Cordwell & Cordwell (No. 2)
[2021] FamCA 552
•29 July 2021
FAMILY COURT OF AUSTRALIA
Cordwell & Cordwell (No. 2) [2021] FamCA 552
File number(s): PAC 6137 of 2018 Judgment of: FOSTER J Date of judgment: 29 July 2021 Catchwords: FAMILY LAW – PROPERTY – property adjustment – where discussion of applicable principles – where substantial agreement as to contribution entitlements – where consideration of s 75(2) matters – where significant asset pool – where adjustment in favour of wife of 2.5 per cent – orders made accordingly. Legislation: Family Law Act 1975 (Cth) s 75(2), 79 Cases cited: Bevan & Bevan [2014] FamCAFC 19
Chapman & Chapman [2014] FamCAFC 91
Farmer and Bramley [2000] FamCA 1615; (2000) FLC 93-060
Horrigan & Horrigan [2020] FamCAFC 25
Kessey and Kessey (1994) FLC 92-495Stanford v Stanford [2012] HCA 52
Number of paragraphs: 111 Date of hearing: 26 April 2021 and 5, 6 and 7 July 2021 Place: Parramatta Counsel for the Applicant: Mr Clarke Solicitor for the Applicant: LCI Legal Counsel for the Respondent: Mr Gardiner Solicitor for the Respondent: Coleman Greig Lawyers ORDERS
PAC 6137 of 2018 BETWEEN: MS CORDWELL
Applicant
AND: MR CORDWELL
Respondent
ORDER MADE BY:
FOSTER J
DATE OF ORDER:
29 JULY 2021
THE COURT ORDERS THAT:
1.That the interim order for spouse maintenance be discharged as and from the date to which it stands paid.
2.Within two months from this date the husband do all things necessary to transfer to the wife his interest in the properties situate at D Street, Suburb J (“the D Street property”) being Folio Identifier … and 1 V Street, Suburb AA (“the 1 V Street property) being Folio Identifier … and do all things necessary concurrently with such transfers to discharge all or any mortgage liability secured against the said properties.
3.Concurrently with the transfer of the said properties to the wife, the husband pay to the wife the sum of $870,539.
4.The husband and wife do all things necessary to authorise and direct that the net proceeds of sale of the parties’ interest in the property at B Street, Suburb C (“the B Street property”) be paid as to the wife $50,000 and as to the balance in reduction of the mortgage secured over the D Street property.
5.The husband and wife do all things necessary to authorise and direct that the parties’ interest in the proceeds of sale of the property at 1 R Street, Suburb T (“the 1 R Street property) be paid to the wife or as she may, otherwise, direct in writing.
6.The husband do all things within 14 days from this date necessary to transfer or cause to be transferred to the wife the following items unencumbered:
(a)Motor Vehicle 3;
(b)Motor Vehicle 2;
(c)Ski boat and trailer;
(d)Aluminium boat and trailer;
(e)Bobcat;
(f)Double wheel axle motor bike trailer;
(g)Tractor;
(h)Lawnmowers;
(i)Turf mower;
(j)Slasher.
7.The wife concurrently with the husband’s compliance with Orders 1 and 2 do:
(a)all things necessary to resign any office held by her in the J Pty Ltd group and transfer to the husband her shareholding and any other interest she may have in the J Pty Ltd group;
(b)do all things necessary to transfer to the husband her interest in the properties:
(i)K Street, Suburb Q (“the Suburb Q property”);
(ii)L Street, Suburb C (“the L Street property”);
(iii)N Street, Suburb C (“the N Street property”);
and concurrently with such transfers the husband do all things necessary to refinance the mortgages secured over the said properties so as to remove the wife from all or any liability therefore and indemnify the wife from all or any liability arising from the trading affairs of the J Pty Ltd group including any loan account liability and any liability to the Australian Taxation Office.
8.Otherwise, the husband and wife be declared solely entitled to such items of personalty that remain in their respective possession or entitlement, save that if the husband contends that any item in the possession of the wife at the D Street property, not being the subject of the previous order, is the property of the J Pty Ltd group then he shall within one month from this date produce to the wife depreciation schedules being either historical or current evidencing such items as property of the J Pty Ltd group and thereafter he or his nominee shall be at liberty within a further period of 14 days by arrangement with the wife to attend at the D Street property and take possession of such of the items as may remain on the property.
9.The husband and wife shall as soon as practicable authorise and direct that audited financial accounts be completed for the Cordwell Superannuation Fund as at the date of these orders including preparation and lodgement of outstanding income tax returns, provision for any penalties that may be imposed, provision for capital gains tax arising from the sale of the B Street property and the calculation of the then member benefit balances for the husband and wife.
10.The husband and wife do all things necessary to cause the Trustee of the fund to comply with the following orders:
(a)That the Court allocates as required by Section 90XT(4) of the Family Law Act 1975 (Cth) (“the Act”) a base amount to the applicant wife Ms Cordwell of 50 per cent of the total member balances in the Cordwell Superannuation Fund as calculated pursuant to the previous order and the husband’s member balance be reduced accordingly;
(b)That in accordance with Section 90XT(1)(a) of the Act the Court creates an entitlement on the part of the applicant Ms Cordwell to be paid in accordance with Part 6 of the Family Law (Superannuation) Regulations 2001;
(c)That whenever the Trustee of the Fund makes a splittable payment out of the husband’s interest in the Fund, the Trustee shall do all acts and things and sign all documents as may be necessary to pay the entitlement created by this order in accordance with the requirements of the Act and Family Law (Superannuation) Regulations 2001;
(d)These orders have effect from the operative time which is two days after the date of these orders.
11.The husband and wife cause all things necessary to be done to rollout the wife’s entitlement in the Cordwell Superannuation Fund to a complying superannuation fund of her choice as soon as practicable after compliance with the previous order.
12.The husband indemnify the wife from all or any liability including any liability to the Australian Taxation Office arising from the Cordwell Superannuation Fund.
13.The husband and wife have liberty to apply as to implementation or enforcement of these orders.
14.The matter be removed from the active pending cases list.
15.All subpoenaed documents produced and all exhibits tendered in these proceedings, be returned at the expiration of one calendar month unless an appeal is lodged.
Note: The form of the order is subject to the entry in the Court’s records.
Note: This copy of the Court’s Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to 17.02 Family Law Rules 2004 (Cth).
IT IS NOTED that publication of this judgment by this Court under the pseudonym Cordwell & Cordwell has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
FOSTER J:
In December 2019 the applicant wife commenced proceedings for property adjustment orders under s 79 of the Family Law Act 1975 (Cth) (“the Act”).
Various interlocutory orders were made during the conduct of the matter. In February 2019, by consent, the husband was ordered to pay to the wife interim spouse maintenance of $1,325 per week with the wife retaining the rent of $500 per week from the cottage on the matrimonial home property “by way of further spouse maintenance and child support payments”. The husband was further ordered to maintain payments in relation to three motor vehicles and two boats that were to remain in the wife’s possession.
Thereafter, the parties failed to comply with various orders and directions to prepare the matter for a conciliation conference. Ultimately, the matter was listed for such a conference on 18 November 2019. Failing agreement, the matter was listed for judicial case management on 12 May 2020.
On 12 May 2020 trial directions were made to prepare the matter for final hearing. In the interim, on 8 July 2020 the parties agreed to orders to facilitate:
(a)the sale of 2 V Street, Suburb AA (“the 2 V Street property”) with the proceeds to be placed in a controlled money account;
(b)the sale of 2 R Street, Suburb T (“the 2 R Street property”) with the proceeds to be placed in a controlled money account.
On 24 September 2020 the matter was not ready for allocation of trial dates and was stood over to 17 December 2020.
On 16 November 2020 further interim issues between the parties were heard and judgment was ultimately reserved on 2 December 2020 following written submissions. On 12 February 2021 orders were made as follows:
1.The husband and wife do all necessary things and sign all necessary documents in their personal capacity and as directors of Cordwell Pty Ltd as trustee of the Cordwell Superannuation Fund to sell the property situate and known as B Street, Suburb C, New South Wales being the whole of the land described in Folio Identifier … at the best price reasonably obtainable by public auction and cause the proceeds of sale to be paid in the following manner and priority:
(a)in payment of agents commission and advertising and other expenses payable on sale;
(b)payment of legal costs on sale;
(c)payment of the share owned by Cordwell Pty Ltd as trustee of the Cordwell Superannuation Fund to Cordwell Pty Ltd as trustee of the fund;
(d)in payment of the sum of $50,000 to the wife or as she may otherwise direct in writing with the categorisation of such sum to be reserved to final hearing;
(e)in payment of the balance then remaining to the credit of NAB home loan account …59 in the joint names of the parties.
2.Pending sale of the B Street property as provided for above, the husband and wife be restrained from further encumbering the said property.
3.Pending further order, the husband and wife be restrained from drawing down or in any way increasing the balance of NAB home loan account …59.
4.The husband and wife do all necessary things and sign all necessary documents so as to cause Cordwell Pty Ltd as trustee of the Cordwell Superannuation Fund to:
(a)within 14 days of these orders instruct GG Accountants or any other accountant jointly appointed by them to finalise and lodge the superannuation fund tax returns and prepare financial statements for the fund for the financial years ended 30 June 2018, 30 June 2019 and 30 June 2020;
(b)provide responses to all requests for information and documents requested by such accountants as soon as practicable and in any event not later than 14 days of such request;
(c)within seven days from the date of exchange of contracts for sale of the B Street property instruct the Accountants to provide advice to the parties regarding any and all tax liabilities of the fund arising from the sale of the said property including but not limited to CGT and provide advice to the parties regarding the sum required to be paid to the fund from the proceeds of sale of the said property representing the interest held by the fund in the said property;
(d)within seven days of settlement of the sale of the said property direct the Accountants to prepare updated financial statements including member balances in the fund as at the last day of the month in which the settlement of the sale of the property is to occur.
5.The husband and wife do all acts and things and sign all documents necessary as and when required including providing all consents in order to give effect to the validity and operation of these orders in the time period as prescribed.
6.In the event that a party refuses or neglects to sign and return the document within 14 days of a written request to do so, then the registrar of the family Court of Australia at Parramatta is hereby appointed under section 106A of the Family Law Act 1975 to sign such document on behalf of that party upon lodgement of such document and the filing of an affidavit of a solicitor on behalf of the requesting party as to the said neglect or refusal.
7.Liberty to apply as to implementation or enforcement of these orders on short notice by application to the Court in chambers in appropriate circumstances.
8.That, otherwise, all outstanding interim applications be dismissed.
9. Costs reserved to final hearing.
The final hearing was listed for two days commencing 26 April 2021. On the first day of hearing it became apparent that the parties had not completed personal and partnership income tax returns for the 2020 year or tax returns and financial statements for their corporate entity and their self-managed superannuation fund, in respect to which there were issues as to non-compliance. The hearing was vacated and orders were made as follows:
…
2.The husband and wife within seven (7) days from this date do all things necessary to facilitate the preparation and completion of personal and partnership income tax returns and complete financial reports for such partnership for the financial years up to and including 30 June 2020.
3.The husband and wife within 7 days do all things necessary to facilitate the completion of tax returns and financial statements for any entity in their control for the financial years ended 30 June 2020 together with draft financial statements for such entities for the financial period ended 31 March 2021.
4.The husband and wife do all necessary things and sign all necessary documents so as to provide to the single expert and to GG Accountants such documents as may be necessary to comply with these orders such documents to include but be not limited to relevant bank accounts, management accounts, general ledger accounts, loan accounts and any other document reasonably requested by the single expert and GG Accountants for the purposes of finalising the financial documents as ordered.
5.On or before 24 May 2021 the parties do all necessary things to facilitate the lodgement of partnership and personal tax returns for financial years up to 30 June 2020.
6.The husband and wife provide to the single expert all and any information reasonably required by him for the purposes of completing the Chapter 15 report for the purposes of these proceedings and do all things necessary to forthwith respond to any question from the single expert seeking further information so as to facilitate the completion of the report in a timely manner.
7.The Applicant file with the Court and serve the single expert report of Mr E by no later than Wednesday, 30 June 2021.
8.The costs of the single expert Mr E and costs of the single expert updating real estate valuations be paid in the first instance by the husband by way of loan drawing from J Pty Ltd by way of a loan to him with such payment to be considered by the trial judge at the hearing.
9.The husband and wife do all things necessary to cause real estate valuations previously done by Mr G as single expert to be updated with such updated valuations to be completed in a timely manner prior to the further hearing of these proceedings.
10.Leave is granted to the parties or either of them to re-list the matter on short notice by application to the Court in Chambers in appropriate circumstances.
11.The costs of the parties be reserved in respect to the vacated hearing dates of 26 and 27 April 2021.
12.The proceedings be adjourned part-heard for further hearing commencing 10.00 am on Monday, 5 July 2021 allocating three (3) days plus for hearing.
At trial the parties’ costs disclosure statements revealed that the wife’s costs were in the order of $392,000 and the husband’s costs in the order of $400,000. Such costs were incurred in a matter that, in the ordinary course, was not complex and more than capable of resolution with compromise on both sides. Yet, the parties continued the battle in circumstances evidenced by mistrust and non-disclosure expending almost 10 per cent of their considerable wealth.
The reality of the parties’ intractability was revealed at the first day of the trial during counsels’ opening submissions. Counsel for the husband contended that overall the Court would be readily satisfied that the parties’ contributions, assessed on a holistic basis, would be regarded by the Court as equal, with no further adjustment between the parties by reason of the matters contemplated in s 75(2) of the Act. Counsel for the wife contended that the husband came into the relationship with modest superannuation and equity in property, against which the Court would contrast the wife’s significant trauma payment some years later with, otherwise, an adjustment in favour of the wife to reflect the parties’ present income disparity and future earning capacity. The wife contended for an overall division of the property pool as to 60 per cent to the wife and 40 per cent to the husband.
At trial, the wife relied on the following:
(a)Her Amended Initiating Application filed 29 June 2020;
(b)Her trial affidavit filed 28 August 2020;
(c)Her updating affidavit filed 23 June 2021;
(d)Her financial statement filed 29 June 2020.
The husband relied on the following:
(a)His Amended Response filed 29 June 2020;
(b)His trial affidavit filed 9 September 2020;
(c)His updating affidavit filed 29 June 2021;
(d)His financial statement filed 22 October 2020.
Background
The wife is presently aged 44 and the husband is 49.
The parties met in 1998 and commenced cohabitating shortly thereafter in 1999. At that time, they lived together at 1 JJ Street, Suburb KK (“the 1 JJ Street property”) owned by the husband.
The parties were married in 2006.
There are two children of the parties’ marriage now aged 20 and 19.
The husband and wife separated in August 2017 and were divorced on 12 February 2020. At separation the children were aged 15 and 17.
In 1999, at the commencement of cohabitation, the parties had the following assets and liabilities:
(1)The husband:
(a)The 1 JJ Street property in which the parties resided, purchased by him in 1997 for $149,000 with a mortgage of $134,000;
(b)A property situated at LL Street, Suburb KK (“the LL Street property”), purchased by him in 1999 at about the time of cohabitation for $164,000 with a mortgage of $147,600 thus having an equity of about $16,400;
(c)Superannuation entitlements of about $80,000;
(d)A motor vehicle and a motor cycle.
(2)The wife:
(a)A motor vehicle that was encumbered by way of loan;
The husband is qualified as a tradesperson and at the commencement of the relationship he worked full-time, earning an income of between $100,000 to $130,000 per annum, dependent on the hours worked. At the commencement of the relationship the wife was apprenticed as a technician which she completed and she worked in that capacity until 2001. From 2009 until 2014 she worked doing administrative work for the parties’ business and some work from home. In 2016 the wife completed a design course.
Her administration work was interrupted for a time in 2010 by reason of the wife’s then serious health circumstances. As a consequence of her health circumstances, the wife in October 2010 received a Trauma Payout of about $243,163 that was deposited into the mortgage offset account, with $176,857 paid to discharge the mortgage then secured over the matrimonial home. The home was thereafter used as collateral security for the parties’ later borrowings detailed below.
From 2005 until separation the parties and their two children lived in the matrimonial home at D Street, Suburb J (“the D Street property”).
The first child was born shortly after cohabitation commenced and the second child only 14 months later. There is no issue that the wife was the primary care giver for the children, attending to their needs and the primary homemaker. The husband worked long hours including weekend work. These work hours continued throughout cohabitation and then until trial.
J Pty Ltd
In 1999 while working full-time and mostly on night shift for HH Company, the husband established a business as a sole trader where he undertook additional jobs.
In 2001 the business was re-structured as a partnership with the wife, presumably for income tax purposes.
In 2002 it was incorporated as J Pty Ltd, with the husband and wife being co-directors and equal shareholders of the company.
In 2003 the business commenced to occupy rented factory premises at MM Street, Suburb KK and later used a shed situated on the D Street property.
In 2009 the husband left his salaried employment to concentrate on the expansion of J Pty Ltd. The company moved into larger commercial premises and acquired a considerable amount of plant and equipment, allowing it to take on large scale projects, including for many well-known corporations.
As the company grew the husband was responsible for hiring and managing staff, overseeing the company’s financials, attending jobsites and project managing. The husband estimates that he works 60 to 80 hours per week over five to seven days, as he is frequently required to perform jobs for the company outside of normal business hours.
Ancillary companies
In 2013 the husband incorporated two companies, Z Pty Ltd (“ZPL”) and E Pty Ltd (EPL), who mainly conduct work for J Pty Ltd. At establishment capital for both companies were provided by J Pty Ltd and the husband is the sole director and shareholder for both entities. The wife has at no time been engaged with either entity.
In 2019 the wife incorporated CC Pty Ltd (“CCPL”) with her current partner. The wife and her current partner are both directors and equal shareholders. The wife asserts that the company is a start-up and is currently trading at a loss.
Acquisition and sale of properties during the relationship
At the commencement of cohabitation the husband owned two properties, those being the 1 JJ Street property and the LL Street property.
In September 2001 the husband purchased the adjoining property to the 1 JJ Street property, 3 JJ Street, Suburb KK (“the 3 JJ Street property). This property was purchased in the husband’s sole name for $184,000 using some savings and a mortgage. The property was privately rented to friends for approximately $200 per week, which was sufficient to cover the interest only mortgage repayments and outgoings. The husband sold the 3 JJ Street property in December 2004 and received net proceeds of sale of $160,000 and in the same month sold the LL Street, Suburb KK property for $280,000 and received net proceeds of sale of approximately $115,000. The net proceeds of both sales were applied to the purchase of the present matrimonial property being the D Street property.
The parties undertook approximately $150,000 worth of renovations and improvements to the 1 JJ Street property, including installation of an in ground pool, construction of a large shed, cladding to the property, installation of new windows and landscaping, including installation of powered gates. The husband funded these renovations through income. The husband also rented out spare rooms at the property, generally having three boarders at any given time. In December 2004, some five years after cohabitation commenced, the husband sold the 1 JJ Street property and applied the net proceeds of sale to the purchase of the D Street property.
In February 2005 the parties purchased a seven acre property at D Street, Suburb J for $1,094,000 using the net proceeds of sale of the JJ Street properties and LL Street properties as outlined above. The parties borrowed on mortgage to National Australia Bank $765,000 to fund the purchase over and above funds from the sales of the properties to cover the balance and purchase costs.
Situated on the D Street property is a main residence, which became the matrimonial home, and a secondary cottage, which was rented at times during the relationship and which the wife is currently collecting rental payments of $500 per week. There is also a large shed on the property which was “rented” by J Pty Ltd until October 2016 for approximately $1,200 per week and was used to store equipment, machinery and trucks.
The parties undertook extensive renovation works to the main residence on the D Street property. Such work included adding an additional bedroom, extending the master bedroom, renovations to the kitchen, bathroom renovations including adding two additional bathrooms, upgrading windows and extensive outdoor landscaping work including improvements to the pool and installation of powered gates. These renovations were estimated to cost approximately $800,000 and were funded through savings and available funds through J Pty Ltd.
In 2010 the husband received a gift from his uncle of $40,000. He purchased a motor bike.
In May 2011 the parties, together with the paternal grandparents, purchased a property at 1 R Street, Suburb T (“the 1 R Street property) for $1,150,000 as tenants-in-common in equal shares. A mortgage was obtained for $765,000 to National Australia Bank in all four names. The parties paid for half of the deposit and balance of the purchase price, with the paternal grandparents paying the other half. The property was leased continuously from the time of purchase, with rental income being applied to mortgage repayments and outgoings for the property, with any shortfall being met equally.
In June 2011 the parties as to 35 per cent and their new self-managed superannuation fund, the Cordwell Superannuation Fund (“the SMSF”), as to 65 per cent, purchased factory premises situated at B Street, Suburb C (“the B Street property”) for $480,000 using a loan secured over the Suburb J property and their then cash superannuation entitlements. The property initially had two commercial tenancies. The commercial tenant in Unit 2 vacated in early 2019 and that unit was then occupied by J Pty Ltd although no rent has been paid by J Pty Ltd. The property was to be sold after orders made on 12 February 2021. Contracts were exchanged at a sale price of $1.4 million with settlement to take place during the trial. The parties will each accrue a capital gains tax liability relating to their 35 per cent, as will the SMSF on its capital gain.
The corporate trustee for the SMSF is Cordwell Pty Ltd, of which the parties are both directors and shareholders. As at 30 June 2019 the parties’ respective member entitlements in the SMSF were as to the husband 73.8 per cent, being $447,998, and as to the wife 26.2 per cent, being $159,183. It is expected that the sale of the B Street property will see the fund realise its real estate interest and receive, after provision for CGT and sale costs, about $860,000 net. It is to be inferred that the parties’ percentage interests will not alter as it appears that the husband and wife have paid no further contributions to the SMSF since that time.
After separation the husband directed his PAYE superannuation contributions to a commercial superannuation fund, OO Super Fund. He presently retains that superannuation interest.
In late 2013 the parties purchased a property situated at N Street, Suburb C (“the N Street property”) for $1,150,000 using a mortgage to National Australia Bank for $1,333,000 cross-collateralised with various properties held by the parties. Situated on the N Street property is a two unit factory complex with a residential flat. Initially, Unit 1 was occupied by a commercial tenant but is now occupied by J Pty Ltd. Unit 2 is leased to Z Pty Ltd, and the residential flat had a commercial tenant until late 2019 when it was occupied by the husband following separation. The wife has no knowledge as to the state of rental payments payable by J Pty Ltd, Z Pty Ltd and the husband to their partnership and the SMSF. The husband asserts that at times the rental income has been insufficient to cover the repayments and outgoings and at these times the shortfalls have been met by J Pty Ltd and later reconciled as Division 7A loans owing by the parties.
In 2015 J Pty Ltd purchased land located at NN Street, Suburb C (“the NN Street property”) for $1,100,000. This purchase was funded through an interest only mortgage obtained with National Australia Bank. The property was sold by J Pty Ltd in 2016, making a profit of $500,000 subject to capital gains liability which was retained by J Pty Ltd.
In 2015 the parties purchased in joint names the freestanding industrial property located at L Street, Suburb C (“the L Street property”) for $1,650,000 funded in full through a mortgage obtained with National Australia Bank. The L Street property is a partnership of the husband and wife and adjoins the N Street property. The company J Pty Ltd now primarily trades from premises at the L Street property and as at separation, the company was paying rent of $10,835 per month to the partnership. The wife asserts that the husband is responsible for the management of the property and rent received and as a result she is not aware of the current status of rental payments, said to be $9,850 per month by the Single Expert valuer. Otherwise, situate on the property is a shop which is leased as a takeaway food shop with rent of $2,881 per month.
Also in 2015, the parties jointly purchased a strata title industrial factory unit situated at K Street, Suburb Q (“the K Street property”) in the sum of $350,000 through a mortgage obtained with the National Australia Bank. From the time of purchase until separation the property was rented by EPL, and following separation it has been rented to a third party. Until August 2019 the rent from the property was deposited directly into the joint partnership account and the property was managed by the husband. In August 2019 until August 2020 the wife unilaterally began to receive rental payments directly as a consequence of the husband not paying interim maintenance payments as ordered. In August 2020 the husband unilaterally terminated the lease at this property and at that time there was $350,000 outstanding on the mortgage. It is the husband’s contention that the tenant had been given a notice to vacate prior to the expiration of the lease in August 2020. The company now stores its heavy equipment on the site.
In 2017 the parties purchased a property at 2 R Street, Suburb T (“the 2 R Street property”) for $1,200,000 fully funded through a mortgage obtained to National Australia Bank. Orders were made on 8 July 2020 with the consent of the parties for the sale of this property. On sale there were no net sale proceeds realised.
In 2018, the parties purchased a strata home unit property located at 1 V Street, Suburb AA (“the 1 V Street property”) for $600,000, fully funded through a mortgage with the National Australia Bank. The wife deposes that this property is currently rented for $450 per week with rental income being paid into the parties’ joint account.
In the same year the parties purchased a second unit in the complex, at 2 V Street, Suburb AA (“the 2 V Street property”) for the same purchase price of $600,000, also fully funded through a mortgage to National Australia Bank. This property was sold in August 2020 for a sale price of $570,000, in accordance with orders made with the consent of the parties on 8 July 2020. The shortfall on sale remained the subject of a collateral mortgage.
In May 2018, J Pty Ltd purchased the strata home unit property at P Street, Suburb S (“the P Street property”) for a purchase price of $1,325,000, fully funded through a loan with National Australia Bank. The property had been tenanted for $800 per week. The husband moved into the property after purchase. It is not clear if he pays rent to J Pty Ltd.
The property partnership of the parties other than the home at Suburb J thus now includes the following properties:
(a)a strata title industrial unit property situated at K Street, Suburb Q;
(b)the freestanding industrial property and shop located at L Street, Suburb C occupied by J Pty Ltd;
(c)industrial premises at N Street, Suburb C occupied by J Pty Ltd and related entity;
(d)35 per cent interest in commercial premises situated at B Street, Suburb C now sold;
(e)50 per cent interest in the home unit property at 1 R Street, Suburb T now listed for sale with a listing price estimated of about $1.7 million,
(f)1 V Street, Suburb AA.
The parties’ personal, partnership and company mortgages are mostly collateralised over the portfolio as a whole.
Otherwise, properties are owned by J Pty Ltd as referred to above.
The wife’s contentions
The wife asserts that the husband has disposed of items of plant, equipment and machinery to the value of approximately $366,550 and has not provided any disclosure or advice as to the location of items which she asserts to be missing.
The wife asserts that since final separation the husband has caused his companies to occupy several properties owned by the parties without her consent. The company J Pty Ltd trades from the L Street property and at separation the company was paying to the partnership rent in the amount of $10,835 per month. Since separation the husband has caused ZPL to occupy the B Street property and J Pty Ltd to occupy the B Street property and the N Street property. The wife asserts she is not aware as to the current status of rental payments at these properties. She also asserts that the husband has unilaterally terminated the leases at the residential flat on the M Street property and the K Street property.
The wife asserts that the husband has failed to comply with his obligations to pay child support and interim spouse maintenance and other financial obligations such as paying various registration fees and insurance payments and as a result owes money to the wife, notwithstanding her unilaterally receiving and using rental payments totalling about $40,000 as referred to above and accessing funds totalling about $63,000 from the parties’ joint account to which rental payments were made.
The ongoing issues between the parties are marked by non-cooperation, failure to disclose, disagreement and unilateral decision making on issues that involve the company and/or partnership assets and income.
The wife at present
In May 2019 the wife and her new partner incorporated CC Pty Ltd. They are both directors and equal shareholders. The company undertakes construction work. The company is essentially a start up with equipment on lease and at the time of trial providing to the wife virtually no financial remuneration. The wife’s disclosure as to this entity had been less than fulsome until day two of the trial.
The wife, in July 2018, incorporated BB Pty Ltd with the intention of undertaking some interior design work. The company has not traded. The wife says she may seek to do so after she has funds from these proceedings.
The wife and the parties’ children continue to occupy the matrimonial property at the D Street property. The wife seeks to retain that property.
The wife complains that the husband has retained and applied rental income from the parties’ property portfolio, save for the rent on the K Street property that she retained for about 12 months until August 2020 when the tenant vacated. Yet, he has attended to payment of all mortgage payments and property outgoings from that income.
The wife does not assert ill health but she is overshadowed by the concern that her cancer, which resulted in the trauma payment, might return.
The wife’s income at trial comprised of only the rent of $500 per week from the cottage on the D Street property and the sale of some puppies for about $6,000. The wife borrowed a small sum from CC Pty Ltd and received job-keeper payments for four weeks, totalling $3,000 in about April 2020.
In late 2018/early 2019 the wife purchased a motor bike for $6,500 with money retained by her from rent.
Since April 2018 she has received no income or dividend from J Pty Ltd.
The husband at present
The husband is in good health. He is almost 50 years of age. He proposes to continue working through J Pty Ltd and its associated entities.
The husband received a salary of about $111,000 per annum plus superannuation and fringe benefits in the 2020 year from the company and has, otherwise, had access to company funds to drawdown as against his company loan account, including some $270,000 for his legal fees and about $120,000 to the purchase of a motor home. In the nine months to March 2021 the husband paid himself a salary of about $135,000, being about $180,000 on an annualised basis.
He seeks that the wife transfer to him her interest in the properties being the freestanding industrial property and shop located at L Street, Suburb C and industrial premises at N Street, Suburb C. Otherwise, he seeks to transfer his interest in the strata title industrial unit property situated at K Street, Suburb Q to the wife.
Approach to Property Adjustment
The approach to the determination of an application under s 79 of the Act is set out in Stanford v Stanford [2012] HCA 52 and further considered by the Full Court in Bevan & Bevan [2014] FamCAFC 19 and Chapman & Chapman [2014] FamCAFC 91.
In Stanford the majority [at 120] said as to ss 79(2) and 79(4) of the Act:
... the requirements of the two sub-sections are not to be conflated. In every case in which a property settlement order under s 79 is sought, it is necessary to satisfy the court that, in all the circumstances, it is just and equitable to make the order.
The expression “just and equitable” is a qualitative description of a conclusion reached after examination of a range of potentially competing considerations. ... while the power given by s 79 is not “to be exercised in accordance with fixed rules”, nevertheless, three fundamental propositions must not be obscured.
The first of these propositions is for the Court to identify, according to ordinary common law and equitable principles, the existing legal and equitable interests of the parties in the property.
The second is that although s 79 of the Act confers a broad power on the Court, it is not a power that is to be exercised according to an unguided judicial discretion. It must be exercised in accordance with legal principles, including the principles which the Act itself lays down.
The third is that the question of whether the order is “just and equitable” is not to be answered by beginning from the assumption that one or other party has the right to have the property of the parties divided between them or has the right to an interest in marital property which is fixed by reference to the various matters set out in s 79(4) of the Act. To conclude that making an order is “just and equitable” only because of and by reference to various matters in s 79(4), without a separate consideration of s 79(2) of the Act would be to “conflate” the statutory requirements and ignore the principles laid down by the Act.
The majority then said [at 122]:
... The fundamental propositions that have been identified require that a court have a principled reason for interfering with the existing legal and equitable interests of the parties to the marriage and whatever may have been their stated or unstated assumptions and agreements about property interests during the continuance of the marriage.
Thus the process ordinarily involves a staged process.
The Court must 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 and then whether it is just and equitable to make a property settlement order.
Such a consideration should not be guided by an assumption that the parties’ rights to or interests in property are or should be different from those that then exist. The question is whether those rights and interests should be altered.
There is no presumption that one or other party has the right to have the property of the parties divided between them or a right to an interest in marital property that is fixed by reference to the various matters in s 79(4) of the Act (Stanford supra). This consideration addresses the prohibition in s 79(2) of the Act.
The Court needs to conclude that it would be unjust or unfair to leave property rights intact.
In many cases, such as this matter, 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, as in this matter, such a circumstance arises where both parties seek adjustive orders but are unable to agree as to same. At present their real estate and corporate interests are inextricably mixed. As both parties readily conceded, it is clearly just and equitable to make adjustive orders under s 79.
The Asset Pool
The property pool for adjustment purposes was the subject of significant agreement. The assets and liabilities of the parties comprise:
ASSETS
Joint 50 per cent 1 R Street, Suburb T $ 750,000
Joint 1 V Street, Suburb AA $ 625,000
Joint D Street, Suburb J $ 2,500,000
Joint Shareholding in J Pty Ltd and associated entities $ 2,829,359
Husband Interest in Motor Home $ 120,000
Joint K Street, Suburb Q $ 650,000
Joint L Street, Suburb C $ 2,685,000
Joint N Street, Suburb C $ 2,630,000
Joint Proceeds sale B Street, Suburb C $ 209,588
Wife Contents D Street home $ 10,000
Husband Contents P Street $ 10,000
Husband Ski boat $ 136,250
Wife Motor bike $ 6,000
Husband Trail bike $ 2,000
ADDBACK
Wife Suburb Q rental income retained $ 40,000E*
Wife Funds withdrawn from joint NAB account $ 62,824*
Total: $ 13,266,021
SUPERANNUATION
Husband OO Super Fund $ 26,436
Cordwell Super Fund; *
Husband Cordwell Super Fund 73.8 per cent $ 734,497
Wife Cordwell Super Fund 26.2 per cent $ 260,756
Total: $ 1,021,690
LIABILITIES
Joint 50 per cent 1 R Street, Suburb T $ 240,000
Joint 1 V Street, Suburb AA $ 620,000
Joint D Street, Suburb J $ 179,329
Joint K Street, Suburb Q $ 346,000
Joint L Street, Suburb C $ 1,619,992
Joint N Street, Suburb C $ 875,500
Husband Consolidated loan account debt to J Pty Ltd $ 492,874*
Husband Loan account debt J Pty Ltd: Motor Home $ 120,000
Total: $ 4,493,695
As to the assets and liabilities above, there are issues as to the items marked *.
(a)Wife – Suburb Q rental income retained: The husband contends that this should be added back to the pool for consideration. In circumstances where the husband concedes that he is in significant default in relation to his spouse maintenance obligation and funds were substantially used by the wife for living expenses it is not appropriate to add back the sum or the next item considered below. However, it is otherwise proper to discharge the husband’s spouse maintenance obligation from the date to which it stands paid.
(b)Wife – Funds withdrawn from joint NAB account: As with the item above, funds were substantially used by the wife for living expenses. It is not appropriate to add back the sum and is, otherwise, proper to discharge the spouse maintenance obligation from the date to which it stands paid.
(c)Cordwell Super Fund: The parties provided an estimate of the value of the fund based on anticipated capital gains tax and sale costs of the B Street property. There may be some minor adjustments but the figures are the best available. The parties’ member benefits are calculated accordingly.
(d)Husband – Consolidated loan account debt to J Pty Ltd: This sum is as per the Single Expert Report Exh “D”. The husband concedes that the sum of $270,000 has been drawn to pay legal fees with that sum including Single Expert fees of $68,420 paid by the husband. It is proper that the loan account notionally be reduced as between the parties by $270,000 and that the wife be required to pay to the husband by way of adjustment her 50 per cent of the Single Expert fees in the sum of $34,210.
As a consequence the adjusted pool for consideration comprises the following:
ASSETS
Joint 50 per cent 1 R Street, Suburb T $ 750,000
Joint 1 V Street, Suburb AA $ 625,000
Joint D Street, Suburb J $ 2,500,000
Joint Shareholding in J Pty Ltd and associated entities $ 2,829,359
Husband Interest in Motor Home $ 120,000
Joint K Street, Suburb Q $ 650,000
Joint L Street, Suburb C $ 2,685,000
Joint N Street, Suburb C $ 2,630,000
Joint Proceeds sale B Street, Suburb C $ 209,588
Wife Contents D Street home $ 10,000
Husband Contents P Street $ 10,000
Husband Ski boat $ 136,250
Wife Motor bike $ 6,000
Husband Trail bike $ 2,000
Total: $ 13,163,197
SUPERANNUATION
Husband OO Super Fund $ 26,436
Cordwell Super Fund:
Husband Cordwell Super Fund 73.8 per cent: $ 734,497
Wife Cordwell Super Fund 26.2 per cent: $ 260,756 $ 995,253
Total: $ 1,021,689
LIABILITIES:
Joint 50 per cent mortgage
1 R Street, Suburb T $ 240,000
Joint Mortgage 1 V Street, Suburb AA $ 620,000
Joint Mortgage D Street, Suburb J $ 179,329
Joint Mortgage K Street, Suburb Q $ 346,000
Joint Mortgage L Street, Suburb C $ 1,619,992
Joint Mortgage N Street, Suburb C $ 875,500
Husband Adjusted consolidated loan account debt to J Pty Ltd $ 222,874
Husband Loan account debt J Pty Ltd: Motor Home purchase $ 120,000
Total: $ 4,223,695
The primary components are thus:
Assets $ 13,163,197
Superannuation $ 1,021,689
$ 14,184,886
Liabilities $ 4,223,695
Net: $ 9,961,191
Contributions
The parties’ contentions as contributions are referred to above. There appears agreement that contributions overall should be regarded as equal.
In Kessey and Kessey (1994) FLC 92-495 (Full Court) at 89,151 the Full Court made clear that ultimately all that is necessary is to evaluate the weight that should be given to each party’s contributions relative to the contributions of the other party:
“... In many – indeed probably in most – property settlement cases the Court has to evaluate and assess contributions to property in the absence of precise valuations of the contributions in question. Indeed, where the contributions to property are indirect or non-financial, precise valuation is impossible, and even where the contributions are direct or financial so that a valuation might be provided, other factors (not capable of precise mathematical statement) may well have eroded the initial value of such contributions. In a case such as the present, it is not necessary to arrive at precise mathematical valuations of the parties’ contributions - all that is necessary is to evaluate the weight that should be given to each party’s contributions relative to the contributions of the other party.”
In Farmer and Bramley [2000] FamCA 1615; (2000) FLC 93-060, Kay J clearly stated two things, namely:
68.The Court’s task is to evaluate all of the contributions from the time of the commencement of the parties’ relationship until the time of the hearing and to give such weight to such contributions as the Court thinks is appropriate in the circumstance.
69.There is nothing in the legislation that requires s 79(4)(a)(b) and (c) contributions to be measured only in terms of what either party contributed to the assets of which the parties are presently possessed.
As the Full Court recently said in Horrigan & Horrigan [2020] FamCAFC 25:
[35]It is well established that an assessment of contributions is not a mathematical exercise, but rather involves the identification and assessment of all of the parties’ respective contributions, in a holistic way across the course of the relationship and in the post separation period to the point of assessment. (Pierce v Pierce (1999) FLC 92-844; Singerson & Joans [2014] FamCAFC 238; Dickons v Dickons (2012) 50 Fam LR 244 and Marsh & Marsh (2014) FLC 93-576; Lovine & Connor and Anor (2012) FLC 93-515 at [39]-[42]).
The parties’ contentions acknowledge the holistic approach to assessment of contributions. Overall, by reason of the discussion and history set out above, it is just and equitable that their contributions be regarded as equal.
Section 75(2) Considerations
The husband contends that there should be no further adjustment by reason of the matters referred to in this section.
The wife contends for an adjustment of 10 per cent in her favour resulting in an overall division of property as to 60 per cent to her and 40 per cent to the husband. This would create a disparity of just under $2 million. The wife contends that significant considerations will be the disparity in the parties’ financial resources and the wife’s limited income earning capacity.
The husband is aged 49 and in good health. The wife is aged 44 and in good health but with concerns as to a past cancer scare.
The property and financial resources of the parties are set out above. Both will have significant assets by reason of the contribution findings. The husband will retain the J Pty Ltd consortium (Exh “C”) that has been the primary source of the parties’ wealth. In the nine months to March 2021 the husband paid himself a salary of about $135,000, being about $180,000 on an annualised basis. In addition, in previous years he has paid himself director’s fees and has company funded motor vehicles. As at March 2021 J Pty Ltd had retained earnings of about $2.045 million. It was conceded at trial that those earnings could be paid as dividends in a staged manner to the husband to reduce and ultimately remove his loan account debt to the company. Otherwise, the husband is able to manage and control, his ongoing superannuation contributions into the future.
The wife has limited capacity for work. She has substantially been out of the commercial workforce for many years. She has technician qualifications, some administrative experience and a modest start-up company. Thus, this consideration is significant as between the parties.
The superannuation entitlements of the parties are set out above. They are capable of being adjusted. The husband by reason of the financial resource of the J Pty Ltd group will have the ability to contribute to his superannuation as he wishes.
The wife’s role within the home with the children and within the household has facilitated the husband devoting significant time to the J Pty Ltd enterprise.
The asset pool is significant with 10 per cent representing almost $1 million. Overall, and by reason of the matters in s 75(2) as discussed, it is appropriate that there be a further adjustment to the equality of contribution finding as to 2.5 per cent in favour of the wife. As such she will receive 52.5 per cent of the overall pool and the husband 47.5 per cent. Thus, creating disparity between the parties of five per cent or about $500,000.
The wife’s entitlement is thus in the sum of $5,229,625.
The wife primarily seeks orders that she retain unencumbered real estate and other assets as follows:
(a)the home at D Street, Suburb J $ 2,500,000
(b)the home unit 1 V Street, Suburb AA $ 625,000
(c)the factory premises K Street, Suburb Q $ 650,000
(d)home contents Suburb J $ 10,000
(e)Ski boat $ 136,250
(f)Motor bike $ 6,000
$ 3,927,250
(g)and a cash adjustment of $1,302,375
Total: $ 5,229,625
The wife seeks that the property be transferred to her unencumbered. The present mortgage balances are:
(a)the home at D Street, Suburb J $ 179,329
(b)the home unit 1 V Street, Suburb AA $ 620,000
(c)the factory premises K Street, Suburb Q $ 346,000
As such the husband would be required to refinance a total of about $1,145,329 less part proceeds of the B Street property. Cash funds are shortly to be realised from the sale of the B Street property thus realising their part share in the property of about $209,500, of which under interim orders $50,000 is to be paid to the wife and the balance in substantial reduction of the mortgage secured over the Suburb J home.
The husband seeks to retain the J Pty Ltd group and understandably the commercial premises occupied by the business, including the K Street property sought by the wife. The difficulties in having the husband and wife remaining in a commercial relationship as to the K Street property is self-evident from the issues in the conduct of these proceedings.
From the sale of their 50 per cent interest in the 1 R Street property the parties expect to realise about $500,000. The husband seeks that the wife receive the proceeds of sale of the B Street property and the 1 R Street property.
Otherwise, the parties have significant total superannuation entitlements. The purpose of the superannuation scheme is to provide for retirement. Both parties are in their 40’s with many years until superannuation can be accessed. The investment by the wife of her superannuation entitlement in the event of an equal split of the Cordwell Fund will provide her a good capital base that is likely to grow significantly until the wife can access her super at her vesting age. They both have working years ahead of them and it is to be inferred that the superannuation investments were made with a view to their ultimate retirement if the marriage had remained intact. The fund will have significant cash following the sale of the B Street property investment. The husband properly proposes an equalisation of their superannuation entitlements. The wife seeks to assign her superannuation interest to the husband leaving her with none. It is proper that the parties’ superannuation be split evenly.
The wife seeks orders for certain items of personalty to be transferred to her: the Motor Vehicle 3, the Ski boat and trailer, the bobcat, the boat and trailer and the double wheel axle motor bike trailer.
Otherwise, the wife will retain other items of personalty and equipment on the D Street property save for items not, otherwise, the subject of orders in respect to which the husband shall be entitled upon production to the wife or her solicitors of J Pty Ltd depreciation schedules, either current or historical, evidencing that such items were property of the company. In that event, the wife shall by arrangement, permit the husband or his nominee to collect such items from the D Street property. It is to be noted that neither party proffered any evidence as to the value of particular items of personalty save for household contents by admission and a few of the other items referred to above.
By reason of the above considerations, orders will be made to give effect to the following:
(a)That the husband transfer to the wife his interest in the D Street property unencumbered: Value $2,500,000;
(b)That the husband transfer to the wife his interest in the 1 V Street unit unencumbered: Value $625,000;
(c)That there be a splitting order to equalise the parties’ superannuation entitlements in The Cordwell Super Fund: Value $497,626;
(d)That the wife receive the whole of the parties’ 50 per cent of net proceeds of sale of the 1 R Street property: Value $500,000;
(e)That the wife receive funds from the proceeds of sale of the B Street property as previously ordered: Value $50,000;
(f)That the husband do all things necessary to transfer or cause to be transferred to the wife the following items unencumbered:
(i)Motor Vehicle 3;
(ii)Motor Vehicle 2;
(iii)Ski boat and trailer: $136,250;
(iv)Aluminium boat and trailer;
(v)Bobcat;
(vi)Double wheel axle motor bike trailer;
(vii)Tractor;
(viii)Lawnmowers;
(ix)Turf mower;
(x)Slasher.
(g)That the wife retain the contents of the home at Suburb J and the motor bike $16,000.
No value has been ascribed by the parties to any other item of personalty.
The wife’s entitlement is $5,229,625. The total value of the above is $4,324,876. This will require the husband to pay a net cash adjustment to the wife of $904,749. The wife and is required to pay to the husband her share of the Single Expert reports in the sum of $34,210 which is to be deducted from the adjustment sum leaving a net payment to the wife of $870,539.
The husband will retain the other assets and liabilities as set out above save for the superannuation fund being split equally.
In the overall circumstances of this matter, the orders proposed are just and equitable.
Order will be made accordingly.
I certify that the preceding one hundred and eleven (111) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Foster. Associate:
Dated: 29 July 2021
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