Daniels and Findlay

[2010] FamCA 195

FAMILY COURT OF AUSTRALIA

DANIELS & FINDLAY [2010] FamCA 195

FAMILY LAW – COSTS

Family Law Act 1975 (Cth)

Calderbank & Calderbank [1975] 3 All ER 323

APPLICANT: Mr Daniels

RESPONDENT: Ms Findlay

FILE NUMBER: MLC 1996 of 2008

DATE DELIVERED: 9  March 2010

PLACE DELIVERED: Melbourne

PLACE HEARD: Melbourne

JUDGMENT OF: DESSAU J

HEARING DATE: 30 November, 1, 2, 3, 4 December 2009, 4 February 2010, 19 February 2010,

REPRESENTATION

COUNSEL FOR THE APPLICANT: Ms Molyneux QC

SOLICITOR FOR THE APPLICANT: Holt & McDonald

COUNSEL FOR THE RESPONDENT:

SOLICITOR FOR THE RESPONDENT:

Orders

Orders re: the wife’s application in a case filed 4 February 2010

1. That the wife is permitted to obtain from Auscript, at her expense, CDs of the transcript of evidence of 30 November, 1 December, 2 December, 3 December, 4 December, 11 December, and 22 December 2009, and 4 February and 19 February 2010.

2. That the wife may have access to all subpoenaed material and exhibits in this case, to inspect them, and to make copies, at her expense, provided that her access to such material and exhibits is to be supervised by a member of the Registry staff so that she is not at any time left alone with the documents.

Orders Re: Property Settlement

1. That the wife shall retain to the exclusion of the husband assets to the value of $389,371.00 as follows:

   ·M property  $300,000

   ·Monies owed to the wife by her sister   $30,729

   ·The motorhome   $13,000

   ·The wine collection   $14,100

   ·Monies withdrawn by the wife from

   the Sandhurst Building Society   $10,900

   ·Furniture   $6,000

   ·The proceeds from sale of furniture   $6,000

   ·Monies held jointly by the parties with

   Bendigo Bank   $6,843

   ·Monies in the Barclays account   $1,799

   $389,371

2. That the husband shall at his expense forthwith lodge a discharge of caveat numbered …, over the property at M and upon written confirmation from the Registrar of Land Titles that the caveat has been discharged, a copy of that letter shall be sent to the wife by ordinary pre-paid post and the husband shall then instruct Holt & Macdonald, Solicitors to forthwith distribute the sum held on trust for the husband and the wife as follows:

   (a)A sum of $383,781 ($389,371 less $5,590 in Order 4) to the husband;

   (b)To pay all taxes due and payable pursuant to Order 11;

   (c)To pay all outstanding fees to N Accountants, pre-existing or as a result of these Orders;

   (d)The balance then remaining to be divided equally between the husband and the wife.

3. That contemporaneously with the payment to the husband in Order 2(a), the husband shall pay to the wife the sum of $7,702.50 representing one-half of the cost of her dental fees. 

4. The husband shall retain to the exclusion of the wife the superannuation entitlement in his name with MLC ($5,590).

5. That the husband forthwith engage N Accountants Company (“N Accountants”) forthwith upon the expiration of 21 days of these Orders to complete:

   (a)A share transfer for the following shares:

   (i)     all shares in public companies held by the husband and wife personally in which the husband and the wife are the transferors and the wife is the transferee  (“the personal shares”); and,

   (ii)    all shares in the A Superannuation Fund wherein the transferor is A Pty Ltd (“A Pty Ltd”) as trustee of the A Superannuation Fund and the transferee is the trustee of a superannuation fund nominated by the wife, to the husband’s solicitor within 21 days of these Orders, or failing such nomination, the wife is the transferee (“the superannuation shares”).

   (b)Withdrawal of Deposit forms for payment by A Pty Ltd as trustee of the A Superannuation Fund to the trustee of a superannuation fund nominated by the husband within 21 days of these Orders, or failing such nomination, to the husband, of monies equal to the total market value of the personal shares and the superannuation shares as at the date the husband signs the Transfers of Shares pursuant to Order 6 (“the monies”).

6. That forthwith upon the preparation by N Accountants of the Share Transfer and Withdrawal of Deposit forms for the purposes of Order 5, the husband shall do all acts and things and sign all documents necessary so that the wife or her nominated entity shall receive the share transfers signed by him and contemporaneously, the husband or his nominated entity shall receive the monies.

7. That the wife shall be solely liable and responsible for any incidence of any tax as a consequence of the transfer of shares pursuant to Order 6 and shall indemnify the husband and keep him indemnified in relation to same.

8. That the husband shall be solely liable and responsible for any incidence of any tax as a consequence of the payment of the monies to the husband pursuant to Order 6 and shall indemnify the wife and keep her indemnified in relation to same.

9. That forthwith after performance of Order 6 the husband shall do all acts and things and sign all documents necessary to transfer any funds remaining in the accounts of the A Superannuation Fund into the Holt & Macdonald Trust Account for the parties, to be disbursed as follows:

   (a)For each party to forthwith receive the sum of $35,000 save that the wife’s sum of $35,000 shall be forthwith directed to the husband to meet part of the costs order in Order 19;

   (b)In accordance with paragraphs (b) and (c) of Order 2;

   (c)In accordance with paragraph (d) of Order 2 save that to meet the remaining $15,000 costs owing from the wife to the husband the first $15,000 due to the wife from her equal share, or the full amount of her equal share in the event that it is less than $15,000, shall be paid to the husband.

10. That within twenty-one days, the wife shall deliver to N Accountants:

    (a)any source documents in her possession that she asserts will enable N Accountants to lawfully amend the income tax returns for A Pty Ltd for the financial years ended 2007 and 2008 to properly record all expenses claimable by A Pty Ltd in those financial years, thereby permitting the lawful reduction of the income tax liability as at 30 June 2008 as recorded in the N Accountants report dated 5 June 2009 and filed in the proceedings; and

    (b)any source documents in her possession for the preparation by N Accountants of the income tax return for A Pty Ltd for the financial year ended 2009 and to the date upon which A Pty Ltd is wound up.

11. That upon receipt of any source documents from the wife pursuant to Order 10, or after 21 days from the date of these Orders (whichever should first occur) the husband shall do all acts and things and sign all documents necessary to:

    (a)Instruct N Accountants to prepare all relevant financial records and income tax returns and to lodge with the Australian Taxation Office (“ATO”) income tax returns for the financial year ended 2009 and for the current financial year up to the date on which the relevant company is wound up pursuant to Order 11(b), together with the income tax returns for the financial years ended 2007 and 2008 prepared by them and, if applicable, as amended by them for each of the following companies:

    (i)     A Pty Ltd (ACN …);

    (ii)    P Pty Ltd (ACN …); and

    (iii)     P Global Pty Ltd (ACN …); and

    (b)To instruct N Accountants to prepare as soon as practicable and to lodge with the Australian Securities Investment Commission (“ASIC”) all documents necessary to wind up the following companies:

    (i)     A Pty Ltd (ACN …);

    (ii)    P Pty Ltd (ACN …); and

    (iii)     P Global Pty Ltd (ACN …).

12. That upon the written request of N Accountants, the husband shall forthwith do all acts and things and sign all documents necessary to cause A Pty Ltd to record a payment to each of the husband and wife (as shareholders) of a fully franked dividend of $59,990, and an unfranked dividend of $1,071, and for the dividend distribution to be made up of franking credits, payment of money, and by distribution of company assets (i.e. to the husband  the motor vehicle and computer in his possession and to the wife, the motor vehicle in her possession) at the written down value in the financial records for the financial year ended 2008.

13. That any incidence of tax liability or stamp duty arising from the receipt of the dividend from A Pty Ltd pursuant to Order 12 shall be the sole liability and responsibility of the payee.

14. That any incidence of tax liability arising from A Pty Ltd forgiving monies the husband and wife owe A Pty Ltd shall be the liability and responsibility of each of the husband and the wife to the amount referable to the debt forgiven.

15. That the wife in her capacity as a director, shareholder, beneficiary and/or creditor of A Pty Ltd, the A Superannuation Fund, P Pty Ltd, P Global Pty Ltd, and P (UK) Ltd shall be and is hereby restrained by herself or her servants or agents from initiating any legal claim against the husband, including for any indebtedness, damages or specific performance.

16. That the husband shall forthwith do all acts and sign all documents prepared by N Accountants necessary to record the payment to A Pty Ltd of all cash at bank and receivables held by P Global Pty Ltd. 

17. That the husband and the wife shall be and are hereby restrained by themselves or their servants and agents, from taking any step or action to have P (UK) Ltd (Company Number …) reregistered.

18. That unless otherwise specified in these Orders and except for the purposes of enforcing the payment of any money due under these or any subsequent Orders:

    (a)each party shall be solely entitled to the exclusion of the other to all property in the possession of such party as at the date of these Orders, and the furniture, personal possessions and like chattels in the former matrimonial home at M are considered to be in the possession of the wife;

    (b)all life insurance policies shall become the sole property of the person in whose name the policy stands as owner; and

    (c)each party shall be solely liable for and indemnify the other against any liability encumbering any item of property to which that party is entitled pursuant to these Orders.

19. That the wife shall pay the sum of $50,000 towards the husband’s costs.

20. That the husband shall have liberty to apply to the court upon short written notice to the wife in relation to any further Orders required to give effect to these Orders.

21. That otherwise all existing applications shall be dismissed, the case removed from the list of cases awaiting finalisation, and all exhibits and subpoenaed material retained until the expiration of the appeal period or, if a Notice of Appeal is filed, until the conclusion of the appeal.

IT IS NOTED that publication of this judgment under the pseudonym Daniels & Findlay is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth)

FAMILY COURT OF AUSTRALIA AT MELBOURNE

FILE NUMBER: MLC 1996  of 2008

MR DANIELS

Applicant

And

MS FINDLAY

Respondent

REASONS FOR JUDGMENT

INTRODUCTION

1. I published Reasons for Judgment in this property case on 22 December 2009.  Despite efforts that day (my last day in the Registry before Long Leave) and again on 4 February 2010 (my first day back in the Registry), the complexity of some technical aspects of the orders precluded final orders being pronounced.  On 4 February it became clear that I required expert evidence as to the potential tax consequences of a particular form of order.

2. The case was adjourned until 19 February 2010 for that evidence to be obtained, but also for the husband’s legal representatives to consider the wife’s just filed Application in a Case, for the wife to consider the detail of the just filed draft orders prepared by the husband’s legal representatives, and for the husband’s costs application.  I ordered that no party was permitted to file any further documents without first obtaining leave.  The proceedings needed to be finite.

3. I shall deal first with the wife’s Application in a Case filed 4 February 2010, followed by the costs issue, and then the form of the final orders.

THE WIFE’S APPLICATION IN A CASE FILED 4 FEBRUARY 2010

1. The application was supported by the wife’s affidavit filed 4 February 2010, sworn on 28 January 2010.  I am dealing with it first because in part it relates to fresh evidence.  She sought seven orders.

The Production of CDs of Transcript

1. The wife sought CDs of the trial transcript, saying it was more cost effective for her to buy them, than to travel to Melbourne to listen to the recordings.

2. At paragraph 5 of her affidavit she swore that she wanted to review the proceedings, to identify whether statements attributed to her were made by her or another person, to be “absolutely certain” that any appeal is based on “fact and relevant Case Law”.

3. Overall, that encapsulates a reasonable approach.  Ms Molyneux took no issue with it.  I will make an order that the wife can, at her expense, obtain a CD of the transcript of evidence to incorporate the hearing as well as the submissions on 22 December 2009, 4 February 2010 and 19 February 2010.

The Removal of Caveat from the property M

1. It was agreed that the wife shall retain this property under the final orders.  She was correct that the husband’s caveat over the property should be removed.  Ms Molyneux agreed.  The question was as to the timing. 

2. Ms Molyneux proposed the caveat should be removed when the husband receives the first specified cash component from the Holt & McDonald Trust Fund.  I agree.  That will be soon after the orders.  It is fair that the wife receives the withdrawal of caveat at that earliest point.  It is logical too in that the cash payment to the husband takes into account that the wife will retain the M property.   

3. I shall include an order for the discharge of the caveat in the substantive orders.  That way, the parties’ respective obligations shall be set out in one place. 

The time-frame for an appeal

1. The wife sought an order for an appeal to lie within 28 days of the orders being made.  I explained to her that the time limit for an appeal does run from the date of the orders, not from the judgment.   

2. This application is without merit in the circumstances of it simply reflecting what can by law occur.  It will be dismissed.

Fresh evidence

1. The wife sought several orders in this respect. 

2. She sought an order that the husband hand over a Dell computer, that Mr K from Victoria Body Corporate Services hand over documents he “failed to produce” under subpoena filed 19 November 2009, and that the husband provide a copy contract note for the purchase of some shares in 2004.

3. The wife had also sought to lead fresh evidence when the matter was brought back before me on 11 December 2009 (a week after the hearing, but before the judgment).  At that time the husband was complaining that from immediately after the hearing the wife had been emailing his solicitors, and was reneging on the approach to orders that had been agreed in the course of the case.  The wife did not deny sending the emails.  She sought to lead fresh evidence, in particular documents from Ms Molyneux’s brief that the wofe said she “came across” in the courtroom at the end of the hearing.  I incorporated my refusal for her to lead further evidence, and my observations about her behaviour, in my Reasons for Judgment delivered on 22 December 2009.

4. I do not propose making orders now for this new discovery or fresh evidence.  It is acknowledged by the wife that these were generally documents already sought by her on or before the hearing.  They were either ultimately not pursued by her, or were pursued without success.  There is no basis for me to allow further discovery or fresh evidence at this point. 

5. In the case of the 2004 share purchase that, according to paragraph 13 of her affidavit, the wife requires to establish a claim “under the principles of the Sons of Gwalia Ltd case”, the issue was simply not run in the course of the hearing, and no sound reason was given to open it now. 

Subpoenaed material and exhibits

1. The wife sought to have access to and to copy all “documents received under subpoena and lodged during the trial as evidentiary items”.  In submissions, she clarified that she meant subpoenaed material and exhibits.

2. Ms Molyneux had no objection to the wife having further access to view or copy those documents.  She asked however that any access be under the supervision of Registry staff, given that the wife had on her own admission removed documents from amongst the husband’s papers in the courtroom, and had separately “come by” other documents from Ms Molyneux’s papers.

3. I am satisfied that for the integrity of the documents and the process, there must be such supervision.

COSTS

1. The detail of the husband’s costs application was contained in his affidavit filed on 3 February 2010 and the affidavit of his solicitor filed on the same day.  He sought an order for costs “on such terms and conditions as this Honourable Court deems appropriate.”  As noted, one of the reasons I adjourned the case on 4 February 2010 was for the wife to consider the costs application.

2. When the costs issue was argued before me on 19 February 2010, the husband sought indemnity costs.

3. Costs are a discretionary matter, governed by s 117 of the Family Law Act. The court may, under s 117(2), order costs against a party if it is of the opinion that there are “circumstances that justify it in doing so.” The matters relevant to the consideration are set out in s 117(2A). The husband relied mainly on sub-paragraph (c) as to the wife’s conduct before, during and since the trial, and sub-paragraph (f) as to offers of settlement made by him well before trial. The wife resisted any order for costs.

The wife’s Conduct

1. At paragraph 4 of his affidavit sworn 2 February 2010, the husband referred to the wife’s expressed intent to run up the costs.  In particular, he annexed the following emails to illustrate her attitude to the litigation. 

2. On 20 January 2008 she wrote to him:

   You can add up the potential cost of legal bills (and you will be charged for every email he reads and I can send thousands); court fees; continued appeals to higher courts;…

3. On 25 January 2008 she wrote:

   I can drag this through court after court and dissipate your $1.4 million and mine too!

4. On 7 March 2008 she wrote:

   I enjoy you running up costs.

5. On 28 March 2008 she wrote:

   I really hope this costs Millions!

6. Mr Ryan, the husband’s solicitor, swore that he received in total 507 emails from the wife from the time he came into the case in January 2008.  He swore that “much” of the email traffic was unnecessary, and had added significantly to the husband’s costs.  He swore that the husband had incurred legal costs exceeding $146,000.

7. The 507 emails were not produced.  At the hearing on 4 February 2010, counsel for the husband suggested that they would be served on the wife.  I observed that it would most likely cause the costs and delay to keep mounting.  Whatever the precise number may be, the wife did not deny that she sent many emails.  She would say that they were necessary.  The sample of emails above strongly suggests the contrary.  So too did the evidence of Mr U from N Accountants.  He swore that the volume of the wife’s emails to his firm unnecessarily increased the costs of preparation of the forensic report by approximately $3,000 to $5,000.  In addition, I have seen the volume and nature of emails sent by the wife immediately after the hearing of this case.  They were unimpressive.

8. Overall, there is ample evidence that many of the wife’s emails were not part of a productive discourse for the purposes of genuinely resolving outstanding issues.  I do not need to know a precise number to reach that conclusion.

9. As to the wife’s conduct during the trial, she was criticised for running issues that she later dropped, or for changing her mind on the agreed approaches to orders.  Both criticisms have substance. 

1. She sought a large number of add-backs at the start of the case, then conceded many along the way, but, as I noted at paragraph 112 of my Reasons for Judgment, she then attempted a “back-flip” on agreements made in the course of the hearing, via the series of emails immediately after the hearing. 

2. Similarly, she gave various assurances in the hearing that permitted the husband to agree that she could be entrusted with the task of winding-up the various companies, but her behaviour immediately after the trial made it clear her assurances could not be relied upon.  In particular, there was her conduct in taking Ms Molyneux’s documents, made worse in the context of a serious reprimand from me when she had removed documents from amongst the husband’s papers just several days’ earlier. 

3. I dealt with the communication from the wife to the husband’s solicitors after the trial at paragraphs 32 to 40 of my Reasons for Judgment.  I made it clear that her conduct was such that I could no longer permit her to handle the winding-up of companies as had been agreed earlier in the course of the hearing. 

4. In addition, at various times she changed her position as to whether or not she would sue the husband through particular entities for particular debts or losses that she said were incurred by him.  Even as late as the final submissions on 19 February 2010, it was brought to my attention that, again via email, she had been threatening legal action against the husband, although at one stage in the course of the hearing she swore that she would not pursue such a course. 

Offers of Settlement

1. On 3 April 2008, the husband’s solicitor sent a letter to the wife containing an offer of settlement “without prejudice save as to costs”.  On the husband’s calculation the wife was offered 55.62% of the pool in that letter. 

2. A second offer was sent to the wife on 30 October 2008.  It was unclear why it was not annexed to Mr Ryan’s affidavit.  There is no sinister inference to be drawn from that.  There was no reason to conceal the offer.  Most likely, for one reason or another, it was overlooked.  In any event, it was properly brought to my attention by the wife.  In that October 2008 offer, it was proposed that the wife would receive about 53% of the pool. 

3. In each instance, the letter referred to the offer being a “Calderbank” offer.  The wife had diligently read the decision in Calderbank v Calderbank [1975] 3 All ER 323 and submitted that these were not valid Calderbank offers, in that they were not clear and precise in their terms, and they did not state clearly the time in which they would remain open.

4. It is true that not all the valuations were certain at the time of the offers, not every small detail of the structure of orders was yet proposed, and there was no express time limit that the offers were expressed to be open. Nevertheless, under s 117(2)(f) of the Act, these are still relevant offers of settlement. The circumstances referred to by the wife are relevant when it comes to my assessment of them.

5. In the end result, the wife received 50% of the pool.  That is less than the husband offered a long time before.  As is often the case though, an assessment of the reasonableness of an offer is complex, given disputes as to the actual pool, and the details and method of distribution of various assets. 

6. At the time of the first offer, the husband had assessed a pool of $3.085 million (at a time when the market was more buoyant than at trial).  At trial the pool became $2.664 million (although for reasons I will explain below, it was more than that by the time of these orders). 

7. The husband’s proposal for the wife to retain M property was consistent with the agreement before me.  Of the other “big ticket items”, it was proposed that the wife would retain the A Super fund cash, the husband the shares.  Although my orders will ultimately reflect the reverse, the parties had previously agreed it in the way proposed by the husband.  It was only agreed the other way around much later, in the course of the hearing.

8. In fact an analysis of the first offer shows the T property at $440,000 (ultimately it sold for $450,000), personal shares of a value very similar to the personal shares included in the pool, superannuation fund assets very similar to those included in the pool, and a wine cellar amount almost identical to that included in the pool.  There were some differences, the most substantial being the value ascribed to the P companies (this pre-dated the N Accountants valuation) and it is important to note that the offer was predicated on the wife retaining those P Company interests.  In the event, they were valued at about $136,000 in the letter.  Even removing that item from the pool, the wife would have received about 50% of the assets. 

9. The wife did not appear to give serious consideration to the offers.  The only reply to the first offer was her email late the same evening which, rather than addressing the substance of the offer, was abusive about the husband’s solicitor, for example calling him “your barking dog”.  She talked about the need for “JUSTICE”, and displayed the sadness and bitterness that have pervaded her communications since the relationship broke down.  Whilst it is a party’s right to reject an offer, this was just a blanket rejection.  She gave no indication of a considered response, and although in submissions to me she said that her concern was that the husband had over-valued assets that would go to her, and under-valued assets that would go to him, she certainly gave no indication of that concern, nor of any alternative valuations or proposals in her response.  It is clear from every aspect of this case that, even unrepresented, the wife had the professional capacity to respond to the detail.

10. I am satisfied that the wife should contribute to the husband’s costs.  That is based in particular on her conduct before, during, and since the trial.  It is also based on her failure to seriously consider offers made by the husband, although to a lesser extent, given the imprecision about some assets and values at the time of the offers.

11. I do not propose ordering indemnity costs.  That proposal was only raised in the course of argument and there was no proper forewarning of it when the husband’s costs application was prepared within the affidavits to which I have referred. 

12. There was no calculation on the husband’s behalf as to the costs unnecessarily added by the excess of emails.  When pressed by me, Ms Molyneux said that such emails probably could be costed at between $12,000 and $20,000, based on Mr U’s estimate that reading 120 emails from the wife added costs of $3,000 to $5,000 to his part of the work. 

13. Although I cannot be satisfied that all of the wife’s emails were unnecessary, I am satisfied that the volume and nature of many of them caused additional work and cost.  I am satisfied that the trial was made longer by the wife claiming many add-backs that she ultimately conceded.  I am satisfied too that her conduct in taking documents that did not belong to her, that doing “a back-flip” as to the orders sought, and her conduct since the evidence finished, has caused the husband additional expense. 

14. I balance those considerations against the observations I made twice in the course of the trial (once during the re-examination of the husband, and once during the cross-examination of the wife) that the time being taken by Ms Molyneux was disproportionate to the issues involved.  I specifically forewarned that I would take that into account when considering costs.  I cannot say with precision what time was thereby added to the length of the trial.  Suffice it to say that some time was added, and I shall weigh that in the balance.

15. In the exercise of my discretion I take into account that the wife has her own needs going into the future and I do not want to make any order that is crushing upon her.  Her deep sadness and incapacity to cope with the breakdown of the marriage is obvious enough.  I propose ordering that she pay $50,000 towards the husband’s costs.  

16. I shall set out below how the costs order is to be met by her.

THE ORDERS

1. It was agreed during the hearing that the detail of the orders would be addressed after my Reasons for Judgment.  The complexity of the mechanics, and then what became a “moving target”, with events changing and unrolling after my Reasons were published, meant that it was not a simple task.  Ultimately, on 4 February 2010, the case was adjourned, in part so that the wife would have ample opportunity to consider the detail of draft orders tendered on 4 February 2010 (Exhibit H 23). Both parties addressed me about them on 19 February 2010. 

2. Unfortunately, the wife often found it difficult to move beyond an attempt to re-argue the substantive decision.  I do not propose addressing those parts of her submissions.  Nor do I need to specifically address some of the minutiae of submissions as to mechanical matters, or various less substantial decisions reflected in the course of discussion, or arrived at by consensus.  Accordingly, I propose addressing only the significantly controversial aspects of the form of orders, emphasising that my 22 December 2009 Reasons for Judgment set out the substance that underpins the orders that I shall make.

3. I am satisfied overall that the orders drafted on behalf of the husband provide a practical and timely schemer to reflect and effect the decision for an equal division of assets, for the husband to have the major running of the mechanics to ensure the relevant distributions, and through N Accountants, to ensure the preparation of company and taxation documents, the payment of accounting and other fees, as well as tax, and for the winding up of the relevant companies. 

4. The draft orders provide for the wife to retain the assets that I noted in the judgment she shall retain (valued at $389,371), and for the husband to retain an equivalent amount from monies presently sitting in the Holt and McDonald trust account in the name of the parties.  Appropriate transfers shall then take place for the superannuation fund to be split, the wife to retain the shares (as well as the shares in the parties’ personal names) and the husband to retain the equivalent in cash from the fund.  The balance of cash in the superannuation account shall then be transferred to the Holt and McDonald trust account, for distribution to the parties, once tax and expenses are met. 

5. As to the division of shares and cash in the superannuation fund, I note that agreed values were struck early in the trial.  In the normal course, they would be the figures to be used for the purpose of dividing the pool.  However, counsel for the husband prepared the draft orders on the basis of a division of cash to the husband equivalent to the value of shares on the day of the signing of the share transfers. 

6. I raised this with the parties.  I am satisfied that in the circumstances of this case it is a fair approach.  It fits with the basis of my judgment for an equal division of assets.  Based on the market value of shares on a specified date, equality can be effected.  As several months have passed since the figure was struck at the start of the case, I am fortified in my view that this is a fair approach to reflect actual values at the time of the settlement. 

7. It seems that the cash in the superannuation fund exceeds the combined value of the shares in the parties’ own name and in the fund, although by how much is not clear.  It could be by more than $250,000, if an updated figure as to the cash and shares given by counsel for the husband in the course of submissions remains current.  It will of course fluctuate, depending on the value of shares at any time, and the interest being earned on the cash.  By way of these orders, the husband shall receive cash to the value of the shares, and once accounting fees, any outstanding taxation, and costs to wind-up the companies have been met, the parties shall share the balance equally between them. 

8. Several issues arose.  The first related to any capital gains tax or other tax attracted by the transfer of the shares and the cash.  The wife argued for the capacity to retain A Pty Ltd as trustee of a new superannuation fund to be established by her, or to use another trustee of the same fund.  She argued strenuously that it was the only tax-effective way to proceed.  I specifically sought evidence on the issue. 

9. Mr U filed an affidavit on 10 February 2010.  His evidence was that a transfer of an asset from a superannuation fund to a spouse would not attract tax, whether the transfer is to a party directly, or to a trustee of the same or another complying superannuation fund for the benefit of that spouse. 

10. I gave the wife a specific timeframe in which to notify the husband’s solicitors if she wanted to cross-examine Mr U.  She did not do so.  She confirmed at the start of the submissions on 19 February 2010 that she did not wish to cross-examine him.  At the end of that hearing she said that she did, but at that late point I did not allow it. 

11. What is clear is that should the wife sell shares in the future, and should they realise a capital gain, then she will be liable for capital gains tax.  Although she objected, I shall adopt the orders proposed by the husband that each party shall be responsible for any tax that arises against them in the future. 

12. The wife, an experienced accountant, and as she emphasised throughout the hearing, the party who handled the parties’ financial affairs, sought to receive shares rather than cash.  Every part of the evidence leads me to confidently infer that she would have been well aware of a potential for capital gains tax if she sold shares at a point in the future.  In saying that she would take the shares, she took on the opportunities as well as the risks in terms of their appreciation and any tax. 

13. There was no evidence before me that the wife proposed selling shares in the near future.  There was no evidence or submissions about any tax liability until her submissions well after trial.  In all those circumstances, I propose retaining the schemer that both parties presented to me throughout the hearing, that is, that one will keep the cash, the other the shares, without any adjustment for possible but completely unknown capital gains or any other tax consequences in the future.

14. Very late in the submissions as to the form of the orders, the wife raised two other points in relation to the transfer of the shares and the cash.  The first was that, depending on when the transfers occurred, the husband could obtain an advantage of receiving cash with an interest component to follow an as yet unmatured term deposit.  Again, this was never part of the evidence.  The agreement was struck that she would obtain shares and he would obtain cash, without reference to this possibility.  In any event, depending on when the transfers are struck, the wife may receive dividends that have matured in effect prior to the date of the transfer.  Any dividends or interest following the transfer should lie where they fall.  I had no other detailed evidence that could assist me to another decision. 

15. Secondly, the wife sought that her costs of creating a new superannuation fund should be met from joint funds.  She said that the husband had set up his own superannuation fund from joint funds after separation.  I do not propose making that order.  I did not hear any evidence or argument about it in the course of the trial.

16. The wife sought an immediate distribution of some of the surplus of funds from the superannuation account, pending the payment of accounting, taxation and other expenses.  When the form of the orders was first discussed, Ms Molyneux proposed that $80,000 should be retained to cover such expenses, with any balance reverting to the parties once the expenses were known.  I favoured that in my Reasons for Judgment. 

17. Although there was nothing in the evidence to suggest that the wife urgently required cash, it struck me as fair to extend some cash to the parties contemporaneously with the other transfers.  The monies to be retained pending the payment of expenses seem on any view to exceed what will be required.  It now seems there may be between $150,000 and $250,000. 

18. In the course of discussion I raised the prospect of a distribution of $50,000 to each party.  Upon reflection, I am concerned that the surplus and the actual expenses are not capable of precision at this stage, and will of course fluctuate accordingly to the value of shares.  It would be a disaster for the parties if the remaining funds were insufficient to meet the expenses.  I need to be more conservative, and to try to ensure that at least $80,000 is retained in accordance with my Reasons for Judgment.

19. I propose an order for each party to receive $35,000 from the surplus cash in the fund.  However, the wife’s share should be paid to the husband towards the costs order that I will make.  Otherwise, I cannot be confident that she will comply with the order to pay costs. 

20. Although that does not meet the wife’s late request for cash, I am satisfied that her financial position is such that she can meet any expenses from interest on investments, or she can realise investments if she chooses.  In any event, provided everything occurs in the timely manner that I shall set out in the orders, there is likely to be another cash distribution quite shortly, after expenses are paid.  I shall order that the $15,000 balance of costs owing to the husband shall be met from the wife’s share at that point, or that he shall receive the full amount of her share if it is less than $15,000.  I appreciate that it builds in a short delay before he can realise the entirety of the costs order in his favour.  I am satisfied on balance it is the most practical and cost-effective way to ensure the husband receives all or most of the costs without the need for enforcement proceedings.  Of course, if any costs are then outstanding, he can choose to enforce them.

21. Even in the course of discussing the mechanics of orders, the wife still raised the prospect of retaining some of the entities.  It is absolutely clear, for the reasons I have already given, that all entities should be wound-up.  I have no faith that the wife will co-operate with this or any other process that would bring the parties’ financial dealings and this case to a true end.  Several other issues also arose from that concern.

22. The first related to the appropriate form of an order restraining the wife from taking further action against the husband.  At paragraph 117 of my Reasons for Judgment I addressed this aspect, saying that orders should only be made in relation to P companies controlled by the wife.  However, on 19 February 2010, I permitted the husband to raise fresh evidence of emails written by the wife since the matter was last before me, in which she threatened legal action against the husband or entities associated with him.  The threats were as follows. 

23. On 11 February 2010, she wrote to the husband’s solicitor and Mr U, that as a beneficiary of the A Superannuation Fund she would have to take action against the trustee and sue for $19,000. 

24. On 8 February 2010, she had written to the husband’s solicitors saying that she had been left with no alternative than to issue civil proceedings under the Corporations Act, as the husband had ignored his legal and fiduciary duty, and was in breach of it when he froze the sale of shares after separation, as a result of which there were losses. 

25. On 17 February 2010, she wrote that there could be multiple actions against the husband noting that “raping me is the least of his problems”.  I do not know what that last comment referred to.

26. The wife agreed that she sent those emails and was clearly unrepentant about them.  Although the issue of the frozen shares, alleged breaches of duties by the husband, purported debts by him to the companies, and debts or losses arising from his conduct, were raised and either specifically withdrawn or dealt with in the course of the trial, the wife evidently still maintains a position that she can and will take legal action against the husband on those and/or other basis. 

1. I propose using the powers under s 114(3) of the Family Law Act to restrain the wife in her personal capacity and/or in her capacity as director, shareholder, beneficiary or creditor of the entities at the core of this case from commencing action herself or by her servants or agents against the husband.  The new evidence persuaded me that the order I had proposed in paragraph 117 of my Reasons for Judgment was too narrow to protect the husband and put an end to litigation as to the parties’ respective roles in relation to entities in which one or both had legal or equitable interests in the course of the marriage. 

2. This brings me to how the orders should be structured to ensure that they are given effect in an orderly and timely manner.  There was considerable discussion about that.  I am satisfied that the husband should have control of the process.  Nothing in the evidence persuaded me that he would be other than honest, realistic and timely in carrying out the tasks under the orders.  On the other hand, the evidence persuaded me that the wife would be obstructive. 

3. The evidence was largely silent as to when it might be insufficient for the husband alone, either personally, or as one of two directors of companies, to sign the necessary documents.  A query was raised in submissions in relation to tax returns, but I was not assisted by evidence.  A query was also raised as to which documents could be deemed “deeds” or “instruments” for the purposes of a Registrar signing under s 106A of the Act.  Doing the best that I can, the orders shall require only the husband’s signature or acts to give effect to them, but there will be liberty to apply.

4. I shall give a period of 21 days for the parties to provide any company or super fund details to N Accountants, or for the wife to produce any documents to N Accountants.  The husband sought a shorter time.  The wife sought longer.  I am satisfied that this case requires certainty and tight time-frames for the property settlement to be effected.  I am conscious that the wife is about to have surgery on her knee.  In any event, she now says she has no documents to supply to N Accountants, but as in the course of the evidence it seemed that she wanted to do so, I shall allow her 21 days.  I am satisfied that it is also a sufficient period for a savvy businesswoman to organise a shelf company or trust to receive the shares, but am in any event satisfied that shares transferred to her can later be put into a superannuation fund on her behalf. 

5. Otherwise, the wife objected to the mechanisms to effect the amended taxation returns in accordance with the evidence of Mr U from N Accountants.  I accept the orders as drafted to reflect his evidence.  She will have the brief opportunity to present documents to N Accountants, failing which N Accountants will proceed on the basis of any documents that are available.  The issue should not be held up beyond that. 

6. Very late in the piece, on 19 February 2010, the wife raised the fact that there were outstanding contravention applications, and outstanding Applications in a Case filed by her on 17 November 2009.  

7. As to the contravention applications, Bryant CJ had noted in her order of 6 January 2009 that:

   The parties have each agreed that they will withdraw their current contravention applications with liberty to raise the issues contained in those applications as matters relevant to the court’s determination under section 79 of the Family Law Act 1975 (Cth) of property matters.

8. Accordingly, there are no outstanding contravention applications. 

9. As to the wife’s applications of 17 November, they seem to relate to her effort to obtain further documentation or details from the husband at the start of the trial.  She did not actively pursue them, nor did she, for example, seek an adjournment of the hearing on the first day of trial.  The applications were subsumed by the evidence.  She had – and took – ample opportunity to cross-examine the husband about documents and discovery, as well as all the issues.  Only at the end of the trial, and since, has she pursued some of that material, although without reference to these applications until the very last minute.  They should be dismissed.

I certify that the preceding eighty-seven (87) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Dessau  

Associate: 

Date:  9 March 2010