Coleman & Coleman

Case [2021] FedCFamC1F 126

FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 1)

Coleman & Coleman [2021] FedCFamC1F 126

File number(s): BRC 15612 of 2019
Judgment of: CAREW J
Date of judgment: 13 October 2021
Catchwords:

FAMILY LAW – PROPERTY – Contributions – Where each party claims to have made greater contributions than the other – Where there are a number of disagreements about balance sheet items such as the add back of the husband’s insurance payout to meet his legal fees and the value of unsold apartments – Where the Court is concerned with a holistic assessment of the myriad of contributions made by each party throughout the relationship – Where the contributions made by the parties are many and varied and should be considered equal – Where there is to be an adjustment of 2.5 percent in favour of the husband to count for s75(2) factors – Where the property will be divided so to reflect the husband receiving 52.7 percent and the wife receiving 47.5 percent.

FAMILY LAW – PROPERTY – Equitable interest –
Non-disclosure – Where the husband alleges that the wife had an equitable interest in her father’s business – Where the husband alleges that the wife has failed to account for a half share of the proceeds of sale in the proceedings and given the absence of proper disclosure the Court should not be overly cautious in making adverse findings against the wife – Where there can be little doubt that the wife’s involvement was more than a normal employee but can be explained by loose family arrangements giving the impression of proprietary interest – Where it is found that on balance the wife did not have an equitable interest in the business – Where open to infer that the wife nevertheless has available to her funds that have not been disclosed.

Legislation:

Corporations Act 2001 (Cth)

Family Law Act 1975 (Cth)

Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)

Income Tax Assessment Act 1977 (Cth)    
Cases cited:

Ascot Investments Pty Ltd v Harper (1981) 148 CLR 337

Black & Kellner (1992) FLC 92-287;

Chang and Su (2002) FLC 93-117

Chorn & Hopkins (2004) FLC 93-204

Dawes & Dawes (1990) FLC 92-108

Dickons & Dickons (2012) 50 FamLR 244

Falcken & Weule [2019] FamCAFC 140

Gould & Gould (1996) FLC 92-657

Gould and Gould (2007) FLC 93-333

Grier & Malphas (2016) 55 Fam LR 107

Hamza v Magdi [2011] FamCA 206

In the Marriage of Aleksovski (1996) FLC 92-705

In the marriage of Monte (1986) FLC 91-757

Jabour & Jabour (2019) FLC 93-898

Lenardi v Lenardi [2011] FamCA 266

Miller v Miller [2009] FamCAFC 121

Rodgers & Rodgers (No 2) (2016) FLC 93-712

Stanford v Stanford (2012) 247 CLR 108

Steinbrenner & Steinbrenner [2008] FamCAFC 193

Tomasetti & Tomasetti (2000) FLC 93-023

Trevi & Trevi (2018) FLC 93-858

Wallis & Manning (2017) FLC 93-759

Weir & Weir (1993) FLC 92-338

Williams & Williams [2007] FamCA 313

Yates v Yates [2012] FamCAFC 138

Number of…

Continue reading Coleman & Coleman

Sign in free to access the full text

Details
AGLC
Coleman & Coleman [2021] FedCFamC1F 126
Case
[2021] FedCFamC1F 126
Decision Date

CaseChat Overview and Summary

In the case of Coleman & Coleman, the parties were married in 2003 and separated in May 2018. The husband, who is self-employed, and the wife, who is a homemaker, have three children. The legal dispute primarily concerns the division of assets and property, as well as the contributions each party made to the marriage. The wife has alleged that the husband has not fully disclosed the extent of his assets, and the court must consider whether any undisclosed assets should be taken into account as a factor under section 75(2) of the relevant legislation.

The court was required to determine the extent to which the husband's undisclosed assets, if any, should be considered in the division of property. Additionally, the court needed to weigh the various contributions made by each party to the marriage, including both financial and non-financial contributions, and decide if an adjustment should be made to either party based on section 75(2) factors. These factors included the likely future earning disparity between the parties and the unexplained expenditure by the husband.

The court found that while the wife had not fully disclosed all her assets, it was not possible to determine the exact value of any undisclosed assets. However, the court did consider this issue as a factor under section 75(2). Regarding contributions, the court concluded that both parties made significant contributions to the marriage, both financially and non-financially, and therefore considered the contributions to be equal. The court also found that an adjustment should be made in favour of the wife due to the likely future earning disparity. The court did not find the husband's unexplained expenditure to be extravagant or unexplained, and thus did not consider it necessary to make an adjustment for this factor.

The court ordered that the assets be divided between the parties, taking into account the various factors considered under section 75(2). The court also noted that the contingent taxation liabilities should be considered as a factor in the division of assets.

Orders

Orders of the court

Full text does not contain this section.

Background

Background to the litigation

Prior to considering the significant issues, it will be useful to provide some background and set out the applicable legal principles.BACKGROUND The husband and wife commenced a relationship in about 1997 but did not commence cohabitation until 2001. They married in 2003 and separated in May 2018. The husband left the former matrimonial home in July 2018. The husband was born in 1966 and is self-employed in his own business, N Pty Ltd (“NPL”), in partnership with another professional. The wife was born in 1969. The wife is a homemaker and works 20 hours per week for a business, P Pty Ltd (“PPL”). The parties have three children, namely, X born in 2004, Y born in 2005 and Z born in 2007. Z suffers from diabetes. All three children continued to live with the wife after separation until early 2019 when Y commenced to live with the husband. The children see little of the parent with whom they do not live. The wife attends to the financial needs of X and Z. The father attends to the financial needs of Y. The wife worked full time until 2007, taking only a few weeks off work before and after the birth of X and Y. The wife reduced her working week to four days shortly before the birth of Z and then took some time off. She returned to employment in 2008 working two days per week. The husband obtained his professional qualifications in 1990 and established his own practice, R Company, in 1992. He operated his practice from home until 1997. In 1997, the husband established a partnership with Mr T and Mr U known as S Company. Mr T left the partnership in 2000 and NPL thereafter continued the practice. The wife commenced to work for her father’s business, O Company, in 1993. This was a financial services business which the wife initially joined while waiting to be offered a position as an educator, but never left. The wife remained in the business until it was sold in 2007 and continues to work for the new owner, two days per week. The wife’s father operated the business via a corporate structure i.e. V Pty Ltd as trustee for the V Family Trust trading as O Company (“OPL”). Commencing in 1990 the husband and three other partners bought land and developed properties which were sold in 1992. During the period 19 April 1990 to 6 February 2000 the husband and his brother purchased vacant land at four sites through a company owned by the husband, his parents and his brother. The husband and his brother developed and sold them. In 1997 the husband incorporated K1 Pty Ltd and he remains the sole director and shareholder. Also in 1997, the husband purchased land with partners and built three developments which were sold in 1999. In 1998, the husband inherited a quarter interest in a property at Suburb W. The property was rented for a period before it was sold in 2002 for $254,000. The husband contends that he received about $63,000 upon sale. Also in 1998, the parties purchased in joint names as tenants in common, a property in Suburb B, Queensland (“the Suburb B property”) for $180,000. The husband and wife contributed equally to the deposit and obtained a joint loan for the balance. The house was rented out until 2011 when the house was demolished and a new house constructed in 2015. The husband was involved in the construction of the home and completed some physical work such as landscaping. The husband and Y live in the Suburb B property.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

The conduct of the wife and her father in relation to the operation of bank accounts and in relation to the operation of OPL certainly raise more questions than they answer and it seems to me that, having established a failure to comply with her obligations to make full and frank disclosure, it is open to infer that the wife has available to her funds that have not been disclosed although determining a quantum is impossible. In my view this issue is a matter that should be taken into account as a s 75(2) factor. Conclusion on contributions As acknowledged by the parties, their respective contributions were many and varied i.e. there were a “myriad” of contributions. Each party introduced assets of value and each party made direct and indirect financial contributions throughout the marriage, although the husband’s direct and indirect financial contributions likely exceeded the wife’s. Each party also made contributions to the welfare of the family, although the wife’s contribution likely exceeded the husband’s at least from 2007. In the main, each party contributed to the best of their abilities in their respective and overlapping spheres. When making the leap from qualitative to quantitative,[33] I conclude that contributions should be regarded as equal. [33] Steinbrenner & Steinbrenner [2008] FamCAFC 193 at [234]. WHEN CONSIDERING S 75(2) FACTORS, WHAT ADJUSTMENT, IF ANY, SHOULD BE MADE TO EITHER PARTY? The following matters have been identified by the parties as relevant factors when considering s 75(2):(a)The likely future earning disparity between the husband and the wife; It is accepted by the husband that there will continue to be an earning disparity favouring him even if the wife increases her employment and as such he concedes an adjustment of five percent should be made in the wife’s favour for this factor. While that concession is made by the husband, I do not propose to apportion a percentage to each party for each relevant s 75(2) factor that may favour them. It is not a requirement of s 79 of the Act and it is an approach disapproved of by the Full Court.[34] All factors relevant under s 75(2) will be taken into account and an overall adjustment made if required after weighing each factor. (b)The unexplained expenditure by the husband of $142,650 enabled by the increase in his personal inter-entity loans in the period 30 June 2018 to 30 June 2020 in circumstances where the husband continued to receive his salary but also had additional funds comprising trauma insurance of $243,199 (as noted earlier in these Reasons, it is more likely that the sum for the trauma payout was $191,000 and the balance income protection payments) and funds from an offset account of $158,095 (the wife retained a similar sum from the offset account);[34] Dickons (n 19) at 250, [23]. The husband contends that an allegation of ‘unexplained expenditure’ was not an issue addressed by him in his material because it was not raised as an issue in the proceedings until very late. He disputes any extravagant or unexplained expenditure and contends that his expenditure is transparent as all funds have gone into and out of the one account – #...91 (Exhibit 14 was tendered in answer to challenges to his expenditure for the period from 23 May 2020 to 30 June 2021). The husband also relies upon evidence from his accountant that his personal loan accounts increased by $105,315 not $142,650 and that $82,819 relates to interest charged on the Division 7A loans and $19,030 related to vehicle expenses. The husband’s invitation for the wife’s accountant to contact his accountant to clarify the husband’s loan accounts was not taken up by the wife.

Ratio Decidendi

Legal Principle Established

I note Mr U’s subsequent evidence that he does not oppose a dividend being declared to enable the payout of the loan owing by Coleman Holding Trust to NPL. Whether the loans are repaid now or in the future, the wife concedes that it is a “significant matter”[12] that needs to be taken into account, but contends that as she wishes to retain the Suburb A property the contingent liabilities should be taken into account as a s 75(2) factor. As long as the loans are taken into account, I do not propose to accede to the husband’s request that the wife be precluded from retaining the Suburb A property, which is an investment property producing an income and a property she sees advantage in retaining. I will take the contingent taxation liabilities into account as a s 75(2) factor. Item 54: Should there be any addback for the husband’s paid legal costs from his alleged post separation earnings and insurance receipts? [12] Rodgers & Rodgers (No 2) (2016) FLC 93-712 at 81,505 (“Rodgers”). Whether or not legal fees are notionally added back is a matter for the discretion of the trial judge.[13] The source of the funds is of course important.[14] The Full Court of the Family Court of Australia (“the Full Court”) in Trevi & Trevi[15] said at [34]:The guidelines emerging from Chorn should be read together and read conformably with the Full Court authorities upon which they are based. That being so, the delineations there referred to — “the funds used existed at separation … such that both parties can be seen as having an interest in them”; or “funds used to pay legal fees have been generated by a party post separation from his or her own endeavours” or received by a party “in his or her own right (for example, by way of gift or inheritance)” - cannot be seen as determinative of the exercise of discretion but, rather, as informing it.[13] Chorn & Hopkins (2004) FLC 93-204 at 79,322, [56] (“Chorn”)[14] Ibid. [15] (2018) FLC 93-858 at 78,455, [34] (“Trevi”). The wife argues that given the husband’s expenses as set out in his financial statement, it cannot be the case that he has paid the legal fees of $234,864 from post separation income. Although the husband’s weekly average income is $4,363 and his weekly personal expenditure is $2,554 i.e. he has an apparent surplus of $1,809, the husband agreed during cross-examination, that his average weekly dividends from K1 Pty Ltd of $1,634, “are required to be paid in order to meet the Division 7A [loan] obligations” and that without the dividends his income and expenses are almost “line ball”. On 25 January 2020 the husband was admitted to hospital suffering from a serious virus which resulted in him spending 10 days in an ICU in an induced coma and on a ventilator. He was moved from ICU on 11 February 2020 and discharged from hospital on 17 February 2020. While the husband was able to undertake some work at home after his discharge, he did not return to his workplace until 1 July 2020. He received a lump sum trauma insurance payout of $191,441 on 11 August 2020. The husband received additional lump sums totalling $51,747 from the same insurance company which I assume represent his income protection payments. The husband’s entitlement under his trauma insurance cover was triggered by his stay in ICU for an extended period.