of these orders.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Charles & Charles 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 PARRAMATTA |
FILE NUMBER: SYC 5072 of 2008
| Ms Charles |
Applicant
And
| Mr Charles |
Respondent
REASONS FOR JUDGMENT
The Proceedings
These are proceedings for the division of property as between the applicant wife and respondent husband.
Both parties are aged 57 years and were born in Europe.
The parties married in Europe in 1983 and in November 1987 migrated to Australia. The parties commenced cohabitation a few months prior to marriage.
There are two children of the marriage; J born in 1984 who is now 29 years of age and V born in 1992 who is now 21 years of age.
It is common ground that neither of the parties brought to the relationship any assets and resources of any significance.
The parties separated initially in 2003 but sometime thereafter the wife returned to reside in the matrimonial home which was also occupied by the husband. The parties were divorced on 3 November 2008.
Subsequent to their initial separation and on 1 October 2004 the parties entered into a financial agreement purportedly pursuant to section 90C of the Family Law Act 1975 (‘the Act’).
By consent on the agreement was set aside and both parties now seek orders as to property adjustment pursuant to section 79 of the Act.
Orders Sought by the Parties
At trial the applicant wife in summary sought the following orders:
a)That subject to the following orders the wife receive a cash payment from the husband so as to effect a 50-50 division of the property of the parties and in default of payment within 14 days from the date of such order the husband pay to the wife the sum of $1 million and cause the [Charles] Family Trust to sell properties at [Suburb W], [Suburb B] and sell the [MM] property … to meet his obligation under this order;
b)That the husband do all things necessary to cause the trustee of the [Charles] Family Trust (“CFT”) to transfer to the wife property situate at [Suburb L];
c)That there be a splitting order in relation to the husband’s interest in the AMP Flexible Lifetime Superannuation Fund as to 100% of the husband’s entitlement in favour of the wife;
d)That otherwise the wife relinquish all of her right title and interest in CFT with the husband to indemnify the wife from all or any liability arising from the affairs of CFT; and
e)That the parties otherwise retain all other assets and financial resources in their respective ownership or entitlement.
At trial the husband sought orders that in summary provided for:
a)A transfer of the properties at Suburb L, Suburb W, and Suburb B from CFT to the wife and that the wife indemnify the husband from any stamp duty or personal taxation liability arising from the transfers and that concurrently with the transfers the husband cause all mortgages secured over the said properties to be discharged;
b)That pending the transfer is the husband be restrained from interfering with the wife’s occupation of the property at Suburb L;
c)That the husband thereafter indemnify the wife in respect to all or any liability arising from the affairs of CFT;
d)That there be a splitting order in the sum of $269 171.75 in relation to the husband’s entitlement in the AMP Flexible Lifetime Superannuation fund in favour of the wife;
e)That otherwise the wife transfer or assign to the husband all her right title and interest in CFT; and
f)That the parties otherwise retain all other assets and financial resources in their respective ownership or entitlement.
Background
During the course of the parties’ relationship the husband was primarily responsible for the organisation and management of the parties’ financial affairs. The wife signed during the relationship of various documents as requested of her by the husband.
At cohabitation the wife was employed as a teacher in Europe and the husband who had tertiary qualifications in engineering was employed in the computer industry.
The wife ceased work shortly prior to the birth of the first child in early 1984 and was on paid maternity leave for about three months and then resumed full-time employment.
In November 1987 the parties relocated to Australia with their young son.
The wife commenced English classes and obtained part time work as a cleaner and thereafter full-time employment as a receptionist on a full-time basis while continuing to undertake some part-time cleaning.
The husband was able to obtain employment in the computer industry.
There was a period of separation in late 1988 between the parties and for a portion of this period the wife occupied home unit premises at D with the child. In November 1988 the parties reconciled and commenced to occupy rented premises at O.
In February 1989 the parties’ son commenced kindergarten.
In 1990 the wife commenced full-time employment as an information manager.
In March 1992 shortly before the birth of the parties’ daughter the wife ceased employment and she remained out of paid employment until April 2004. Thereafter she has had some employment but is now in receipt of disability benefits.
Following the birth of the child the wife was prescribed various medications including Zoloft and Temazepam. In 1996 she was diagnosed with Crohn’s disease.
Companies and the CFT
In August 1992 Y Pty Ltd was set up. The company was thereafter in the business of technology parts sales and distribution. The shareholders of this company at inception were the husband and a Mr Z equally. The husband acquired the shares of the other shareholder in 2000. In June 2002 this company changed its name to H Pty Ltd. The company no longer trades, with all business now conducted through Y Pty Ltd.
In July 1999 H Pty Ltd was set up by the husband. The company was thereafter in the business of technology repairs and spare parts. The shareholders of this company at inception were the husband and a Mr Z equally. The husband’s contribution to start-up capital was from accumulated savings at that time. In September 2000 the husband acquired the interest of his shareholder partner in the companies for the sum of $280 000 to be paid by instalments of $70 000 per annum over four years and the provision of a motor vehicle.
In June 2002 the name of the company was changed to Y Pty Ltd. The husband holds of 20 ordinary shares in the company and since July 2009 the CFT through its trustee holds 20 K-class shares entitling the trust to discretionary dividends. Y Services Pty Ltd holds 20 H-class shares that entitle that entity to the payment of discretionary dividends.
Y Services Pty Ltd was registered in February 2004 and the husband is the sole shareholder. The company ceased trading shortly after its inception. The company is a beneficiary of CFT and a shareholder entitled to discretionary dividends from Y Pty Ltd.
In September 2001 T Pty Ltd was incorporated. N Pty Ltd as trustee of the CFT later acquired over a period a 37.33 per cent shareholding in the company. T Pty Ltd was the owner of two properties in Wollongong that had been the subject of development approval.
In early December 2003 the company negotiated the sale of its shareholding for $5 080 000.
The T Pty Ltd share sale did not proceed with the original purchaser who had defaulted on the contract to purchase. In May 2004 T Pty Ltd contracted to sell its shareholding to another purchaser for $5 080 000. The completion of this sale was not effected and proceedings were commenced by T Pty Ltd seeking damages against the purchaser.
In September 2006 T Pty Ltd entered into a further contract to sell its landholdings for the sum of $5.5 million. A deposit of $250 000 was paid on exchange of contracts. Subsequently the contract was terminated on 1 September 2007 for failure to complete. Prior to that date the purchaser had paid additional interest of about $150 000.
In March 2002 the CFT, a family discretionary trust, was established with N Pty Ltd as trustee. In June 2004 the company Y Services Pty Ltd became a beneficiary of the CFT.
In May 2002 the CFT purchased the property at Suburb L for $138 000. The purchase price partially comprised a mortgage advance in the sum of $124 000. Subsequent to purchase this property was tenanted.
In May 2002 the CFT purchased a second property at Suburb B for $239 000. The property comprised two units. The purchase price of $239 000 was funded by a mortgage advance of $250 000. The property was tenanted after purchase and remains tenanted.
In May 2002 the CFT purchased a further property at Suburb W for $235 000. The property comprises three units and the purchase price was funded in part by a mortgage advance of about $255 000. Subsequent to purchase the property was tenanted.
The family home at RR was used as collateral security for the CFT borrowings.
In December 2003 the CFT acquired 98 shares in T Pty Ltd for $458 000. The purchase of these shares by CFT was funded by way of a mortgage advance from the Commonwealth Bank secured over the family home at RR and several of the CFT properties for $400 000 and the balance by way of loan from Y Pty Ltd.
In July 2009 P Pty Ltd was incorporated. The husband held 16 of the 38 ordinary shares in this company. The purpose of the company was to raise monies to advance funds to T Pty Ltd in order to facilitate a refinance of T’s mortgage of $2.5 million to the St George Bank. In July 2009 the husband paid from his own account $800 000 (being funds previously drawn from Y Pty Ltd) to Y Services Pty Ltd with those funds then being on lent to P Pty Ltd as a contribution towards discharge of the St George Bank facility.
Subsequently in November 2011 Y Pty Ltd lent $430 000 to Y Services Pty Ltd. These funds were then on lent to P Pty Ltd as a further contribution to the refinance of the T Pty Ltd secured debt, making the total of funds advanced to P Pty Ltd as at 30 June 2013 of $1 245 000.
Northern Sydney property
By 1993 the parties purchased the property at Northern Sydney for about $188 950 with the purchase price comprising a mortgage advance of $130 000 and the balance from the parties’ savings.
Separations
In 1993/1994 the wife suffered some health difficulties that continued thereafter and are ongoing. The parties separated for about five months. The wife moved out of the family home with their daughter and the son remained residing with the husband in the home.
The parties again separated again in 1998/1999 for a period of six to eight months.
The relationship between the parties deteriorated in early 2003 and in very late 2003 or early 2004 the wife left the family home at RR and with the child V commenced to reside in a one bedroom apartment at M. The eldest child, then doing his final year of high school studies, remained in the family home with the father.
Financial history
In early 1999 the husband purchased in his name a property at HH for $333 000 with funds borrowed from the business. He moved to this property during the period of separation referred to above.
In January 2000 the wife’s father passed away. The wife’s father’s estate comprised only of a bank account with $27 000. Subsequently these funds were remitted to Australia and absorbed into the parties’ finances.
In February 2000 the husband and wife jointly purchased property at RR for $800 000 with bridging finance and the balance from funds available to the parties at that time. Following the sale of both the Northern Sydney property and the HH property the mortgage balance secured over the new home was $161 274 by late June 2000.
The RR property at the time of purchase was old and in poor condition and only minor renovations had been undertaken to the property by the time the parties separated again in 2003/2004.
In 2003 the husband acquired in his own name shares in T Pty Ltd for $326 960 with funds advanced to him by Y Pty Ltd. In June 2007 he transferred those shares to the CFT.
Subsequent to the parties’ final separation the husband caused the CFT to pay to the wife various payments between early January 2004 and late November 2004 totalling $36 674.
Over the latter part of 2004 there was a considerable correspondence between the parties’ solicitors on the question a property settlement.
On 23 September 2004 the wife signed an agreement pursuant to section 90C of the Act. The husband signed the agreement on 1 October 2004. The agreement noted the parties’ separation on 1 April 2013. In summary the agreement provided for the following:
a)A distribution to the wife from the CFT of $40 000 per annum for a period of 4 and a half years from the date of the agreement in respect of which the wife would be liable for any tax payable on the distribution;
b)That the wife acknowledged that she had no right title or interest in any of the assets or income of the CFT and she was to transfer her shares in the trustee company to the husband or his nominee and resign as a director of the trustee company;
c)That the wife was to receive a motor vehicle;
d)That the husband was to pay to the wife the sum of $550 000 in that she would be entitled to the X property and the husband would meet all payments in respect of the mortgage of $378 000;
e)Payment to the wife of a further sum of $172 000;
f)That the wife transfer her interest in the family home at RR to the husband; and
g)That the wife would retain her then superannuation entitlement.
The husband in his affidavit sworn on 4 September 2013 at [327] now acknowledges that at the time the agreement was entered into there was information provided to the wife that was fundamentally flawed, inadequate and out-dated. He further acknowledged that by the end of the financial year ended 30 June 2004 there had been a significant improvement in the trading position of Y Pty Ltd and that financial documents for the various entities were only provided to 30 June 2002, even though draft returns for the year ended 30 June 2003 were available by May 2004.
Otherwise the husband conceded that in formal disclosure between the parties’ solicitors prior to the financial agreement being signed there was no disclosure by him of the T Pty Ltd investment, in particular the proposed sale of the shareholding in T Pty Ltd for $5.08 million.
Subsequent to the agreement the husband failed to make some repayments in respect of the mortgage over the X property and failed to make some of the periodic payments to the wife as provided for in the agreement over the period until 2009 totalling $26,960.
In November 2004 settlement of the purchase of the home unit property at X was completed for $540 000 with the purchase price part funded by a mortgage of $395 000. The property was held as tenants in common as to 1 per cent to the husband and 99 per cent to the wife to facilitate registration of the mortgage that part funded the purchase.
The wife and the child V occupied this property for a period after purchase with the eldest child remaining living with the husband. The husband provided to the wife $20 000 following the purchase of the X property to facilitate her purchasing furniture and furnishings and painting the premises.
In late 2006 the wife obtained employment as an alternative health practitioner working Monday to Friday. However this employment only lasted three months. Subsequently the wife established a business as an alternative health practitioner renting a room on a weekly basis in a clinic for a period until April 2008.
In March 2008 the husband paid to the wife the sum of $20 000.
In June 2008 the wife rented out the X property and travelled to the United States of America for three months. The child V at this time commenced living with the husband.
Upon the wife’s return to Australia tenants remained in the X property and with the husband’s consent she stayed at the RR family home until September 2008 when she commenced to occupy, with the husbands consent, the Suburb L property owned by the CFT. The wife continued thereafter to attend at the family home at RR as she pleased. She cooked meals for the children and stayed overnight. She describes her relationship with the husband at this time as being on “friendly terms”.
The wife agreed to pay to the husband $600 per month rent for the first six months and thereafter $800 per month. In addition the wife paid the outgoings being water rates, telephone and electricity for the property. Subsequently about $17 000 was spent on renovating that property.
The wife ceased paying rent to the husband in January 2009. The outstanding rent due by the wife is shown in the CFT balance sheet as a debt owing by her to the trust. The husband who controls the trustee will not require that outstanding debt to be paid.
The wife continued to receive rent on the X property of about $2400 a month and her partial distributions from the CFT of about $2600 a month.
In early 2009 the wife became aware that tax returns had not been filed on her behalf since 2005. By this time the wife still had no assets in her name as the X property remained in the joint names of the husband and wife by reason of the mortgage encumbrance.
In March 2009 the wife through her solicitor requested the husband discharge the mortgage over the X property and transfer that property to her name.
On 30 April 2009 the husband facilitated a discharge of the mortgage over the X property and that property was transferred to the wife. At this time the Commonwealth Bank notified the wife’s solicitors that the wife was still a borrower in respect of a mortgage secured over the family home at RR that was collaterally secured over the CFT properties and that this mortgage was in arrears.
On 16 June 2009 the wife transferred interest in the family home at RR to the husband and concurrently with that transfer the mortgages in respect of which the wife was a co-borrower were discharged with a payment of $48 124 and refinanced by him with a further mortgage in his name for $270 000.
On 16 June 2009, the same day the husband mortgaged the RR property in the sum of $270 000, the sum of $105 815 was paid by the CFT to discharge by refinancing the mortgage secured over the trust property at Suburb L that was occupied by the wife. On the same day the sum of $204 590 was paid by the CFT to discharge by refinancing the mortgage over the trust property at Suburb B.
On 16 June 2009 the husband discharged by refinancing the parties’ joint investment loan with the Commonwealth Bank, with a payment of $193 898. The security property for that loan was described as the RR property.
On 16 June 2009 the sum of $355 594 was deposited to the CFT account as a consequence of a further borrowing by the trust.
The CFT refinance of its properties was facilitated by the husband refinancing the existing mortgages over the assets of the trust and the RR home, now in the husband’s name, thus releasing the wife from any liability in relation to same. The CFT borrowing was $666 200.
On 21 July 2009 the husband held in his personal bank account (CBA Net Saver account …) the sum of $822 628. Those funds substantially comprised moneys he had drawn against his loan account in Y Pty Ltd. The balance of this loan account being the debt by the husband to the company as at 30 June 2010 was $705 362.
On 21 July 2009 he deposited $800 000 of those funds into the account of Y Services Pty Ltd. The husband failed to disclose that loan to his company in his financial statement sworn on 26 November 2009 and filed on the same day.
On 21 July 2009 $800 000 was credited to the Commonwealth Bank account of Y Services Pty Ltd. That sum was withdrawn the same day and advanced to P Pty Ltd as referred to above.
On 27 July 2009 the wife’s then solicitor wrote to the husband’s solicitors seeking information as to various asserted non-disclosures by the husband prior to the execution of the financial agreement by the parties in 2004.
On 13 October 2009 the wife commenced these proceedings seeking to set aside the financial agreement and seeking adjustive financial orders under section 79 of the Act.
On 19 April 2010 the X home unit property was sold for $601 000. The wife received from the sale the sum of $597 031.
From the proceeds of sale of the X property the wife spent $416 570 on legal fees and purchased a motor vehicle for $30 000 after trading in her car. Otherwise she has expended the monies on her living expenses. The wife also realised her AMP superannuation fund of $30 000 and applied those funds also to payment of her legal fees.
In October 2010 CFT through its trustee as one of the Plaintiffs commenced proceedings in the Supreme Court of New South Wales seeking damages for professional negligence in relation to the failed sale of shares in T Pty Ltd. Those proceedings were settled for $1 230 000 of which $247 000 was deducted for outstanding legal fees. The net verdict monies were distributed in proportion to the shareholders’ interests in T Pty Ltd. The husband received $130 583 and the CFT $213 286.
In about mid June 2012 the wife became aware that the husband had commenced significant renovations to the family home at RR. These renovations were completed in late 2012. Initially the husband borrowed funds as against his loan account in the companies’ to fund the renovations. In June 2013 the husband received home loan approvals from the CBA in the total sum of $465 000. These funds were applied to discharge the then existing mortgage over the RR home in the sum of $183 000 and to pay the sum of $283 000 in part payment of the husband’s loan account balance with Y Services Pty Ltd.
In June 2012 the wife applied for and was granted a disability pension from Centrelink. In December 2012 she received a payment of $9220 being arrears and presently receives payments in the sum of $760 per fortnight.
In December 2012 the child V moved out of the family home at RR and she is now living independently. The eldest child J remains living in the family home having completed a Bachelor’s degree in 2012.
Following some health issues in early 2012 and again this year the husband did on 14 August 2013 retire from active involvement in the day to day management of Y Pty Ltd. The company Y Pty Ltd, under the control of the husband, has appointed a managing director to conduct the day-to-day affairs of the business.
In the 2013 financial year the husband was paid a salary of $133 959 together with director’s fees in the sum of $50 000. In addition he was paid franked dividends totalling $671 428 primarily from Y Services Pty Ltd. He now does not draw a salary from the company but is entitled to distributions from the CFT trust at his discretion and franked dividends at his discretion. He may in the future elect to pay himself a salary or director’s fees.
On 14 August 2013 the husband caused to be paid to himself $133 925 from the CFT. On the same day the husband withdrew from his CBA super online account the sum of $133 925 and paid that account into his savings account. The husband thereafter paid a total of $180 000 in respect to his legal fees relating to these proceedings.
At trial the husband’s loan account indebtedness to the entities was as follows:
a)Y Services Pty Ltd $268 000
b)Y Pty Ltd $133 248
c)CFT $103 569
The husband’s loan account balance in Y Services Pty Ltd includes $143 600 drawn by him for the payment of legal fees.
As at 1 September 2013 Y Services Pty Ltd and Y Pty Ltd had total cash funds standing to the credit of their accounts of about $983 000.
The Parties’ Evidence
The financial history of the parties cohabitation and thereafter was somewhat convoluted, particularly as a consequence of the interrelationship between the husband’s personal affairs and the corporate entities used by him and the CFT as referred to above.
In comparing the respective parties’ history of the relationship it is clear that in many instances their recollections are in error or inaccurate. The Court has been assisted in the determination of the history by reference to objective documents exhibited to the parties’ affidavits, documents produced on subpoena and later tendered in evidence and particularly the single expert report of Mr A.
The Court is not satisfied that either of the parties has been untruthful or wilfully failed to comply with their disclosure and discovery obligations for the purposes of the hearing. There is no doubt that attempts to prepare financial statements on behalf of the husband were poorly undertaken without any proper reference to the interrelationship between his personal affairs, his companies and the CFT.
The Law
The approach to the determination of an application under s 79 of the Family Law Act 1975 (Cth) is set out in Stanford v Stanford [2012] HCA 52 and that decision was the subject of detailed consideration by the Full Court in Bevan & Bevan [2013] FamCAFC 116.
The Court should firstly identify the present assets, financial resources and liabilities of the parties.
The Court should then consider whether, having regard to the circumstances before it, it would be unjust and unfair not to make orders for alteration of the property interests of the parties having regard to the provisions of s 79(2) of the Act.
The Court can then proceed to consider the contributions by each of the parties as contemplated by s 79(a) – (c) of the Act.
Having determined the contribution-based entitlements of the parties the Court can then consider the various factors set out in s 75(2) of the Act and whether any further adjustment to the parties’ contribution-based entitlements is appropriate.
The Court is then required to consider the justice and equity of the proposed orders and whether in all the circumstances the orders to be made are appropriate.
The Property of the Parties
The Court is firstly required as a starting point to identify the existing legal and equitable interests of the parties in the property, the liabilities and financial resources of the parties at the time of the hearing.
Exhibit EE comprises the working balance sheet settled by the parties and tendered at the conclusion of evidence. There is significant agreement as to the pool and some items of specific disagreement.
Set out hereunder is the agreed existing pool. The Court will give consideration to the disputed items thereafter:
Assets
Husband RR property $1 250 000
Husband Interest in N P/L $ 45 522
Husband Interest in Y Pty Ltd $1 510 000
Husband Interest in H Pty Ltd $ 277 238
Husband Interest in Y Services Pty Ltd $1 920 926
Husband CBA account …13 $ 2848
Husband CBA account …01 $ 2
Husband AMP shares $ 8471
Husband Furniture and furnishings $ 14 300
Husband Funds held in lawyers trust account $ 37 620
Wife AMP shares $ 2039
Wife Westpac account …24 $ 9
Wife Westpac account …64 $ 2211
Wife Westpac account …69 $ 550
Wife Toyota motor vehicle $ 8700
Wife Furniture and furnishings $ 5000
$5 085 436
Superannuation
Husband AMP Flexible Superannuation $ 387 437
Husband Charles Superannuation Fund $ 56 855
$ 444 292
Liabilities:
HusbandRR home loans $ 464 322
HusbandCBA MasterCard $ 14 243
WifeANZ Visa card $ 16 023
Wife ANZ Frequent Flyer card $ 30 520
Husband Loan due to Y Pty Ltd $ 133 248
Husband Loan due to CFT $ 103 569
Husband Loan due to Y Services Pty Ltd $ 267 302
$1 029 227
Just and Equitable to Make Orders?
The Court should determine whether it is just and equitable to make a property settlement order. The Court needs to conclude that it would be unjust or unfair to leave present property rights intact. In many cases this requirement is readily satisfied where the parties are no longer in a marital or de facto relationship and thus, for example, the common ownership or use of property by husband and wife will no longer be possible or the express or implicit assumptions that underpinned existing property arrangements such as the accumulation of assets or financial resources by one for the benefit of both have been brought to an end with the relationship. In particular such a circumstance arises where both parties seek adjustment orders but are unable to agree as to same.
In this matter over the period of the parties’ relationship, which was for some 20 years until separation, the parties accumulated joint property and financial resources. The strong inference being that such assets were accumulated for the common purpose of providing for their life into the future and in all probability ultimately for their adult children. After separation the husband retained the bulk of the parties’ assets and they have been in his control for nearly 10 years since separation. As a consequence of the commencement of proceedings as to property settlement in respect to which both parties seek disparate property adjustment orders identified above, the Court is satisfied that it is just and equitable to make orders as to property adjustment under s 79 of the Act.
The Appropriate Pool for Division
As referred to above the parties were in disagreement as to various items comprised in Exhibit EE and whether those disputed items should be included in the pool as between the parties for adjustment. These items are discussed below.
Paid legal fees
Counsel for the wife submits that paid legal fees for both parties should be included in the pool for division. Paid legal fees for the husband total $550 536 but after allowing for the funds withdrawn from CFT by the husband and debited to his present loan account that represents an asset to the trust the net sum is $355 447.
Paid legal fees for the wife total $469,936 and was substantially paid by her from the proceeds of sale of the X property received by her.
In Omacini & Omacini [2005] FamCA 195 Full Court identified three clear categories of cases where it was appropriate to notionally add back to the pool assets which were said by the Full Court to “no longer exist”. The three categories were:
(a) monies spent on legal fees;
(b) monies disbursed by way of premature distribution of matrimonial assets;
(c) monies lost by one party either during or after the marriage as a result of a course of conduct designed to reduce or minimise the effective value or worth of matrimonial assets or as a result of reckless negligent or wanton behaviours which had the effect of reducing or minimising the value of assets.
In Gollings & Scott [2007] FamCA 398 the Full Court said:
68. As a general rule once the parties have separated, subject to obligations of maintenance and support, and subject to the type of considerations described in Kowaliw (1981) FLC 91-092 relating to waste, each party is entitled to get on with his or her life independent of the other. The husband would be free to go about spending the money he earned post-separation in the furtherance of his relationship with Ms Y if he chose to do so providing that at the same time he properly met his obligations towards his wife and children for their due support. It would not normally (emphasis added) be appropriate some years after separation to require each of the parties to account for any monies they had spent post-separation so as to determine whether or not that expenditure was reasonably necessary for their own self-support, and to the extent that it was not, to determine whether it would be proper to add it back into the pool of assets available for division between the parties..
In C & C (1998) FamCA 143 the Full Court said:
45… In a case involving the magnitude of the assets of this case, in our view it is unreasonable to conduct a microscopic examination of each of the parties’ items of post-separation expenditure with a view to determining whether or not it is appropriate that they be brought into account in dividing up the asset pool between them. The cases which deal with notional add-backs are generally examples of circumstances in which it would be clearly unjust and inequitable not to take those matters into account
46. Whilst not seeking to place a fetter upon the exercise of discretion of a trial judge in individual cases, it seems to us that the concept of adding monies reasonably (emphasis added) disposed of back into the pool ought to be the exception rather than the rule. The parties are entitled to reasonably conduct their affairs post-separation in a manner that is consistent with properly getting on with their lives.A number of subsequent authorities have said that, whilst it is ultimately a matter for the exercise of discretion of the trial judge, the use of add-backs should be exceptional.
In Bevan & Bevan (supra), the Full Court (per Bryant CJ and Thackray JJ) said as follows in relation to this issue at [79]:
79. We observe that “notional property”, which is sometimes “added back” to a list of assets to account for the unilateral disposal of assets, is unlikely to constitute “property of the parties to the marriage or either of them”, and thus is not amenable to alteration under s 79. It is important to deal with such disposals carefully, recognising the assets no longer exist, but that the disposal of them forms part of the history of the marriage – and potentially an important part. As the question does not arise here, we need say nothing more on this topic, save to note that s 79(4) and in particular s 75(2)(o) gives ample scope to ensure a just and equitable outcome when dealing with the unilateral disposal of property.
Ultimately the question of notional add backs or whether circumstances are relevant for consideration under section 79(4) or section 75(2)(o) of the Act is a matter for judicial discretion in all of the particular circumstances of the case, with the Court mindful of the general guiding principle that “add backs” are more the exception than the rule.
In this matter the wife after separation was in a far inferior financial position to that of the husband. Ultimately by reason of the circumstances relating to the financial agreement entered into between the parties and thereafter it was necessary for the wife to commence the present proceedings and indeed the husband at the outset of the hearing consented to an order that the financial agreement be set aside.
As a consequence of the wife’s financial position post separation it was necessary for her to have recourse to capital from the proceeds of sale of the X property to fund her legal fees and expenses.
On the other hand the husband retained significant financial resources in the form of the business and other entities retained by him and the family home having significant value. In the event that he had not provided for himself funds from the CFT and the financial resources represented by his business interests then the monies expended on legal fees would have remained to some extent reflected in the present pool of assets.
The Court is satisfied that the circumstances referred to above bring this matter into the category of the exception to the general rule identified in Bevan & Bevan (supra).
Legal fees for both parties will be added back to the pool for division.
Renovations to the RR property post separation – waste
The wife contends that the sum of $126 711 should be added back to the pool as against the husband for division representing a sum in respect of which the renovations did not add value to the RR property.
There is no evidence to support this contention.
The husband expended significant funds in relation to the renovation of the property post separation and the present value of the property is included in the pool at $1 250 000.
The sum contended for by the wife will not be added back to the pool as against the husband.
Funds from Charles Superannuation Fund
The wife contends that the sum of $195 089 should be added back to the pool as against the husband representing his entitlement in the Charles Superannuation Fund. The sum contended for approximately represents the husband’s entitlement in the fund prior to his withdrawal of funds as referred to below.
The husband withdrew portion of the funds from his superannuation entitlement and along with other funds borrowed from the CFT made a payment on account of his legal fees in the sum of $180 000. After withdrawal of portion of his superannuation entitlement in the Charles Superannuation Fund a balance of $56 855 remains in the fund.
By reason of the proposed add back of each of the party’s paid legal fees and that the balance of the fund remains in the pool for the Court’s consideration this contention is rejected.
Husband’s Unpaid Tax
The husband contends for the inclusion of his underpaid tax in relation to the 2013 tax year in the sum of $125 973 as a relevant liability in the pool.
The reason for the non-payment of income tax was not made clear by him in his evidence. The husband asserts an overall outstanding income tax debt of $160 652.11. His income for the 2013 tax year was in excess of $800 000 and substantially comprising franked dividends. His assessment for the 2013 tax year dated 2 September 2013 evidences a tax liability of $90 277 payable by 22 April 2014.
The husband has had available to him his taxable income and there is no reason put forward as to why the wife should bear portion of his liability by including the sum asserted in the pool. The husband’s contention is rejected.
Post separation credit card debts
It was contended on behalf of the husband that post separation credit card debts that are included in the pool set out above should be excluded for both parties as there was no evidence as to the period of, the extent of and the nature of the expenditure represented in the present debit balances.
In the event that the credit card debts are excluded from the pool for division it is still incumbent on the Court to have regard to the parties present assets and financial resources and liabilities in the context of section 75(2).
In circumstances where there the financial circumstances and financial resources of the parties have been so disparate since separation the Court will have regard to the credit card liabilities in the context of the pool for division.
The wife’s inheritance
The wife has a prospective interest in her late grandmother’s estate that comprises a one bedroom property in central Europe. The wife’s entitlement in the estate is the subject of dispute as between herself and the other two beneficiaries. The husband contends that sum of $10 000 should be included in the pool of assets for division.
The ultimate circumstances of the inheritance are unclear and accordingly the Court will have regard to this prospective resource in the context of section 75(2) of the Act.
Accordingly the resultant pool for consideration is set out below:
Assets
Husband RR property $1 250 000
Husband Interest in N Pty Ltd $ 45 522
Husband Interest in Y Pty Ltd $1 510 000
Husband Interest in H Pty Ltd $ 277 238
Husband Interest in Y Services $1 920 926
Husband CBA account …13 $ 2848
Husband CBA account …01 $ 2
Husband AMP shares $ 8471
Husband Furniture and furnishings $ 14 300
Husband Funds held in lawyers trust account $ 37 620
Husband Paid legal fees $ 355 447
Wife Paid legal fees $ 469 936
Wife AMP shares $ 2039
Wife Westpac account …24 $ 9
Wife Westpac account …64 $ 2211
Wife Westpac account …69 $ 550
Wife Toyota motor vehicle $ 8700
Wife Furniture and furnishings $ 5000
$5 910 819
Superannuation
Husband AMP Flexible Superannuation $ 387 437
Husband Charles Superannuation Fund $ 56 855
$ 444 292
Total: $6 355 111
Liabilities:
HusbandRR home loans $ 464 322
HusbandCBA MasterCard $ 14 243
WifeANZ Visa card $ 16 023
Wife ANZ frequent Flyer card $ 30 520
Husband Loan due to Y Pty Ltd $ 133 248
Husband Loan due to CFT $ 103 569
Husband Loan due to Y Services Pty Ltd $ 267 302
$1 029 227
Net: $5 325 884
Assessment of Contributions
Having determined that it is just and equitable to make orders in that it would be unjust or unfair not to, the Court can then consider the contributions made by the parties as defined in s 79(4)(a) to (c).
It was contended by counsel for the wife that as at separation contributions in all their different characters should be regarded as equal between the parties. It was then contended that in considering contributions post separation that overall contributions would favour the husband in the range of 55 to 60 per cent and the wife in the range of 40 to 45 per cent.
It was further contended on behalf of the husband that the Court should adopt a “two pools approach”, making a finding as to contributions as at the date of the financial agreement 1 October 2004 and thereafter a finding as to contributions after that date. With respect such a contention does not involve a two pools approach but simply an assessment by the Court of the parties’ relevant contribution entitlements over two particular periods so as to make an assessment as to overall contribution-based entitlements to date of hearing.
It was contended on behalf of counsel for the husband that up to October 2004 that being a short while after separation contributions should favour the husband as to 55 per cent to him and 45 per cent to the wife.
Thereafter it was contended by counsel for the husband that in considering post separation contributions the Court would focus upon the husband’s contributions to the growth of the asset pool in terms of the history post separation as set out above. It was contended on behalf of the husband that the wife post 2004 made no material contribution to the accretion of the asset pool. It was further contended that the wife had dissipated funds from the sale of the X property and that apart from payment of her legal fees there are significant funds unaccounted for.
In general terms the underlying asset base of the CFT and the husband’s retention of the RR home remains much the same as it was in 2004. The husband has had recourse to the financial resources available to him by reason of his retention of the RR property, the trust and the associated entities. Underlying property values have contributed to the increase in the pool over the ensuing nine years as has the husband’s ability to make significant contributions to his superannuation funds by reason of the assets he retained in 2004.
It is contended by counsel for the husband that overall contributions should favour the husband as to 72 per cent and as to the wife 28 per cent.
In considering the history of the relationship as set out above the initial period up to 2004 was about 20 years there is no doubt in that time that the husband was the primary income earner and applied his time and attention to the businesses conducted by him. He, to the extent afforded to him by reason of his commitments to the business, assisted the wife in her homemaker and parenting role in relation to the two children of the marriage. The wife from time to time had some employment during this period but since 1993 it appears has suffered ongoing health difficulties.
Overall contributions during this first period up until 2004 should be regarded as equal.
From 2004 in relation to the asset pool the wife made no material contribution. She received over a period distributions from the CFT and rent from the X property which provided to her an income for her day-to-day support.
In 2004 the eldest child was 20 years of age and remained residing with the husband. The youngest child was 12 years of age at this time and remained substantially in the wife’s care until June 2008 at which time the child was 16 years of age. Thereafter the child has resided with the husband.
However the Court cannot disregard the husband’s ongoing contribution to the businesses that provided significant benefits to both parties after 2004. The single expert evidence reveals that the business was on a sound footing by 2003 and the husband has maintained that basis substantially until hearing.
In considering the history after 2004, contributions should be seen overall to the date of hearing as favouring the husband as to 62.5 per cent and to the wife 37.5 per cent. Thus the wife’s contribution based entitlement is $1 997 206.
Section 75(2) Considerations
The Court has had regard to all of the factors in s 75(2) but particularly to each of the considerations set out below as relevant:
Age and Health
The wife is presently aged 57. She has historically suffered from various health issues and is presently in receipt of a disability benefit from Centrelink.
The husband is presently aged 57. He initially presented to his general practitioner in late 2003 suffering from depression and anxiety by reason of the marriage breakup. Some years later in 2009 he again presented to his general practitioner complaining of severe insomnia as a consequence of the stressful Court proceedings. In September 2011 he again complained of difficulties coping with stress of Court proceedings and was prescribed Xanax. In May 2012 he again attended upon his general practitioner complaining of worsening mood and panic attacks. He was prescribed antidepressants and psychological counselling was suggested. On 15 August 2013 the husband again presented to his general practitioner with feelings of guilt of underperforming at his work and anhedonia. He was prescribed Xanax to help his anxiety and agitation. It is perplexing that the husband on 15 August 2013 did not mention to his general practitioner that he had retired from work the day before the consultation.
There is no evidence that the husband is precluded from employment by his health circumstances.
Income, Property and Financial Resources
The property and financial resources and liabilities of the parties for division are set out above.
The husband asserts that he has now retired from employment with his company. However he has the ability to continue to receive dividends from the company and or distributions either by way of income or capital from the CFT.
The husband has capacity for employment that he chooses not to exercise as his health circumstances are not suggested to preclude him from working.
The wife is presently in receipt of disability benefits from Centrelink and has had a long history of varying illnesses and conditions. She has been out of any mainstream workforce for many years and has not worked in a meaningful way for quite some time. At best she may have a residual capacity for modest part-time work.
The husband proposes that the wife receive the property she occupies and two income producing properties presently owned by CFT. They will provide to the wife a modest ongoing rental income and if she chooses to sell the properties, a reasonable investment sum. The husband proposes that there be a superannuation split in favour of the wife that will provide to her a future resource. Otherwise the wife proposes that she receive a further cash sum to meet her entitlement as determined by the Court. That sum will be available to the wife as an investment sum.
Commitments for self-support
Neither party has an obligation to care for another.
The wife’s financial statement discloses expenses necessary for her self-support in the sum of $542 per week. She was not cross examined on these expenses. Her only income is her disability pension in the sum of $386 per week.
The husband’s most recent financial statement provides no details as to his expenses necessary for his self-support other than his fixed expenses for mortgage payments and rates and taxes for the RR property. He asserts other expenditure in the sum of $890 per week but provides no details of how that amount is comprised.
Superannuation and Pension Entitlements
The husband’s remaining superannuation entitlements are set out above. Otherwise the wife is in receipt of a means tested government pension.
The husband can still facilitate contributions to his super fund from income he can derive from dividends or trust distribution if not from salary from employment.
The wife has no accumulating superannuation from employment and has no base sum to which to add to. The husband seeks a significant superannuation split in favour of the wife.
Discussion
Counsel for the wife focused on the issue of the parties’ disparity in health circumstances and the husband’s ability should he so wish to remain in employment. Otherwise it was contended that the disparity in financial resources available to the parties was deserving of recognition in favour of the wife.
Counsel for the wife contended for an adjustment by reason of section 75(2) factors between 5 and 10 per cent in favour of the wife.
Counsel for the husband submitted that in the event that the parties’ legal fees were not added back to the pool of assets for division there should be an adjustment by reason of section 75(2) considerations of 7.5 per cent in favour of the wife. It was contended that such adjustment was warranted by reason of health and earning capacity considerations.
The wife on a contribution basis has an entitlement to 37.5 per cent of the asset pool being equivalent to the sum of $1 997 206.
The net asset pool for division is in the sum of $5 325 884. A 5 per cent adjustment in relation to that pool is $266 294 and in effect creates a significant disparity between the parties of $532 558 in favour of the wife.
Having regard to the considerations set out above the Court is satisfied that an appropriate adjustment under section 75(2) of the Act is 2.5 per cent in favour of the wife, creating a disparity of $266 558 in favour of the wife.
Overall the wife’s entitlement is thus the sum of $2 130 353.
The wife presently has the following assets and liabilities:
Wife Paid legal fees $ 469 936
Wife AMP shares $ 2039
Wife Westpac account …24 $ 9
Wife Westpac account …64 $ 2211
Wife Westpac account …69 $ 550
Wife Toyota motor vehicle $ 8700
Wife Furniture and furnishings $ 5000
$ 488 445
Wife ANZ Visa card $ 16 023
Wife ANZ frequent Flyer card $ 30 520
$ 441 902
Just and Equitable: Appropriate Orders
It is contended on behalf of the wife that the Court should fashion orders that provide for a transfer to the wife from the CFT of the Suburb L property that she presently occupies, retention by her of assets in her possession or entitlement including notional property and an adjustive cash payment from the husband to the wife.
The husband contends that the entitlement of the wife should comprise a transfer to her of the CFT trust properties at Suburb L, Suburb W and Suburb B unencumbered and that otherwise there be a splitting order from his superannuation in favour of the wife.
The real estate properties owned by CFT have the following values:
a)Suburb L $260 000
b)Suburb W $262 500
c)Suburb B $310 000
$832 500
The wife presently has an entitlement to the sum of $441 902 as referred to above. In the event that there is a splitting order in the sum of $250 000 in favour of the wife and she receives the Suburb L property ($260 000) then her remaining entitlement is in the sum of $1 178 451..
The transfer to the wife of the additional rental properties from the trust would see her have a secure source of income, subject to her own decision to realise those properties in due course. Such a transfer would then reduce the cash payment component payable by the husband to $605 951.
Subject to an initial cash payment this sum should be paid over a period to facilitate the husband making appropriate arrangements for finance and/or to realise resources within the CFT or his business entities.
There is no evidence before the Court as to any capital gains tax issues arising out of the prospective transfer of the real estate properties to the wife nor any evidence as to income tax implications as a consequence of the properties being received by the wife by way of capital distribution from the trust. In the absence of any evidence it is appropriate that the husband indemnify the wife from all or any income tax liability arising as a consequence of the transfers to her.
In the event that any stamp duty is payable on the transfers of the subject properties to the wife she will be required to pay that stamp duty from the preliminary cash payment to be received by her from the husband.
The Court will make orders accordingly.
I certify that the preceding one hundred and seventy-four (174) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Foster delivered on 30 October 2013
Associate
Date: 30 October 2013
Key Legal Topics
Areas of Law
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Family Law
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Equity & Trusts
Legal Concepts
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Remedies
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Costs
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Constructive Trust
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Injunction
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Res Judicata
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