Court & Court
[2008] FamCA 941
•30 October 2008
FAMILY COURT OF AUSTRALIA
| COURT & COURT | [2008] FamCA 941 |
| FAMILY LAW – PROPERTY SETTLEMENT – asset pool of $2.2 million – whether wife should be required to receive income-producing asset. FAMILY LAW – PROPERTY SETTLEMENT – whether wife made greater contributions than the husband – finding of equal contributions. FAMILY LAW – PROPERTY SETTLEMENT – other factors including section 75(2) factors - disparity of income earning capacity - older children in shared care arrangement – wife has health issues – 10% adjustment made. FAMILY LAW – PROPERTY SETTLEMENT – Family Trust – creature of the husband’s parents – husband a shareholder - whether husband has an interest – how to treat. FAMILY LAW – SPOUSE MAINTENANCE – wife able to generate income from assets allocated to her pursuant to property settlement – wife found to have income earning capacity of $270 per week - application dismissed. |
| Family Law Act 1975 (Cth) Clauson and Clauson (1995) FLC 92-595 |
| APPLICANT: | Ms Court |
| RESPONDENT: | Mr Court |
| FILE NUMBER: | LNC | 736 | of | 2007 |
| DATE DELIVERED: | 30 October 2008 |
| PLACE DELIVERED: | HOBART |
| JUDGMENT OF: | JUSTICE BENJAMIN |
| HEARING DATE: | 16-17 September 2008 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | MR AYLIFFE |
| SOLICITOR FOR THE APPLICANT: | DOOLAN & BROS |
| COUNSEL FOR THE RESPONDENT: | MR DIXON SC |
| SOLICITOR FOR THE RESPONDENT: | TEMPLE SMITH PARTNERS |
Orders
Within 4 months of the date of these orders the husband sign all documents and do all acts to transfer to the wife the following:
(a)The house and land at L (“L property”);
(b) The furniture and chattels in L property;
(c) The 2004 Toyota motor vehicle.
The husband pay to the wife the sum $316,255.00 within 4 months from the date of these orders; and at the time of payment of this sum the husband pay out and discharge the mortgage to the Westpac Banking Corporation secured over L property and until discharge the husband meet the normal repayments of principal and interest on that loan and indemnify the wife in relation to her personal covenants in respect of that mortgage.
At the same time as the husband complies with order 2 above the wife do all acts and sign all documents to transfer to the husband her interest in:
(a)C property;
(b)S property;
(c)Furniture and chattels at C property and S property;
(d)Furniture and chattels at the Warehouse.
Within 1 month of the date of these orders the husband and wife, in their own right, as Directors of N Pty Ltd and in either their individual or joint roles as Appointers under the Court Family Trust (“the Family Trust”) shall do the following:-
(a)transfer to the Wife the abalone unit beneficially owned by the Family Trust, together with any fish outstanding in respect of that unit, at a notional consideration of $165,000.00.
(b)cause the Warehouse to be sold by public auction at a reserve price of $331,835.00 subject to the following:
(i)the solicitors acting on the sale be appointed as jointly agreed by the parties or, if the parties are unable to agree, as nominated by the President of the Law Society of Tasmania at the request of either party;
(ii)to be sold by an agent as jointly agreed by the parties or, if the parties are unable to agree, as nominated by the President of the Real Estate Institute of Tasmania at the request of either party;
(iii)if the property does not reach the reserve then to accept the advice of the real estate agent as to a realistic market price;
(iv)to produce and sign all documents as reasonably requested by the real estate agent and/or solicitor in respect of such sale;
(v)direct to be deducted from the proceeds of sale the following:
A.legal expenses in respect of the sale of the Warehouse;
B.real estate agents fees, auction expenses and reasonable advertising expenses in respect of the sale of the Warehouse;
C.any fees associated with the appointment of a solicitor and/or agent;
D.any other fees reasonably incurred in respect of the sale of the Warehouse;
E.A sum to be held in trust sufficient to meet the anticipated liabilities pursuant to orders 6, and 7 and 8;
F.an amount to be retained (as agreed between the parties) to enable the lodgement of company returns, income tax returns in respect of the company and Family Trust (including an allowance for any capital gains tax), income tax, accounting fees and other expenses in relation to the sale of the assets of the Family Trust and in relation to the winding up of the Family Trust and N Pty Limited. If the parties are unable to agree on the amount to be retained they will accept the advice as to that amount by the accountant for the Family Trust (being an accountant agreed between the parties and in the event that the parties are unable to agree an accountant nominated for that purpose by the President of the Law Society of Tasmania at the request of either party).
G.the balance of the net proceeds of sale to be distributed as to 60% to the wife and 40% to the husband subject to any sums payable pursuant to this order.
As and from the date of these orders the parties shall do all acts and sign all documents to cause all of the income from the Warehouse and the Family Trust abalone unit to be paid to the wife provided:
(a)The wife being responsible for the income tax accruing in respect of such income as and from the date of this order.
(b)In terms of the Warehouse the income shall continue until such time as the Warehouse has been sold.
(c)In terms of the abalone unit the income shall continue until such time as the Family Trust transfers its interest in the unit to the wife.
(d)The wife shall indemnify the husband in respect of any tax incurred in or by the Family Trust from the date of these orders in respect of payments to the wife of Family Trust income pursuant to this order.
(e)The wife will be liable for expenses in relation to the abalone unit and the Warehouse for the period of time for which she is in receipt of income from those entities pursuant to these orders.
In terms of the income tax payable by or on behalf of the Family Trust the whole of the income tax for the financial years prior to 30 June 2008 shall be taken out and paid out of the net proceeds of sale of the Warehouse before distribution to the husband and wife.
As to the income tax payable by or on behalf of the Family Trust for the financial year ending 30 June 2009 that tax shall be paid on a pro rata basis as follows:-
(a)for the period from 1 July 2008 to the date of these orders to be taken out of the proceeds of sale of the Warehouse before distribution to either the husband or wife;
(b)the pro rata income tax for the period after the date of these orders to be taken out of the wife’s share of the capital to be distributed from the sale of the Warehouse AND the wife hereby indemnifies the husband and the Family Trust in respect of such tax.
The Husband indemnify the Wife in respect of:
(a)Any liabilities with regard to C property;
(b)Any liabilities in regard to S property;
(c)The debt to D Pty Ltd
(d)Any personal income tax of the Husband;
(e)Any liability pursuant to the Westpac mortgage;
(f)The liabilities to Mr W Court (Accountant) as set out as annexure to his Affidavit filed 23 November 2007.
The wife shall indemnify the husband in respect of:-
(a)the family tax benefit liability of approximately $2,700.00,
(b)the American Express Card liability of approximately $16,500.00,
(c)the CBA MasterCard liability of approximately $2,800.00,
(d)the Citibank Credit Card liability of approximately $8,500.00,
(e)the supermarket account of approximately $6,577.00 and
(f)the Coles MasterCard of approximately $3,000.00.
Pursuant to section 90MT(1)(a) of the Family Law Act whenever a splitable payment becomes payable in respect of the husband’s interest in the Court Superannuation Fund, the wife shall be entitled to be paid an amount calculated in accordance with the regulations using a base amount, at the date of these orders, being the difference between $200,000.00 and the amount credited to the wife’s account in that superannuation as at the first day of the hearing (16 September 2008) and that there be a corresponding reduction to the entitlement the husband would have had in the superannuation fund but for this order noting that:
(a)That both parties, by consent, direct the Trustees of the Superannuation Fund to roll out into a separate Superannuation Fund the wife’s entitlement together with the sum split pursuant to this order within twenty-one (21) days of these orders;
(b)That the remaining assets of the Superannuation Fund, including the abalone unit, shall be assets attaching to the remainder of the husband’s interest in that fund.
In the event that N Pty Ltd is a trustee of the Superannuation Fund and the husband wishes to retain that company as trustee for that Fund, then the requirement to wind up that company shall abate and the husband shall indemnify the wife in relation to any liabilities arising by virtue of her being a Director, Public Officer or Shareholder of that company and the Wife shall assign the whole of her right, title and interest in the shares in that company to the husband and resign any public office she holds within that company within twenty-one (21) days.
The wife’s application for spouse maintenance is dismissed.
The extant order that the husband pay the wife spouse maintenance is discharged.
This matter is removed from this list of cases requiring determination.
All subpoenaed documents shall be returned to the persons or institutions from which they emanated and all exhibits are returned to the person or persons who tendered the same.
IT IS CERTIFIED
Pursuant to Rule 19.50 of the Family Law Rules 2004 it was reasonable to engage counsel and/or senior counsel to attend
IT IS NOTED
The husband has agreed to continue to pay private school fees for the child M, until such time as she completes her secondary education.
The husband will pay school fees for the child K until such time as she finishes her secondary education.
The husband has agreed that he will maintain the children’s private health cover until such time as they complete their secondary education.
IT IS NOTED that publication of this judgment under the pseudonym Court & Court is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth)
| FAMILY COURT OF AUSTRALIA AT LAUNCESTON |
FILE NUMBER: LNC736 of 2007
| MS COURT |
Applicant
And
| MR COURT |
Respondent
REASONS FOR JUDGMENT
These are proceedings between the wife and the husband who are in dispute in regard to division of their property and spouse maintenance following the breakdown of their marriage. The parties were living together for 24 years prior to their May 2006 separation. They have 2 children, K aged 17 and M aged 14.
The husband is 50 and is in relatively good health. The wife is 46 and she has a number of health difficulties.
The wife wants a division of property as to 65% to her and 35% to the husband. She asks for the matrimonial home, together with the furniture and fixtures in it. The wife also wants a 2004 Toyota motor vehicle. Her retention of these assets at their agreed values is not opposed by the husband.
The wife also asks for an abalone unit owned by the parties’ family trust. The family trust also owns a warehouse. The value of the warehouse and the abalone unit are agreed. The husband is the trustee of the family trust. Until late 2006 the trustee was N Pty Ltd, a company owned by the parties. The wife asks for orders that the warehouse be sold and that the family trust be wound up with the net proceeds of the windup to be divided between the parties in accordance with this property determination.
The parties own a holiday home at S and a property at C together with the furniture and furnishings in those homes. There are chattels at the warehouse. It is agreed that S property, C property and the warehouse chattels are to be transferred to the husband at their agreed value.
The parties agreed on the value of all of the relevant property including a Toyota land cruiser. With regard to the land cruiser there is an issue as to ownership.
The agreed transfers of those assets are to be included in the percentage division.
The parties have a self managed superannuation fund called the Court Superannuation Fund which has two substantial assets: an abalone unit with an agreed value of $165,000.00, and $306,300.00 in the bank. The parties agree that there should be a splitting order such that a sum of $200,000.00 from this superannuation fund is rolled over to a superannuation fund set up by the wife or nominated by the wife. That $200,000.00 is to be regarding as part of the percentage to which the wife seeks. The husband will retain the balance of the superannuation fund which is the abalone unit of $165,000 and a balance of the money in the bank of $106,300 making a total of $271,300.
The husband seeks property be divided as to 53% to the wife and 47% to him. During closing submissions it was conceded by the husband that he would retain a liability to the Westpac Bank and consequently making his proposed division closer to 55% to the wife and 45% to the husband.
In the case outline the husband sought an adjustment on a contribution basis of 51% to himself and 49% to the wife. In final submissions senior counsel for the husband asserted that the contributions should be treated equally and there should be effectively a 3% adjustment for the other factors.
The wife wants the abalone unit from the family trust transferred to her at a value of $165,000.00 and the warehouse sold. The husband seeks orders that the family trust be transferred to the wife so that she has both the abalone unit and the warehouse. The wife opposes that order. There are different tax consequences depending on the course that is adopted. The wife does not want the warehouse.
In these reasons any statement of fact is to be treated as a finding of fact unless a contrary intention is clear in the context of the statement.
Spouse maintenance:
On 22 February 2007 the husband was ordered to pay the wife $700.00 per week spousal maintenance. Subsequently, in August 2007 consent orders were made changing the earlier order and requiring the that the husband pay or cause to pay, by way of spousal maintenance and/or agreed child support:
·the income from an abalone unit owned by the family trust;
·private school fees for the children (including any arrears, school books, fees);
·repayments on the Westpac loan over the matrimonial home at L; and
·private health cover for the children.
In her financial statement in June 2008 the wife claimed that her living expenses were approximately $1,600.00 per week. Of that sum $451.00 related to the children’s expenses leaving a balance of approximately $1,150.00 for her expenses. The wife claimed credit card repayments of $131.00 per week. These debts are likely to be repaid after property settlement.
The wife agreed that her claims for medical expenses had reduced from the claimed $300 per week to about $60 per week. This meant the wife’s overall expenses were between $750 and $800 per week.
The wife sought spousal maintenance at $250 per week if she received less than 65% of the asset pool.
There was some suggestion at the commencement of trial which implied that there may be child support issues. Both counsel made clear to me that there were no child support issues to be determined.
It was discovered late in the process that the husband had shares in a company called D Pty Ltd and there were issues as to his entitlement to and value of those shares.
The issues
Whether there ought to be a division of property of 65% or 55% to the wife. The wife claims her contributions were 55% whilst the husband contends that they were equal or about equal. In terms of the other factors the wife sought an adjustment of 10% in her favour and the husband agreed there should be an adjustment in her favour but that the range was 3% to 5%.
There is an issue as to whether the wife should be forced to take the family trust including the warehouse, or to take the warehouse on its own.
There is an issue as to whether a land cruiser registered in the name of the husband is his property or whether he holds it on trust for the child K.
There was an issue as to how the husband’s shareholding in D Pty Ltd should be treated.
It is not in issue that the wife has health difficulties but the impact of those difficulties upon the wife is in issue.
Agreed Issues
I raised with counsel a number of matters as the end of the trial. There is no issue that the wife ought to receive the income from the warehouse and the income from the family trust abalone unit from the date of these orders until such time as the warehouse is sold and until such time as the abalone unit is transferred to the wife. I will make that order. The wife will be required to pay income tax accrued on that income.
In terms of the tax on the income of the family trust, the husband has been receiving the income from the warehouse and that will continue up to the date of these orders and the wife is receiving the income from the abalone unit. The orders I propose will provide that the income tax payable as a result of that income being accrued will be paid out of the proceeds of sale of the warehouse prior to distribution of the net proceeds of sale. I raised that issue with counsel in final submissions and neither demurred from that approach.
The child K is in Grade 11. Until March 2008 she attended a private school. The child M is in Year 9 and is attending a private school. The husband is paying those school fees.
M lives half the time with the husband and half the time with the wife and the husband pays child support. K presently lives with the wife and has done so for a number of months on a full time basis but it is the wife’s evidence that she will be returning to live part of the time with the husband and part of the time with the wife later on this year. The evidence of the husband, which I accept, is that the elder child will spend six months with one parent and six months with the other.
The husband intends to continue to pay private school fees for M and school fees for K. K will finish high school at the end of 2009. M has a few more years before she completes high school. I raised that issue with counsel and said that I would make notations of these agreements in the orders. Counsel accepted that was an appropriate step.
The evidence:
The wife relied upon the following:
a)her affidavit filed 7 July 2008 which was admitted into evidence without objection.
b)a schedule of medical expenses.
c)her affidavit filed 26 June 2008.
d)her financial statement filed 26 June 2008.
e)Family Court Order dated 28 August 2007.
The wife tendered in evidence without objection the following:
a)An ASIC search for D Pty Ltd. D Pty Ltd was incorporated in February 1970 and owns assets to which the wife concedes she has made no direct contribution. It appears to be a creature of the husband’s parents.
b)The company tax returns of D Pty Ltd for the 2006 and 2007 financial years.
c)a letter from Temple Smith Partners (the husband’s solicitors) to Doolan & Brothers (the wife’s solicitors) dated 12 September 2008.
d)Affidavit of Dr O. There was no issue as to Dr O’s qualifications nor the factual matters contained in this affidavit. Her affidavit included her reports dated 14 January 2008 and 25 June 2008.
e)Affidavit of Dr J filed 7 July 2008. This affidavit was likewise admitted into evidence without controversy in respect of the content or the doctor’s qualifications. The affidavit included the report dated 26 February 2008.
The husband relied upon the following:
a)his trial affidavit filed 21 November 2007.
b)his interim affidavit filed 23 November 2007.
c)an affidavit of his brother, Mr W Court, filed 23 November 2007.
d)the husband’s financial statement filed 21 November 2007.
e)the husband’s financial statement filed 20 May 2008.
Each of the parties was cross examined as was the husband’s brother and the parties’ accountant Mr W Court.
Credit of witnesses:
The wife gave her evidence in a clear and straightforward way. It was, from time to time, subjective and reflected her view of the litigation. However, she did make concessions against interest and seemed genuinely endeavouring to provide frank and straightforward evidence.
The husband was challenged on a number of issues by counsel for the wife. He was at times somewhat defensive and did not have a grasp of his facts to the same extent as did the wife. His evidence with regard to the events of 2006, when he appointed himself sole trustee of the family trust, was defensive and in some elements seemed to be a little reconstructive. However, I generally accept his evidence and I accept that, from his subjective point of view, he was trying to give his evidence truthfully.
The husband was challenged about his knowledge of D Pty Ltd and his interest in that company. I accept the evidence of the husband that he did not believe he had an interest in that company as it was one which was operated and traded by his father.
Neither the evidence of the husband nor wife was seriously impeached during the course of the trial. Their evidence is generally not contentious although the emphasis given by each reflects their subjective standpoints, which is understandable.
Mr W Court’s evidence was not impeached. The primary issues to which his evidence addressed was to liabilities which were conceded. His knowledge of the workings of D Pty Ltd was limited to that in terms of accounting and did not provide significant expertise in relation to the corporate structure itself.
The law
The approach in respect of the property issues involves a number of steps:-
a.The identification of the property and its value;
b.An evaluation of the parties’ contributions having regards to
ss 79(4)(a)(b) & (c);c.Consideration of any adjustment to that assessment having regard to the relevant matters in ss 79(d),(e),(f) & (g) (“the other factors”) including the matters referred to in s.75(2); and
d.A review of the outcome against a just and equitable requirement.
The pool of assets:
53. The assets are agreed and comprise:
Property
Owned by
Value
L property - agreed value.
Jointly
$395,000.00
C property - agreed value.
Jointly
$385,000.00
S property - agreed value.
Jointly
$440,000.00
Warehouse - agreed value.
Family Trust
$331,875.00
Abalone unit - agreed value.
Family Trust
$165,000.00
L property furniture - agreed value.
Jointly
$16,120.00
C property furniture - agreed value.
Jointly
$20,230.00
S property Furniture - agreed value.
Jointly
$24,715.00
Warehouse chattels - agreed value.
Husband
$7,355.00
2004 Toyota - agreed value.
Wife
$23,000.00
Wife’s superannuation - agreed value.
Wife
$200,000.00
Husband’s superannuation - agreed value.
Husband
$271,300.00
Total Assets:
$2,279,595.00
LIABILITIES
Mortgage to Westpac Bank secured over L property
$88,762.00
Total Liabilities:
$88,762.00
Total Assets
$2,279,595.00
Total Liabilities
($88,762.00)
NET ASSESTS
$2,190,833.00
The only issue as to the pool of assets was the Landcruiser registered in the name of the husband. The husband says that the Landcruiser was purchased for his eldest daughter shortly before her seventeenth birthday. This was in the period after separation and before the hearing. The agreed value of that vehicle was $2000.00. The question is who is the beneficial owner of that vehicle. The husband’s evidence was that he purchased the Landcruiser for his elder daughter from a friend, whilst this daughter was overseas. For the purposes of registration and insurance he left the vehicle in his name. However, his daughter drives the vehicle to and from school and the husband regards it as her vehicle. I accept his evidence that the motor vehicle was a gift to his daughter and that it is not an asset of the parties for the purpose of these proceedings.
At the commencement of the hearing there were some issues about liabilities. The parties agreed that the amount owed to Westpac secured over L property is about $88,762. It was further agreed between the parties that there should be an order that the husband pay out that liability. It was also agreed that the husband would continue to meet the normal payments of principal and interest in respect of the mortgage until such time as it was paid out. My orders will reflect that agreement.
The wife claimed various credit card and family tax benefit liabilities totalling about $40,000 (family tax benefit overpaid, American Express card, CBA MasterCard, Citibank Credit card, Supermarket account and Coles MasterCard).
The husband disputed whether these debts should be allowed. The husband claimed debts totalling about $60,000. The wife disputed much of these debts.
During the course of the hearing counsel for each party advised me of an agreement between the parties that the debts ought to be disregarded as for the purposes of the proceedings as to all intents and purposes they cancel each other out. That is a sensible approach and I have I have adopted it.
The wife initially claimed a liability for legal costs. During the hearing counsel for each party said that the legal costs for each party ought to be set off against each other and no allowance or claim should be made. I adopted that course.
In respect of the warehouse the husband seeks an order that it be transferred to the wife. The wife does not want it. The warehouse was leased to the husband’s employer in January 2004. The tenant agreed to pay rental of $21,000 per annum together with outgoings and rates.[1] The lease was renewed in December 2006.
[1] See agreement to lease Exhibit H2
The warehouse is beneficially owned by the family trust. The renewal of the lease came up shortly after the parties separated in circumstances where the parties were in high conflict. The wife wanted the rent adjusted to $26,000 per year. The tenant said it was only prepared to pay $23,700. The husband believed that if he did not agree to that rental the parties would lose the tenant, this being a stable and secure tenant. The husband says that he obtained a valuation of the rent. The wife believed that the rental ought to have been higher and seven months later obtained a rental valuation showing the market rental at that time ought as $25,920. The evidence of both the husband and wife in respect of this issue was accurate from their subjective points of view. The husband wished to preserve the tenancy and to do so, after consultation with his accountant/brother, the husband exercised his power as appointor under the family trust and removed the parties’ company N Pty Ltd as trustee and appointed himself. As trustee he executed a renewal of lease at a rental of $23,700 per annum.
At that time the husband said that he wanted to retain the warehouse as part of the assets for himself. He no longer wishes to retain that asset but seeks an order that the wife retain that asset as part of the assets in the family trust.
It is agreed between the parties that the wife should have the family trust’s abalone unit. The current value of that unit is $165,000 which is about $80,000 less than its acquisition cost. It was agreed that the warehouse at a value of $331,875 and that if it was sold at that price it would have a capital gain of about $100,000.
The counsel for the husband, in closing submissions, argued that the wife should take the warehouse and then she could do with it as she wished. It would provide her with an income of about $460 per week which would increase in accordance with the CPI each year. According to the husband it was an easy transaction.
On the evidence before me it was clear that the wife did not have a good relationship with the tenant as a consequence of the 2006 rent negotiations. Counsel for the husband submitted this should not be a concern. It was open for the wife to have someone to manage the factory for her.
Counsel for the wife submitted that the rental for the warehouse was slightly under market amount because of the approach adopted by the husband, and that the poor relationship between the wife and the tenant, at least on the wife’s part, was such that she should not be forced into that commercial relationship. Further, if the wife retained the family trust’s abalone unit and sold the building she would be left with the capital gains tax liability. He further submitted, and is not in issue, that she did not get balance sheets, in respect of the family trust, until the start of the trial.
Having considered the arguments of both parties and the underlying facts I determine that the warehouse ought not to be forced upon the wife contrary to her wishes and should be sold. The capital gains tax can then be calculated paid and the net proceeds applied to give effect to the orders which I make.
The family trust’s abalone licence ought to be transferred to the wife at its present value of $165,000.00. The consequence of this will mean that there will be a capital loss for the family trust from the sale of that abalone unit which loss can be applied against any capital gain on the sale of the warehouse.
The orders that I propose will enable the winding up of the family trust and, if necessary, the family company N Pty Ltd, and payment of the capital gains tax. I will treat the income that the wife will receive from the warehouse and the abalone unit as her income from the date of these orders. This will mean she pays the tax from the date of these orders and the parties share tax up to that date. I will have regard to the income from the unit and the warehouse for the purpose of the other factors and in respect of the wife’s maintenance application.
D Pty Ltd
In his trial affidavit the husband disclosed that he had borrowed some money from a company called D Pty Ltd. He was not fully aware of the circumstances of this company, except that it was his father’s company. When cross-examined the husband said that the company was set up by his father about 30 years ago and he was later appointed a director. He said that he had not signed any papers for the company and understood it to be his father’s retirement fund to support his father until his father passed away. The husband’s father is aged 79.
The father said that at Christmas when they have a family get together they have a meeting and he had not seen the books and he had not received any income or dividends. He does not run the company. He only became aware that he had an interest in the company a few days ago. The husband was cross-examined about the loan from the company. He was asked if he knew the nature of the loan agreement. He was aware that it was a loan agreement but not that it was a shareholder loan agreement. I accept his evidence in that regard.
The husband’s brother Mr W Court gave evidence that he was a shareholder and director of D Pty Ltd and that it was run by the husband’s father (his father as well) to accumulate assets. It was agreed that the total assets of D Pty Ltd as at 28 October 2008 amounted to $512, 650.00. The evidence of Mr W Court was that that money would be used, if required, by his father to purchase an interest in a nursing home, but that his father did not currently draw upon those funds.
Tendered in evidence in respect of D Pty Ltd were:
a)ASIC search;
b)Financial and company returns for the year 2006 and 2007;
c)The memorandum of articles of association of D Pty Ltd; and
d)Net agreed assets of D Pty ltd.
D Pty Ltd was incorporated in February 1970 and has operated since that time. The husband’s father, the husband, his brother Mr W Court and his sister are the directors of D Pty Ltd. The husband’s father is the secretary.
The company has various classes of shares. The husband, his brother and sister each have four ‘A’ class shares in D Pty Ltd.
The husband, his brother and sister each have redeemable preference shares. The husband’s father has 500 ‘J’ class redeemable preference shares.
June 1993 the nominal capital of the company was increased from $10,000 to $50,000 by creating 40,000 ‘M’ class ordinary shares. Of those ‘M’ Class shares the husband, his brother Mr W Court and his sister each have 1,013 shares and the husband’s father has 13 shares.
The memorandum of articles of association provide the following:
a)The rights, privileges and conditions attaching to the said 12 “A” 5% preference shares are as follows:
i)The said “A” 5% preference shares shall be the only shares in the capital of the company which shall confer the right to vote at any general right of the company
ii)The said “A” 5% preference shares shall carry the right to affix non-cumulative preferential dividend at the rate of 5% per annum on the capital paid up thereon respectively
iii)On a winding up the said “A” 5% preference shares shall in regard to a repayment of paid up capital be on ranking priority to all other shares in the capital of the company but the said “A” 5% preference shares shall not carry the right to any further participation the profits or assets of the company
b)The following rights, privileges, obligations, terms and conditions shall be attached in the like manner to each of the said classes of “B”, “C”, “D”, “E”, “F”, “G”, “H”, “J”, “K” and “L” redeemable preference shares.
i)The said redeemable preference shares shall not confer any right to vote at any general meeting of the company but the holder thereof shall be entitled to notices of and to attend the general meetings of the company
ii)Each of the set classes of redeemable preference shares shall rank in a winding up as regard to the return of paid up capital and any dividend declared but unpaid at the date of winding up in priority to the ordinary classes and pari passu with the several other classes of redeemable preference shares, but shall not carry the right to any further participation in the profits or assets of the company.
The “M” class shares provided:
“It was resolved or proved as an ordinary resolution that the nominal capital of the company be increased from $10,000 to $50,000 by the creation of 40,000 “M” class ordinary shares at $1 each.”
The 2007 company tax return and financial statements set out the assets of D Pty ltd in the balance sheet as at the 30 June 2007. This comprised:
Cash on hand $ 36,400
Deposits $ 57,887
Other Debtors $ 5,352
Loan - [the husband] $ 31,500
Plant and equipment $ 2,420
Investment portfolio $622,003
Total $753,204This was raised in the following way:
Issued and paid up capital $ 3,864
Capital profit reserve $158,078
Capital redemption reserve $ 2,700
Retained earnings $588,562
Total $ 753, 204
At the conclusion of the hearing counsel was given 14 days to make written submissions in how these shares ought to be treated and how this company ought to be treated as an asset or a financial resource. There were issues as to the extent of the husband’s interest in the company (noting his status as minority shareholder) and the value of that interest.
I made a chambers order giving notice to the company and to the husband’s father that there was interest in these proceedings and giving them leave to intervene if he wished. There has been no application to intervene by either the husband’s father or D Pty Ltd.
Counsel for both parties subsequently filed written submissions and counsel for the wife submitted that the husband failed to make full and frank disclosure regarding this company. I do not make that finding, the husband believed that D Pty Ltd was an asset of his parents. I do not accept that the husband deliberately failed to meet his obligation to disclose all of his financial circumstances.
In terms of the value of his shareholding it was agreed between the parties that it equalled one third value of the company, being $170,885.00. The wife claims that she should be entitled to 27.5% of that sum which is approximately $46,993.00.
D Pty Ltd was incorporated in February 1970 and appears to be a style of company set up at those times to minimise death duties. In December 2006 and subsequent to the marriage break-up the husband needed monies to assist him and his father “lent him” some money. This was lent through D Pty Ltd. That loan was documented by a loan agreement dated 11 December 2006.
I find that the husband’s interest in D Pty Ltd is not an asset to which the husband has unfettered access. The husband is a minority shareholder in that private company.
I accept the evidence of Mr W Court that the assets of D Pty Ltd are for the benefit of the husband’s father, and such assets may be used by him to buy retirement accommodation. Therefore, the assets will not be available to the husband until such time as the company is wound up or his father dies.
That would have an impact on the value of that asset and whilst the husband has a legal interest in his shareholding, on the evidence, the husband’s interest may be subject to his father’s equitable interest, at least until such time as the husband’s father dies.
The memorandum and articles are obtuse in terms of the shareholding. The “A” class preference shares are said to have priority in regard to repayment of capital on a winding up. This may conflict with the rights and privileges in respect of the redeemable preference shares.
For the purpose of this hearing I determine that it is likely that the husband will receive his interest in D Pty Ltd after the death of his father. The value of this interest, bearing in mind it is primarily contained in shares in public companies, must be seen as able to fluctuate bearing in mind the reduction of the value of the assets from 30 June 2007, vis $753,204.00 to some $603,000.00 in September 2008 at trial, and then to $512,650.00 in late October 2008.
The appropriate way to deal with this interest is to treat it as a financial resource and have regard to it under the other factors. That is the course that I will adopt. I have had significant regard to that asset in terms of the other factors.
Contributions
The parties lived together for 24 years and accumulated considerable assets. There is agreement as to the value of the pool of assets. The parties agree that at the commencement of their relationship they each had limited assets.
In his case summary the husband sought a loading of 1% to him to recognise his contributions during the marriage and his post-separation contributions. Counsel noted that the husband’s position was that contributions were virtually equal. The husband asserts that he was the primary bread winner and that he built up the business in the course of the marriage. He concedes the wife was the primary homemaker but that he made some contributions by way of work around the home. The husband said that he was involved with the children, and the wife concedes he was a good father and that he did much of the outside work and assisted inside the house from time to time.
In his opening submissions counsel for the wife submitted that a proper determination of the parties’ contributions was 55% by the wife and 45% by the husband. It was submitted that:
a.the wife undertook an equal role in the parties’ business (which at one stage had up to 11 employees, including the husband and wife) and undertook most of the paperwork.
b.the wife was the driving force behind real estate and abalone unit investments and the family’s general financial and business affairs, and that her astute business decisions in that regard caused the parties to accumulate the level of wealth that they did.
c.in addition she parented and maintained the parties’ home to a far superior degree.
What was telling in the evidence of both parties, and the wife in particular, was their acknowledgement of the significant contribution of the other. Some of the wife’s evidence included:
“It was a good team”
“Both of us did our share.”
“He was a good father.”
“We worked equally to get where we are.”
The parties started their own business in 1991 and sold in about 2003. The husband worked long hours as an income earner, the wife worked long hours in a combination of the business, the family’s business affairs, parenting, and homemaker. The parties distributed their income between them and each of them undertook tasks which saved expenses. The wife undertook the task of a bookmaker and at times, business manager. The wife acknowledged that the husband was a very good tradesman and at one stage said that the business would be better if there were “two of him.” The husband acknowledges the significant role that the wife played. Indeed there was limited negative comment from either about the other.
There was some criticism of the husband’s post-separation expenditure on the children in terms of telephone and car. I find that those expenses are not unreasonable in context of the dynamics of this family.
Considering all of the evidence in regard to contribution I am satisfied that the contributions made by the parties throughout the marriage, including post separation contributions, were equal. This applies both to the superannuation property and the non-superannuation property.
The Other Factors including section 75(2) factors.
The husband has the benefit of the use of a company car. This is a financial resource to which I have had regard.
The wife does not enjoy the best of health.
Consultant Psychiatrist Dr J in unchallenged evidence said that the wife fulfilled the criteria of a bi-polar disorder. She was compliant with treatment and her prognosis was favourable. Dr J opined that the wife was able to take on part time work 2 days per week.
The wife says that her bi-polar disorder leaves her with insomnia, mood swings and hyperactivity. She has had these symptoms for some 17 years. Despite these symptoms the wife was able to work, at least part time, in recent years
The wife was diagnosed with and treated for a breast carcinoma over the last 12 months. Her breast surgeon, Dr O, provided a report which evidence was unchallenged. As a consequence of the illness the wife had a bilateral mastectomy which was performed in February 2008. At the same time a bilateral reconstruction was performed, this later operation was reconstructive not cosmetic operation but reconstructive surgery.
Dr O said in her second report that it was possible that the wife may need further multiple procedures. The wife has undergone drug treatment for the cancer and is presently cancer free. Dr O said that the wife had a good prognosis but will need to continue medication for 5 years. Dr O went on to note that;
(f)It is difficult to anticipate at this point the speed with which [the wife] will make a full physical recovery. The expectation is that this should occur over time and it is possible that she should be able to obtain full time employment.
The wife says that she suffers from adult cystic acne and that the cost of removing those cysts is expensive. The wife brought no medical evidence in relation to illness, however, I accept that she has the condition but there is no expert evidence as to the cost of treatment.
The wife says that she has bowel polyps which require colonoscopy once every 5 years at a cost of approximately $100.00 per year. I accept that evidence.
The wife has a 15% chance of recurrence of her cancer and I have given that consideration in terms of the adjustments. She has had breast cancer although it is in remission. She suffers from bipolar disorder and other health issues. The impact of the surgery in 2007/08 is set out in financial terms in her particulars of medical expenses[2]. The wife deposes that she spent $22,116.11 in that financial year. This needs to be seen in the context that some of those expenses are already included in her normal living expenses, such as pharmacy. Some of the amounts she claimed related to preparation of reports for these proceedings. In terms of the wife’s health it can only be said that her health is poor and challenges her. I have had regard to her state of health
[2] Exhibit W1
The combination of breast cancer and bipolar is such as to impact on her income earning capacity and I accept, as I indicated earlier, that her capacity to work is two days per week. Her income earning capacity is about $14,000 per year and the husband is on a total package of about $89,000 per year. That is a significant differential in income earning capacity. The effect of these orders will be that the wife has significant assets which will provide her with income.
Each party will provide equal care to the two children under the age of 18 years. The husband pays child support, school fees, and covers health insurance. I have had regard to that in terms of the other factors.
The husband has chosen to retain S property for his benefit and that of the children. How he uses that asset is a matter for him.
The wife provides greater care for the elder child at this stage although that is only for a short period of time. M is 14 years old and spends approximately equal time with both parents. The husband pays child support and private school fees. In terms of child support the elder child is in receipt of a government allowance but this will cease once the property orders are made. The children have the capacity to undertake some part-time work in particular the elder child. I accept that the wife’s living standards have deteriorated since separation. No other party is cohabitating with another person.
The wife has not been in employment since late 2007. Up to that time she worked with her brother part-time in his business and earned approximately $270.00 per week. I am satisfied that the wife can, at the present time, work at that level and earn that income. It was submitted by counsel for both parties that this is the approach that I ought to adopt.
As a consequence of the orders that I will be making the wife will have the abalone unit currently owned by the family trust. It returns an agreed income of $20,000.00 per annum, or approximately $384 per week.
The husband offered to transfer to the wife the warehouse which has an income of approximately $23,500.00 per annum and a lease which provides for an increase in rent at 3% per annum for the next 4 years. The tenant is the husband’s employer and it has paid rent on time for a number of years. The wife does not like the managers of this business and declined the warehouse and the consequential income that it can accrue. Her view was that she could earn as much, or more, with less stress by virtue of her own investments whether that be in a bank or property development. Accordingly, I find that the wife can earn from that sum of money at least $24,000.00 per annum which is about $461 per week.
In addition the wife will earn an income from other property to which she will be entitled pursuant to these orders.
The husband is a tradesman and is paid about $72,355.00 per annum. In addition he receives the superannuation levy of about $6,500 per year and is provided with a work motor vehicle. The husband is entitled to annual leave, two weeks’ sick leave each year, long service leave (from commencement of his employment in 2003/2004) which will accrue after ten years on the husband’s evidence.
Unlike previous years, for the financial year ending June 2008 the husband was not paid for overtime work.Instead the husband earns an income of about $10,000 per year from his private business.
The husband’s total annual income from his work is about $89,000.
The wife has a smaller income earning capacity although part of that will be made up by virtue of the nature of these orders. The wife will have some ongoing medical expenses which she estimates, in the best case scenario, at approximately $3,000.00 per annum. These could be greater if her cancer returns. I have had regard to the medical expenses the wife will have in the future.
The wife will be limited to working two days per week whilst the husband can work five days per week. The husband is some 4 ½ years older than the wife and I have had regard to the difference in the parties’ ages.
I have given weight in my proposed adjustment to the impact of the income differential and the particular assets which will be transferred to the wife. I also have regard to the rejection of the income that would have been earned had the wife accepted the warehouse. I have had regard to the property which each party will have as a consequence of the orders I propose to make.
The husband pays income protection insurance which will provide him some comfort in the years to come and it is a fact to which I have had regard.
The husband has his interest in D Pty Ltd. I find that that is not an interest which is readily realisable by him but is a resource from which he has been able to borrow funds. I accept that these funds are to provide for the husband’s father’s old age but also accept that the husband may receive funds from D Pty Ltd in the future.
Having regard to these factors it seems to me that adjustment in favour of the wife of 10% is appropriate in all of the circumstances.
Just and equitable
The effect of these orders will be that of the total pool of assets the wife will receive sixty per cent. The total pool of assets is $2,190,833.00. The warehouse is to be sold and the net proceeds to be divided in accordance with these orders. Therefore the pool to be distributed between the parties (excluding the warehouse) is calculated as:-
Pool of assets
$2,198,033.00
Warehouse (agreed value)
($331,875.00)
Balance
$1,858,958.00
The wife is to receive sixty per cent of $1,858,958.00 which is $1,115,375.00. The husband’s forty per cent is $743,583.00.
I will order the husband to pay the wife $316,255.00, the effect of which is:-
Assets to wife
L property
$395,000.00
L property Furniture
$16,120.00
2004 Toyota
$23,000.00
Wife’s superannuation
$200,000.00
Abalone unit
$165,000.00
Amount paid to wife by husband
$316,255.00
Total
$1,115,375.00
The husband will receive the following:-
Assets to husband
C property
$385,000.00
S property
$440,000.00
C property furniture
$20,230.00
S property furniture
$24,715.00
Warehouse chattels
$7,355.00
Superannuation
$271,300.00
Westpac mortgage
($88,762.00)
Amount payable by husband to wife
($316,255.00)
Balance
$743,583.00
Half the fish have been sold from each abalone unit for the current year. The other half are thus available to each party so there will be equality in terms of those additional assets.
In addition the parties will distribute the net proceeds of sale of the warehouse of which the wife should receive 60% and the husband will receive 40% after payment of expenses associated with sale, taxation liabilities, winding up expenses and the like and my orders will be so expressed.
Having regard to all of the findings in these proceedings I determine that this is just and equitable.
Spousal Maintenance
The Full Court in Clauson and Clauson (1995) FLC 92-595 said at 81,907:
Where spousal maintenance is sought in addition to a property order it becomes, in effect, the fourth step in the process. It is only to be exercised after the three step process under s. 79 has been completed and it is not to be confused with the s. 75(2) component in that latter exercise. The reason why it must be exercised after the s. 79 exercise is because that latter exercise establishes the background against which s. 74 must operate, that is, the financial circumstances of the parties.
The result of the s. 79 order may be such that the applicant for maintenance can no longer be described as being ``unable to support himself or herself adequately'' because he or she may have sufficient assets which, with or without income arising from the investment or use of those assets, will provide an adequate level of support. It also defines the other party's capacity to meet any order.
I am satisfied that the wife’s income needs will be met by her capacity to earn income and from her investments - initially from the abalone unit and warehouse, and subsequently from investments she will make from that time. She gave evidence that she could invest money at about 8% which would be the same as, or more likely exceed her expenditure. This would include covering the cost of the $3,000.00 per year hospital, medical and pharmaceutical expenses.
I have considered all of the factors under s 75(2) including the wife’s age, health, property as set out earlier in these reasons. I am not satisfied that the wife has shown a need for periodic maintenance in excess of her capacity to earn income either by personal exertion and/or through investments. As such I will dismiss her spousal maintenance application and dismiss the previous spousal maintenance order.
I certify that the preceding 116 paragraphs are a true copy of the reasons for judgment of the Honourable Justice Benjamin
Associate:
Date: 30 October 2008
Key Legal Topics
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Family Law
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Equity & Trusts
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