Diamarda & Diamarda (No 2)

Case [2024] FedCFamC1F 755

FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA

(DIVISION 1)

Diamarda & Diamarda (No 2) [2024] FedCFamC1F 755

File number: MLC 9432 of 2021
Judgment of: CARTER J
Date of judgment: 11 November 2024
Catchwords: FAMILY LAW – PROPERTY – Final orders altering property interests – Where there is a dispute as to the quantum of the pool –Where orders for valuations were not complied with – Where the wife asserts the husband has sold vehicles for less than market value – Where the wife contends the husband continues to possess vehicles he claims were sold in clearing sales and by the liquidator – Where the husband unilaterally appointed liquidators –Where there are outstanding issues as to the liquidators’ fees and the finalisation of the liquidation of the parties’ companies and the treatment of those fees – Pool divided 60% to the wife and 40% to the husband.
Legislation:

Family Law Act 1975 (Cth) ss 75, 79, 81, 90XT, 106A

Family Law (Superannuation) Regulations 2001 (Cth) Part 6

Cases cited:

Aleksovski v Aleksovski (1996) FLC 92-705

Bevan v Bevan (2013) 49 Fam LR 387

Dickons v Dickons (2012) 50 Fam LR 244

J & S [2003] FamCA 618

Omacini and Omacini (2005) FLC 93-218

Parshen v Parshen (1996) FLC 92-720

Stanford v Stanford (2012) 247 CLR 108

Stein v Stein (1986) FLC 91-779

Division: Division 1 First Instance
Number of paragraphs: 203
Date of last submission/s: 17 October 2024
Date of hearing: 18 – 21, 25 – 26 March 2024
Place: Melbourne
Counsel for the Applicant: Mr Stanley
Solicitor for the Applicant: Cahill Family Lawyers
Counsel for the Respondent: Ms Swann
Solicitor for the Respondent: Schembri + McCluskys

ORDERS

MLC 9432 of 2021

FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN:

MS DIAMARDA

Applicant
AND:

MR DIAMARDA

Respondent

INDEPENDENT CHILDREN'S LAWYER

ORDER MADE BY:

CARTER J

DATE OF ORDER:

11 NOVEMBER 2024

THE COURT ORDERS THAT:

Division of the proceeds of sales of the real properties

1.The parties do all acts and things and sign all such documents to direct the net funds held by T Lawyers on behalf of U Company in respect of V Pty Ltd (in liquidation) ATF W Trust, be distributed as follows:

(a)first, to pay V Pty Ltd (in liquidation) ATF W Trust;

(b)secondly, the husband in his capacity as director cause the funds to be distributed to the W Trust;

(c)thirdly, the proceeds as held by W Trust be distributed in proportions of:

(i)60 per cent to the wife, plus a further sum of $4,130; and

(ii)the balance to the husband.

Y Pty Ltd ATF Z Unit Trust

2.The wife in her capacity as the director of Y Pty Ltd (“the company”) ATF the Z Unit Trust (“the trust”) do all such act and things and sign all documents necessary to sell the real property situate at and known as 1 AA Street, Suburb P (“[1 AA Street]”).

3.The net sale proceeds of the sale of 1 AA Street be distributed as follows:

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AGLC
Diamarda & Diamarda (No 2) [2024] FedCFamC1F 755
Case
[2024] FedCFamC1F 755
Decision Date

CaseChat Overview and Summary

Ms Diamarda and Mr Diamarda were married in 1992 and have a child together. They have separated, and this matter involves a dispute over the division of their property, including vehicles, parts, and properties. The court was tasked with determining the appropriate division of the property pool, the treatment of vehicles and parts, the allocation of liquidators' fees, and the finalisation of the liquidation of the parties' companies. The wife argued that the husband had sold vehicles for less than market value and still possessed vehicles he claimed to have sold. The husband contended that the fees of the liquidators should be borne equally between the parties and that the wife's actions had increased the costs of the liquidation. The court considered the evidence and submissions from both parties and the liquidators, ultimately deciding to divide the pool 60% to the wife and 40% to the husband. The court also ordered the sale of certain properties and the winding up of the companies, with specific instructions on the distribution of funds, payment of taxes, and the handling of remaining vehicles.

The reasoning behind the court's decision was grounded in the principles of fairness and the statutory requirements of the Family Law Act 1975. The court found that the husband's claims of contributions were invalid as they were effectively made from joint assets. The court also noted the limited earning capacities of both parties and the husband's criminal charges, which affected his employment prospects. The final orders included specific directions for the distribution of funds from the sale of properties, the winding up of companies, and the handling of remaining vehicles. The court also addressed the allocation of superannuation entitlements and other miscellaneous property. The orders were intended to finally determine the financial relationship between the parties and avoid further proceedings.

Orders

Orders of the court

MLC 9432 of 2021

FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)

BETWEEN:

MS DIAMARDA

Applicant

AND:

MR DIAMARDA

Respondent

INDEPENDENT CHILDREN'S LAWYER

ORDER MADE BY:

CARTER J

DATE OF ORDER:

11 NOVEMBER 2024

THE COURT ORDERS THAT:

Division of the proceeds of sales of the real properties

1. The parties do all acts and things and sign all such documents to direct the net funds held by T Lawyers on behalf of U Company in respect of V Pty Ltd (in liquidation) ATF W Trust, be distributed as follows:

(a) first, to pay V Pty Ltd (in liquidation) ATF W Trust;

(b) secondly, the husband in his capacity as director cause the funds to be distributed to the W Trust;

(c) thirdly, the proceeds as held by W Trust be distributed in proportions of:

(i) 60 per cent to the wife, plus a further sum of $4,130; and

(ii) the balance to the husband.

Y Pty Ltd ATF Z Unit Trust

2. The wife in her capacity as the director of Y Pty Ltd (“the company”) ATF the Z Unit Trust (“the trust”) do all such act and things and sign all documents necessary to sell the real property situate at and known as 1 AA Street, Suburb P (“[1 AA Street]”).

3. The net sale proceeds of the sale of 1 AA Street be distributed as follows:

(a) first, to pay the costs, commissions and expenses of the sale;

(b) secondly, to discharge the mortgage and any other encumbrance affecting the property, including outstanding rates and taxes;

(c) thirdly, to pay the sum of $240,000 to Cahill Family Lawyers to be held in an interest-bearing trust account, pending the payment of capital gains tax, in accordance with Order 12 herein;

(d) fourthly, to set aside $5,000 to meet the anticipated accountancy costs of obtaining taxation advice and winding up the company and the trust; and

(e) fifthly, the wife in her capacity as director cause the funds to be distributed in proportions of:

(i) 60 per cent to the wife; and

(ii) 40 per cent to the husband.

4. By no later than 14 days prior to the settlement of 1 AA Street, the husband do all acts and things required to remove all remaining items on the property (including but not limited to tools, car parts, engines and shipping containers), at his sole expense.

5. Contemporaneously with the settlement of 1 AA Street, the wife do all acts and things and sign all such documents as may be required to withdraw, at the wife’s sole expense, including any PEXA fees, the Caveat (…) with respect to the property.

6. Upon completion of the sale of 1 AA Street the parties do all acts and things and sign all documents necessary to wind up the company and vest the trust.

7. In the event there is insufficient funds to meet the costs of winding up from the funds held on trust in accordance with Order 3(d), the parties meet the shortfall in the proportions of:

(a) 40 per cent by the wife; and

(b) 60 per cent by the husband.

8. In the event there is surplus funds after payment of the costs of winding up from the funds held on trust in accordance with Order 3(d), the surplus funds be distributed in the proportions of:

(a) 60 per cent to the wife; and

(b) 40 per cent to the husband.

Capital Gains Tax

9. By 1 September of the relevant taxation year, the wife attend upon BB Accountants (or such other accountant elected by her), for the purpose of estimating the probable capital gains tax and any subsequent taxes payable upon settlement of the sale of 1 AA Street, noting Order 3(c) herein.

10. That for the purposes of Order 9, the wife shall pay the costs of the accountant from the funds held on trust in accordance with Order 3(c).

11. Within 30 days of the end of the relevant financial year, the wife attend upon the accountant for the purpose of completing her individual taxation return and attend to lodging same with the Australian Taxation Office.

12. The wife provide to the husband a copy of the calculation provided by the accountant as to the capital gains tax payable within 14 days of receipt of same and within 7 days of providing the calculation to the husband, the wife direct Cahill Family Lawyers to pay the capital gains tax from the funds held on trust in accordance with Order 3(c).

13. In the event there is insufficient funds to meet the capital gains tax payable from the funds held on trust in accordance with Order 3(c), the parties meet the shortfall within 28 days of compliance with Order 12, in the proportions of:

(a) 40 per cent by the wife; and

(b) 60 per cent by the husband.

14. In the event there is surplus funds after payment of the capital gains tax from the funds held on trust in accordance with Order 3(c), the surplus funds be distributed within 28 days of compliance with Order 12 in the proportions of:

(a) 60 per cent to the wife; and

(b) 40 per cent to the husband.

CC Pty Ltd ATF DD Trust

15. Forthwith upon completion of the liquidation of CC Pty Ltd (in liquidation) ATF DD Trust the net funds, if any, held by T Lawyers on behalf of U Company in respect of that liquidation be distributed as follows:

(a) First, to pay CC Pty Ltd (in liquidation) ATF DD Trust;

(b) Secondly, the husband in his capacity as director cause to distribute the funds to DD Trust;

(c) Thirdly, from the proceeds as held by DD Trust be distributed in proportions of:

(i) 60 per cent to the wife; and

(ii) 40 per cent to the husband.

BY CONSENT

Australian Taxation Office liability

16. Upon the issue of a remittance (if any) to the husband and / or wife personally arising from the lodgement of the taxation returns contemplated by the orders made 30 April 2024 or 17 October 2024:

(a) The husband and wife do all things necessary to jointly instruct EE Accountants to negotiate with the Australian Taxation Office to mitigate any remittance, penalties or interest that has been issued.

(b) The costs of EE Accountants be limited to $3,000, unless otherwise agreed in writing between the parties, and borne two thirds to the husband, and one third to the wife.

(c) The husband and wife be equally responsible for any remittance, penalty or interest incurred by the husband and wife, or either of them, arising from lodging the taxation returns for the entities.

BY THE COURT

Remaining vehicles

17. In the event the parties agree on the value of Motor Vehicle 1 driven by the wife, and the wife wishes to retain that vehicle, she shall forthwith pay to the husband a sum equal to 40% of the agreed value of the vehicle and thereafter retain that vehicle.

18. In the event the parties agree on the value of any of the other vehicles/parts that the husband wishes to retain, he shall forthwith pay to the wife a sum equal to 60% of the agreed value of the vehicle/s he wishes to retain and thereafter retain those vehicles.

19. In the event that within 28 days of these orders no agreement is reached pursuant to Orders 17 or 18, regarding the value of any remaining vehicles, trailers, trucks, excavators, forklifts, engines, vehicle parts and bodies;

(a) the parties forthwith do all acts and things and sign all necessary documents to jointly appoint a selling agent to conduct a clearing sale of all remaining vehicles and parts (save for Motor Vehicle 2 purchased by the parties for the child); and

(b) the net proceeds of the sale/s be divided 40% to the husband and 60% to the wife.

BY CONSENT

Superannuation

20. The wife retain her superannuation entitlements with Superannuation Fund 1.

21. The husband retain his superannuation entitlements with Superannuation Fund 2.

22. Within 60 days of these orders, the husband and wife convene a meeting and, in that meeting, do all such acts and things, and sign all such documents as may be necessary to cause FF Pty Ltd ATF GG Company (“SMSF”) to be wound up including but not limited to:

(a) sell all non-cash investments held by the SMSF with such sales to be at the usual market value, including but not limited to:

(i) the real property situate at HH Street, Suburb JJ; and

(ii) the real property situate at KK Street, Town LL.

(b) directing the accountant for the SMSF to do all things necessary to complete a final taxation return for the SMSF and have the final taxation return audited by an approved auditor upon the completion of the sale of investments contemplated in Order 22(a);

(c) identifying on the advice of the accountant for the SMSF an amount sufficient to pay the final taxation return and any further expenses related to these orders and to wind up the SMSF (“the windup reserve”);

(d) paying, if a condition of release has been met, or transferring to a complying fund, all superannuation benefits held in the name of the members as nominated by the members following the creation of the new interests in accordance with this Order less the windup reserve on a pro rata basis;

(e) completing and lodging the final SMSF audited annual return;

(f) paying any outstanding taxes and outstanding liabilities and close all accounts held in the name of the SMSF;

(g) after completion of the above, calculate a base amount necessary to equalise the parties’ interests in the SMSF having regard to their existing member entitlements (“the base amount”); and

(h) pursuant to section 90XT(1)(a) of the Family Law Act 1975 (Cth):

(i) in the event that wife’s entitlements are greater than the husband’s, the Trustee of the SMSF shall pay to the husband the amount which is calculated in accordance with Part 6 of the Family Law (Superannuation) Regulations 2001 (Cth) using the base amount specified in Order 22 (g) of these orders, and there be a corresponding reduction in the entitlement that the wife would have had but for these orders;

(ii) in the event that the husband’s entitlements are greater than the wife’s, the Trustee of the SMSF shall pay to the wife the amount which is calculated in accordance with Part 6 of the Family Law (Superannuation) Regulations 2001 (Cth) using the base amount specified in Order 22 (g) of these orders, and there be a corresponding reduction in the entitlement that the husband would have had but for these orders; and

(iii) That Orders 22 (h)(i) and 22 (h)(ii) have effect from the operative time.

BY THE COURT

Other property

23. Unless otherwise provided for in these orders, the wife retain to the exclusion of the husband, the following:

(a) the NN Auctions clearing sale proceeds previously paid to her;

(b) funds in bank accounts in her sole name; and

(c) all other property (including choses-in-action) in her possession.

24. Unless otherwise provided for in these orders, the husband retain to the exclusion of the wife, the following:

(a) the NN Auctions clearing sale proceeds previously paid to him;

(b) funds in bank accounts in his sole name; and

(c) all other property (including choses-in-action) in his possession.

MISCELLANEOUS

25. Unless otherwise specified in these orders and save for the purposes of enforcing any monies due under these or any subsequent orders:

(a) each party be solely entitled to the exclusion of the other to all other property (including choses-in-action) in the possession of such party as at the date of these orders;

(b) monies standing to the credit of the parties in any joint bank account are to be divided equally within 28 days of these orders and the parties shall forthwith do all such acts and things and sign all such documents as may be required to close all joint bank accounts with a further 14 days of the funds being distributed;

(c) each party forgoes any claims they may have to any superannuation benefits or other employment related benefits belonging to or earned by the other;

(d) insurance policies shall remain the sole property of the owner named thereon;

(e) each party 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;

(f) each party be solely responsible for the payment of any debts in their respective names; and

(g) any joint tenancy of the parties in any real or personal estate is hereby expressly severed.

26. The husband and wife be at liberty to provide a copy of these orders to the liquidators, conveyancer or accountant, as required to give effect to these orders.

27. The parties have liberty to apply to have the matter re–listed before her Honour Justice Carter on short notice regarding the implementation of these orders, and in relation to the terms and conditions of the various sales.

28. In the event that either party refuses or neglects to execute or return a deed, instrument or document in compliance with these orders, the Registrar of the Federal Circuit and Family Court of Australia at Melbourne is hereby appointed pursuant to section 106A of the Family Law Act 1975 (Cth) to sign or execute all deeds and/or instruments in the name of defaulting party and do all acts and things to give viability and operation to the deeds and/or instruments.

AND THE COURT NOTES THAT:

A. Pursuant to section 81 of the Family Law Act 1975 (Cth), the parties intend that these orders shall, as far as practicable, finally determine the financial relationship between them and avoid further proceedings between them.

Note: The form of the order is subject to the entry in the Court’s records.

Note: This copy of the Court’s Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 10.14(b) Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 10.13 Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).

Part XIVB of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish an account of proceedings that identify persons, associated persons, or witnesses involved in family law proceedings.

Background

Background to the litigation

I also had the benefit of hearing some evidence from Mr PP, the liquidator appointed for V Pty Ltd. BACKGROUND The parties commenced living together in 1992 and were married later that year. It is common ground that the parties collected cars, and various parts of cars. They also engaged in purchasing and selling properties through various entities. How various cars and properties were purchased and sold featured in the trial affidavits of each party with the parties giving different accounts. That detailed history is of no real relevance to the determinations that I must make. In 2003 the parties set up the following entities:(a)V Pty Ltd as trustee for the W Trust. The husband was the sole shareholder and director; and(b)Y Pty Ltd as trustee for the Z Unit Trust. The wife was the sole shareholder and director. In 2003 the parties purchased the property at 1 AA Street, Suburb P, through Y Pty Ltd. That was a vacant block of land which the parties have referred to as “the yard”. The parties used the premises for storing cars, car parts, trucks and trailers that were accumulated over the relationship. In 2004 the parties purchased the former matrimonial home at 2 AA Street, Suburb P through V Pty Ltd. This property is adjacent to the yard. In 2007 the husband established a business, QQ Company (later re–named), which he operated for 10 years. Much of the plant and equipment used for the business was stored at the yard, which the husband’s business rented. In addition, at some point in time the husband obtained rented premises at Region RR where some equipment, cars and car parts were stored. In 2008 the husband registered another entity – CC Pty Ltd. This entity primarily traded and leased vehicles, plant and equipment to the husband’s business. CC Pty Ltd is also the trustee for the DD Trust. In 2008 the wife stopped working as an educator. The parties’ daughter X was born in 2008. The wife was X’s primary carer throughout the relationship, and she did not return to the paid workforce after X was born. The parties separated sometime between December 2020 and February 2021. Nothing turns on the precise date. The wife remained in the former matrimonial home and the husband retained X in his care and lived with her in rented accommodation. It is common ground that at separation, there were many vehicles, trailers and vehicle parts owned by CC Pty Ltd, and owned by the parties’ personally, most of which were stored at the yard. There is a dispute as to what has happened to a number of those vehicles. In mid-2021 the husband obtained an Intervention Order against the wife which prohibited the wife from attending the yard. At about that time the husband was charged with sexual offences that required him to cease working at the venue where he was doing maintenance. He has not engaged in paid employment since that time. The wife obtained an Intervention Order against the husband in mid-2021 which prohibited the husband from attending at the former matrimonial home. This application was made after the wife said the husband had attended at the former matrimonial home and the yard on several occasions and removed a number of vehicles and parts.

Evidence

Evidence Before The Court

This is a matter involving disputes regarding the parties’ property. I delivered reasons and made final orders in relation to parenting on 26 August 2024. Substantially the parties do not agree on the quantum of the tangible pool, or the appropriate percentage division of it. THE EVIDENCE The Wife In relation to the property dispute, the wife relied on:(a)her Further Amended Initiating Application filed on 12 February 2024;(b)her affidavit filed on 12 February 2024;(c)her Financial Statement filed 12 February 2024;(d)the affidavit of Mr MM, director at OO Real Estate, filed on 12 March 2024; and(e)her affidavit-in-reply filed on 12 March 2024.The Husband The husband relied on:(a)his Further Amended Response to Initiating Application filed on 26 February 2024;(b)his Financial Statement filed on 26 February 2024; and(c)his affidavit filed on 27 February 2024. The parties both gave evidence. As I already observed in the judgment delivered on 26 August 2024 both parties presented as authentic and reasonably candid in their evidence. However they remain highly distrustful of each other. Mr MM also gave evidence. He was an impressive witness. I also had the benefit of hearing some evidence from Mr PP, the liquidator appointed for V Pty Ltd. BACKGROUND The parties commenced living together in 1992 and were married later that year. It is common ground that the parties collected cars, and various parts of cars. They also engaged in purchasing and selling properties through various entities. How various cars and properties were purchased and sold featured in the trial affidavits of each party with the parties giving different accounts. That detailed history is of no real relevance to the determinations that I must make. In 2003 the parties set up the following entities:(a)V Pty Ltd as trustee for the W Trust. The husband was the sole shareholder and director; and(b)Y Pty Ltd as trustee for the Z Unit Trust. The wife was the sole shareholder and director. In 2003 the parties purchased the property at 1 AA Street, Suburb P, through Y Pty Ltd. That was a vacant block of land which the parties have referred to as “the yard”. The parties used the premises for storing cars, car parts, trucks and trailers that were accumulated over the relationship. In 2004 the parties purchased the former matrimonial home at 2 AA Street, Suburb P through V Pty Ltd. This property is adjacent to the yard. In 2007 the husband established a business, QQ Company (later re–named), which he operated for 10 years. Much of the plant and equipment used for the business was stored at the yard, which the husband’s business rented. In addition, at some point in time the husband obtained rented premises at Region RR where some equipment, cars and car parts were stored. In 2008 the husband registered another entity – CC Pty Ltd. This entity primarily traded and leased vehicles, plant and equipment to the husband’s business. CC Pty Ltd is also the trustee for the DD Trust. In 2008 the wife stopped working as an educator. The parties’ daughter X was born in 2008. The wife was X’s primary carer throughout the relationship, and she did not return to the paid workforce after X was born.

Decision

Reasons for decision

Full text does not contain this section.

Ratio Decidendi

Legal Principle Established

Whilst the husband said he paid for joint expenses, including Family Reports, counselling, family therapy, car repairs and the like, he also received the funds from the sale of some vehicles post separation, and the monies from the two clearing sales which he used to fund those payments. Accordingly, I cannot treat those payments as contributions made by the husband as they were effectively made from joint assets. RELEVANT CONSIDERATIONS PURSUANT TO SECTION 75(2) OF THE ACT The husband is 53 years old. He is in good health. He has a medical condition but that is managed by him with the assistance of his doctor. The husband’s contract with the venue in Town L was terminated when he was charged with criminal offences. The husband is on a criminal register until 2030. These matters have affected the husband’s income earning capacity. He is not in paid employment and is in receipt of Centrelink payments. He has limited skills and limited resources. The wife is 57 years old. She is also in reasonably good health, although she suffers from anxiety. The wife has not been engaged in paid employment since 2008 when she commenced maternity leave. She is also in receipt of Centrelink payments and undertakes some volunteer work. The wife was previously an educator but has not worked as such for more than 16 years. She would have to retrain to be able to re-register as an educator. The wife is also exempt from seeking work due to her diagnosis of anxiety. Accordingly, I accept it is not reasonable to expect the wife to retrain and return to work as an educator, and her earning capacity is limited. The husband does not pay child support for X. He has not provided the wife, or X, with any funds since 8 December 2023. Prior to that the husband made direct financial payments to X, but not to the wife to meet the costs of primarily caring for their child. I accept that given the husband’s criminal charges it may be difficult for him to obtain employment. The parenting orders I have made ultimately provide for X to move over time to live in a shared care arrangement between her parents. Section 75(2)(o) of the ActThe appointment of the liquidators The husband said the fees of the liquidators should be borne equally between the parties. He urged the Court to consider the circumstances in which he appointed the liquidators for V Pty Ltd; that he was struggling to meet the mortgage repayments, that he had repeatedly sought the wife vacate the former matrimonial home so it could be sold, and that the wife’s refusal to leave the home “resulted in the mortgage being in default and significant interest accruing on the mortgage”. The husband also said he was led to believe the costs incurred would be significantly smaller than those costs actually charged. Additionally, the husband asserted the wife’s actions surrounding the sale of the home caused the costs to be increased. For instance, he said the wife made it difficult for the liquidator to access the property with a photographer. That was denied by the wife and Mr PP did not refer to any issues with the wife’s behaviour in his evidence.