Dovgan & Dovgan
[2021] FamCA 306
FAMILY COURT OF AUSTRALIA
| DOVGAN & DOVGAN | [2021] FamCA 306 |
| FAMILY LAW – PROPERTY – Where single expert appointed to value real estate in a Sydney suburb – Where husband accepted valuation but wife does not – Where wife made application to call adversarial expert evidence of value on fourth day of trial – Where held that the wife failed to satisfy any of the criteria in Rule 15.59(2)(a), (b) or (c) of the Family Law Rules, 2005 – Where court would not have exercised discretion in favour of permitting the wife to call adversarial expert evidence. REAL PROPERTY – VALUATION – Valuation of real property – Where parcel of real estate had remote potential for rezoning to allow high density residential development – Whether single expert used proper valuation methodology – Whether potential for rezoning too remote – Whether Court should reject valuation evidence of single expert - whether Court should reach its own value as a “best guess” – where held the evidence did not permit departure the value reached by the single expert –Where any potential for a higher value to be taken into account under s 79(4)(e) of the Family Law Act 1975 (Cth). DEEDS – CONSTRUCTION – Proper construction of deeds – Where husband executed “Deed of Acknowledgement” – Whether document recorded or created a trust in favour of third respondent – Where held not trust existed – Whether alternatively the document acknowledged a promise to pay on a contingency – Whether conduct of husband swearing affidavit evidence in support of a trust argument was subsequent conduct inconsistent with any contractual or promissory intention. FAMILY LAW – PROPERTY – Where very substantial asset pool close to $40 million – Where significant dispute concerning what constituted the “property of the parties to the marriage” – Where substantial assets held in two non-exhaustive discretionary trusts – Whether the trust assets were property “of” the husband – Where husband a discretionary object but not trustee, settlor, or appointor of the trusts – Where trustee a company – Where husband no longer a director of the trustee – Where decisions of trustee made by husband’s father – Where held the trust assets not property “of” the husband – Where trust assets fit more readily within concept of “financial resources”. FAMILY LAW – PROPERTY – where wife sought orders under Part VIIIAA of the Act to protect any payment ordered in her favour – Where rights or property interests of third parties likely to be altered by proposed orders – Where held not appropriate to make orders under Part VIIIAA FAMILY LAW – PROPERTY – Contributions – Where there was a long marriage as between the parties – Where the parties took gender traditional roles during the marriage – Where the husband brought substantial assets into the relationship – Where those assets grew significantly during the relationship – Where the asset pool is now close to $40 million – Where husband made overwhelming financial contribution while wife made significant contribution as homemaker and carer of the children – where parties acknowledge husband has substantial financial resources. |
| Conveyancing Act 1919 (NSW) s 38 Family Law Rules 2004 (Cth) rr 1.04, 1.06,1.07, 1.08, 15.42, 15.65, 15.48, 15.49, 15.51, 15.59, 15.63, 15.64B, 15.65, 15.69 |
| Adair & Adair [2019] FamCAFC 70 Allen v Carbone (1975) 132 CLR 528 Arcus Shopfitters Pty Ltd v Western Australian Planning Commission [2002] WASC 174 Ascot Investments Pty Ltd v Harper (1981) 148 CLR 337 Atkins & Hunt and Ors [2017] FamCAFC 79 Atkins & Hunt and Ors [2019] FamCA 977 Australian Broadcasting Corporation v XIV Commonwealth Games Ltd (1998) 18 NSWLR 540 Barnell & Barnell [2020] FamCAFC 102 Benson & Drury [2020] FamCAFC 303 Bevan & Bevan (2013) 29 Fam LR 387 Bollen & Bollen [2020] FamCA 605 Bowen & Williams [2015] FamCA 545 Brambles Holdings Ltd v Bathurst City Council (2001) 53 NSWLR 153 Brewarrana Pty Ltd v Commissioner of Highways (No 2) (1973) 6 SASR 541 Brown v Tavern Operator Pty Ltd (2018) 98 NSWLR 586 Byrnes v Kendle (2011) 243 CLR 253 C & C (2000) FLC 93-220 Campbell & Kuskey (1998) FLC 92-795 Chorn & Hopkins (2004) FLC 93-204 Clauson & Clauson (1995) FLC 92-595 Coghlan & Coghlan (2005) FLC 93-220 Commissioner of Taxation v Tomaras (2018) 265 CLR 434 Commonwealth v Miledge (1953) 90 CLR 157 Conias Hotels Pty Ltd v Murphy & Anor [2012] QSC 297 Conrad & Conrad and Anor [2019] FamCA 106 CPT Custodian Pty Ltd v Commissioner of State Revenue (Vic) (2005) 224 CLR 98 Daniels v Walker [2001] 1 WLR 1382 Darjan Estate Co Plc v Hurley [2012] 1 WLRD 1782 Dasreef Pty Ltd v Hawchar (2011) 243 CLR 588 Dickins v Dickons (2012) 50 Fam LR 244 Dome Resources NL v Silver (2008) 72 NSWLR 693 Equuscorp Pty Ltd and Another v Glengallan Investments Pty Ltd (2004) 218 CLR 471 Federal Commissioner of Taxation v St Helens Farm (A.C.T.) Pty Ltd (1981) 146 CLR 336 Fielding and Nichol [2014] FCWA 77 Film Bars Pty Ltd v Pacific Film Laboratories Pty Ltd (1979) 1 BPR 9251 Fischer v Nemeske Pty Ltd (2016) 257 CLR 615 Fitzwater & Fitzwater (2019) 60 Fam LR 212 Flotilla Nominees Pty Ltd v Western Australia Land Authority (2003) 27 WAR 403 Frederick & Frederick (2019) FLC 93-900 G & G (2000) FLC 93-043 Garraway v Territory Realty Pty Ltd [2010] FCAFC 9 Gartside v IRC [1986] AC 553 GWR & VAR (2006) 36 Fam LR 237 Hall v Hall (2016) 257 CLR 490 Harris & Dewell (2018) 58 Fam LR 313 Harris & Harris (1991) FLC 92-254 HCK China Investments Ltd v Solar Honest Ltd (1999) 165 ALR 680 Hickey & Hickey & Attorney General for the Commonwealth of Australia (2003) FLC 93-143 Hocking v Director-General of the National Archives of Australia (2020) 94 ALJR 569 Horrigan & Horrigan [2020] FamCAFC 25 Howard F Hudson Pty Ltd v Ronayne (1972) 126 CLR 449 Howard Smith and Co Ltd v Varrawa (1907) 14 ALR 169 Hsiao v Fazarri (2020) 61 Fam LR 465; [2020] HCA 35 Hunt v Hunt [2006] FamCA 167 In the Marriage of Aleksovski (1996) FLC 92-705 In the Marriage of Biltoft (1995) FLC 92-614 In the Marriage of Borriello (1989) 97 FLR 211 In the Marriage of Burke (1981) FLC 91-055 In the Marriage of Crapp (No 2) (1979) FLC 90-615 In the Marriage of Goodwin (1990) 101 FLR 386 In the Marriage of Kelly No (2) (1981) FLC 91-108 In the Marriage of Kowaliw (1981) FLC 91-092 In the Marriage of Kowalski (1993) FLC 92-342 In the Marriage of Little (1990) FLC 92-147 In the Marriage of Petersens (1981) FLC 91-095 In the Marriage of Pierce (1998) FLC 92-844 In the Marriage of Prince (1984) FLC 91-501 In the Marriage of Reynolds (1985) FLC 91-632 In the Marriage of Townsend (1995) FLC 92-569 Investa Properties Pty Ltd v Nakervis (No 7) [2015] FCA 1004 Jabour & Jabour [2019] FamCAFC 78 JEL & DDF (2001) FLC 93,075 Jillett v Jillett [2018] FamCA 913 Kennon v Spry (2008) 238 CLR 366 Lenehan & Lenehan (1987) FLC 91-814 Liverpool City Council v Commonwealth of Australia (1993) 81 LGERA 405 Longworth v Commissioner of Stamp Duties [1953] 53 SR (NSW) 342 Lovine & Connor and Anor (2012) FLC 93-515 Lunar & Lunar [2019] FCWA 259 Little & Little (1990) FLC 92-147 Macquarie International Health Clinic Pty Ltd v Sydney Local Health District (No 11) [2017] NSWSC 1249 Makita (Australia) Pty Ltd v Sprowles (2001) 52 NSWLR 705 Malec v J.C. Hutton Pty Ltd (1990) 169 CLR 638 Mallett v Mallett [1984] HCA 21 Manolis & Manolis (No 2) [2011] FamCAFC 10 Marcin & Marcin [2010] FamCAFC 85 Minister for Immigration and Multicultural and Indigenous Affairs; Ex Parte Lam (2003) 214 CLR 1 Multari v Roads and Traffic Authority of NSW [2004] NSWLEC 649 Norbis v Norbis (1986) 161 CLR 513 Norman & Norman [2010] FamCAFC 66 Oswald & Karrington [2016] FamCAFC 152 Pacific Carriers Limited v BNP Paribas (2004) 218 CLR 451 Pfenning & Snow [2016] FamCA 29 Phillips & Phillips (2002) FLC 93-104 Players Pty Ltd v Corporations of the City of Adelaide [2001] SASC 369 Public Trustee v Smith (2008) 1 ASTLR 488 Re Snowden (dec’d) [1979] Ch 528 Richstar Enterprises Pty Ltd and Others; Australian Securities and Investment Commission v Carey (No 6) (2006) 153 FCR 509 Rodger & Rodgers (No 2) [2016] FamCAFC 104 Rosati & Rosati (1998) FLC 92-804 Royal Sydney Golf Club v Federal Commissioner of Taxation (1957) 97 CLR 379 Sagacious Procurement Pty Ltd v Symbion Health Ltd [2008] NSWSCA 149 Salmon & Salmon [2020] FamCAFC 134 Sandhurst Trustees Ltd v Roads and Traffic Authority of NSW [2006] NSWLEC 243 Scaffidi v Montevento Holdings Pty Ltd (2011) 6 ASTLR 446 Sharrment Pty Ltd & Ors v Official Trustee in Bankruptcy (1988) 82 ALR 530; (1988) 18 FCR 449 Simmons and Anor & Simmons (2008) 40 Fam LR 520 Simons & Simons [2020] FamCAFC 128 Sippel & Sippel [2004] FamCA 201 Smith and Smith (1991) FLC 92-261 Spencer v the Commonwealth (1907) 5 CLR 418 Stanford & Stanford (2012) 247 CLR 108 Stead v State Government Insurance Commission (1986) 161 CLR 141 Stein & Stein (1986) FLC 91-779 Telstra Corporation Ltd v The Commonwealth (2008) 234 CLR 210 Toll (FGCT) Pty Limited v Alphapharm Pty Limited (2004) 219 CLR 165 Tomasetti and Tomasetti (2000) FLC 93-023 Trevi & Trevi [2018] FamCAFC 173 Tyler v Thomas (2006) 150 FCR 357 Vines v Australian Securities and Investment Commission (2007) 73 NSWLR 451; Walker Corporation Pty Ltd v Sydney Harbour Foreshore Authority (2009) 173 LGERA 155 Walters & Carson [2018] FamCAFC 233 Woodcock v Parlby Investments Pty Ltd (1988) 4 BPR 9568 XYZ Pty Ltd and Anor & Charisteas & Ors; ABC Pty Ltd & Charisteas and Ors (2017) FLC 93-782 Yanner v Eaton (1999) 201 CLR 351 |
| APPLICANT: | Ms Dovgan |
| FIRST RESPONDENT: | Mr Dovgan |
| THIRD RESPONDENT: | D Pty Ltd ATF Dovgan Trust |
| FILE NUMBER: | SYC | 866 | of | 2017 |
| DATE DELIVERED: | 14 May 2021 |
| PLACE DELIVERED: | Sydney |
| PLACE HEARD: | Sydney |
| JUDGMENT OF: | Harper J |
| HEARING DATE: | 17, 18, 19, 20 & 21 August 2020 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr Hutley SC, Mr Lawrence of Counsel & Mr Cooper of Counsel |
| SOLICITOR FOR THE APPLICANT: | Ferrer Lawyers |
| COUNSEL FOR THE FIRST RESPONDENT: | Mr Newlinds SC & Ms Jeliba of Counsel |
SOLICITOR FOR THE FIRST RESPONDENT: | Barkus Doolan |
| COUNSEL FOR THE THIRD RESPONDENT: | Mr Moses SC & Mr Sharp of Counsel |
| SOLICITOR FOR THE THIRD RESPONDENT: | Gordon & Barry Lawyers Pty Ltd |
Orders
THE COURT NOTES:
A. The following definitions apply for the purposes of these Orders:
(a) Entities means the following:
(i)W Pty Ltd;
(ii)Dovgan Investment Trust;
(iii)Dovgan Trust;
(iv)Dovgan Trust & C Family Trust;
(v)T Pty Ltd;
(vi)FF Pty Ltd;
(vii)GG Pty Ltd;
(viii)V Pty Ltd;
(ix)HH Limited;
(x)JJ Limited;
(xi)M (Administration) Pty Ltd (Deregistered);
(xii)M Trust;
(xiii)M Pty Ltd;
(xiv)M Pty Ltd & Mr Dovgan & Mr C Partnership;
(xv)M Services Trust;
(xvi)KK Pty Ltd;
(xvii)D Pty Ltd;
(xviii)F Pty Ltd;
(xix)J Investments Pty Ltd;
(xx)U Pty Ltd.
(b) “husband” means Mr Dovgan;
(c) “wife” means Ms Dovgan.
(d) “Suburb H property” means the property situated at and known as G Street Suburb H, in the State of New South Wales, being the whole of the land contained in Folio Identifier … of which the husband and wife are registered proprietors as joint tenants and which is unencumbered;
The Court has determined to effect a just and equitable property adjustment by ordering, inter alia, the husband to pay to the wife a total amount of $12,802,462.
THE COURT ORDERS:
All previous Orders stand discharged from the date of these orders.
Within 45 days of the date of the making of these Orders and contemporaneously:
(a) the wife shall do all acts and things and sign all documents presented to her by the husband as are necessary to:
(i)transfer to the husband the whole of her right, title and interest in her shares in J Investments Pty Ltd ABN: …;
(ii)assign to the husband the whole of her right, title and interest and liability (if any) in any loan account (credit or debit) and/or unpaid distributions she may have in any of the Entities;
(iii)relinquish all her right, title and interest in respect of any trust controlled by the husband, whether such interest may be actual, contingent or otherwise;
(iv)make available for collection by the Husband from the Suburb H property, the following items:
A. The husband’s clothing and personal belongings that remain in the master bedroom and the study;
B. The husband’s sporting equipment (save the treadmill which shall remain with the wife) and vehicle parts;
C. All electrical tools;
D. The guitar in the lounge room;
E. The signed surfing poster in the rumpus room;
F. The large artwork in the atrium opposite the study.
(b) The husband shall do all acts and things and sign all documents necessary to:
(i)Transfer to the wife the whole of his right, title and interest in the Suburb H property;
(ii)pay or cause to be paid to the wife or as she directs the amount of $9,000,000.
That within 90 days of the date of the making of these Orders, the husband pay to the wife the further amount of $3,802,462.
Except for the purpose of compliance with Orders 2 and 3, and pending such compliance, the husband be restrained from transferring, dissipating, or otherwise dealing with the funds held in:
(a) Term Deposit #...11;
(b) Term Deposit #...02;
The husband indemnify and keep indemnified the wife against any liability of any nature which the wife has at any time arising in any way in respect of any of the Entities whether:
(a) by reason of the wife having been an employee, director, officer and/or shareholder of any of the Entities;
(b) pursuant to any guarantee given by the wife in respect of any liability of any of the Entities;
(c) in respect of the receipt by the wife of any money from any of the Entities;
(d) in respect of any liability of any of the Entities, or otherwise.
The husband hereby indemnifies the wife from and in respect of all actions, claims, suits and demands as may be made against the wife in relation to all liabilities in the name of the husband.
The wife hereby indemnifies the husband from and in respect of all actions, claims, suits and demands as may be made against the husband in relation to all liabilities in the name of the wife.
Except as otherwise provided for by these Orders, each of the husband and wife release the other from all debts owing from one to the other.
That except as otherwise provided for in these Orders:
(a)Each of the parties is the sole legal and beneficial owner of all items of property, including real estate, monies, shares, insurance policies, superannuation and pension entitlements, rollover funds, motor vehicles, furniture, furnishings and personal effects, presently in the name, possession or control of each of them respectively;
(b)The husband shall be the sole legal and beneficial owner of and the Wife has no interest in the Entities and Trusts.
In the event that either party refuses or neglects to execute any Deed, instrument or document necessary to give effect to these Orders then the Registrar of the Court be appointed pursuant to Section 106A of the Family Law Act 1975 (Cth) to execute such Deed, instrument or document in the name of the defaulting party and to do all acts and things necessary to give validity and operation to the Deed or instrument, and the defaulting party shall pay the costs of the non-defaulting party in relation thereto.
That wife’s Application in a Case filed in Court on 19 August 2020 be dismissed.
That all final and interim applications be otherwise dismissed.
Costs
If any party seeks an order for costs, an application to the Court may be made by Application in a Case within 28 days of the date of these orders, with an affidavit in support, to be filed and served within that time period and a copy forwarded to my Chambers.
The Court further notes:
If an application for costs is made in accordance with Order 13, the Court will make procedural orders for any questions costs to be determined.
If no such application is made within the time period specified, no order will be made as to costs.
Note: The form of the order is subject to the entry of the order in the Court’s records.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Dovgan & Dovgan has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
Note: This copy of the Court’s Reasons for Judgment may be subject to review to remedy minor typographical or grammatical errors (r 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to r 17.02 Family Law Rules 2004 (Cth).
| FAMILY COURT OF AUSTRALIA AT SYDNEY |
FILE NUMBER: SYC 866 of 2017
| Ms Dovgan |
Applicant
And
| Mr Dovgan |
Respondent
And
| D Pty Ltd ATF Dovgan Trust |
Third Respondent
REASONS FOR JUDGMENT
INTRODUCTION
Ms Dovgan (“the wife”) and Mr Dovgan (“the husband”) have been unable to agree on the division of their property following the breakdown of their marriage. They were married for some 26 years and have been involved in protracted financial proceedings in this Court since February 2017.
The property pool is considerable, being no less than $35,000,000. Both parties seek property adjustment orders under s 79 of the Family Law Act 1975 (Cth) (“the Act”), however by his opening Senior Counsel for the wife identified three broad areas of legal and factual dispute necessary for determination before property adjustment orders can be made.
The first was whether the husband held a percentage of his interest in a property at K Street, Suburb L (“Suburb L”) on trust for the Second Respondent, D Pty Ltd (“D Pty Ltd”) ATF Dovgan Trust (“DT”) and Dovgan Investment Trust (“DIT”). The second was whether D Pty Ltd is no more than the “creature” of the husband, so that all the assets held by it as trustee should be treated as his assets. The third was a valuation issue about Suburb L; there is single expert evidence valuing this property, but the wife contends that the property value may be considerably higher than the estimate given by the single expert. She made an Application in a Case during the hearing for leave to call further expert evidence. This application was heard during the trial. Judgment was thereafter reserved. My determination of that application forms part of this judgment.
The hearing was occupied substantially with the evidence and argument about these three areas of debate, although some others came to prominence as the proceedings evolved.
Beyond the three areas just identified, there was dispute in relation to the entitlements of the parties to the asset pool. In relation to questions of contributions under s 79, with reference to s 75(2) factors, the wife argued that orders should be made adjusting the property interests 60 per cent in her favour and 40 per cent in the husband’s favour, while the husband argued the split should be 57.5 per cent in his favour and 42.5 per cent in favour of the wife.
Background
The wife was born in 1960 in Europe. She does not currently work in paid employment, describing her current occupation as homemaker.
The husband was born in 1961 in the Middle East. He consistently undertook paid employment, with a focus on building his business interests throughout the relationship. He currently acts as a director for M Pty Ltd, a company incorporated by the husband and Mr C in January 1985. M Pty Ltd specialises in the installation and maintenance of buildings. There was no dispute the business activities of the husband have been the primary source of the parties’ vast wealth.
The parties have two adult children, Ms Y, born in 1991, and Ms Z, born in 1996.
The parties commenced their romantic relationship in 1988, and by May 1989, the parties had commenced cohabitation in Suburb N. It is uncontentious that the wife had nominal assets at the point of cohabitation, while the husband had a 90 per cent interest in M Pty Ltd. The value and significance of this asset is contentious, and will be discussed later in this judgment.
D Pty Ltd was incorporated on or around 13 May 1983. The husband’s father, Mr O Dovgan, and his mother, Ms P Dovgan, were appointed as directors and each was assigned one share in the company. For ease of reference, and intending no disrespect, I will refer to Mr O Dovgan as “Mr O” in the course of these reasons. Later that month, DIT was also settled by deed, with D Pty Ltd acting as trustee and appointer. The husband is a discretionary beneficiary, together with a broad class of other individuals and corporations.
All of D Pty Ltd, M Pty Ltd, the husband, and Mr O were involved in contentious proceedings with competitor manufacturing companies in the late-1980s. These proceedings related to Mr O’s involvement in those companies prior to the establishment of M Pty Ltd, which Mr O started consulting for in 1985, and specifically centred around a non-compete clause between Mr O and the competing companies. For present purposes, it is sufficient to note that by judgment delivered on 10 August 1989, the parties involved in these proceedings were not found to be in fault. As of 1989, Mr O was no longer restrained from competing with the other companies in the manufacturing area.
Soon thereafter, in November 1989, D Pty Ltd applied for ordinary shares in M Pty Ltd. D Pty Ltd was able to purchase 4,500 shares at $1.00 per share and obtained a 30 per cent interest in M Pty Ltd, leaving the husband’s interest at 60 per cent. Mr O was also appointed as director of M Pty Ltd.
The husband and wife were engaged in December 1989, and married in 1990.
In 1992, the Suburb L Partnership was established between the husband, M Pty Ltd and Mr C for the purchase of Suburb L. Suburb L can be described as an industrial unit complex made up of 11 units which are leased out to third parties. Suburb L was registered in the names of the parties as tenants in common, with 50 per cent to M Pty Ltd, 45 per cent to the husband and the remaining 5 per cent to Mr C.
On 17 March 1995, DT was established, with D Pty Ltd acting as trustee.
In October 1998, F Pty Ltd was incorporated, with the husband’s late sister, Ms Q (“Ms Q”), acting as director and secretary.
Around the same time in 1998, the parties to the marriage purchased a home in joint names unencumbered at R Street, Suburb S for approximately $2,310,000 (“Suburb S”). This purchase was funded from the proceeds of sale of a property previously held in the sole name of the husband, with the balance derived from dividends the husband had received from M Pty Ltd.
On 10 March 1999, the husband executed a document entitled “Deed of Acknowledgement” (“the Deed”). The effect of the Deed is in contention. The arguments in summary were that it acknowledged either a trust in favour of D Pty Ltd in respect of part of the husband’s interest in Suburb L, or a promise to pay D Pty Ltd. The terms of the Deed will be discussed later in these reasons.
On 18 November 1999, the husband became a director of D Pty Ltd. He continued in this position until 12 April 2018.
Eventually, the parties made the decision to sell Suburb S for $4,400,000. They used the net proceeds of sale, along with additional savings and dividends from M Pty Ltd, to purchase an unencumbered property at G Street, Suburb H (“Suburb H”) in joint names for $4,500,000 in late-2006.
The husband continued in his position, both with D Pty Ltd and M Pty Ltd, over a number of years. It is uncontentious that the husband made the bulk of the parties’ financial wealth at this time. The wife, on the other hand, acted as homemaker and primarily contributed to the care of the children during this time.
Additionally, the husband was involved in a variety of different companies and investments throughout the relationship. Relevantly, these include;
a)J Investments Pty Ltd (“J Investments”), which was incorporated in May 2004. The husband holds 90 per cent of the shareholding and the wife holds the remaining 10 per cent. The husband is the sole director.
b)T Pty Ltd, which was incorporated as M Properties Pty Ltd in October 2004. The husband holds 60 ordinary shares in the company, which reflects a 60 per cent interest. D Pty Ltd holds 30 ordinary shares, or a 30 per cent interest, and Mr C holds the remaining 10 ordinary shares, or 10 per cent interest. The husband, Mr O and Mr C act as the directors of M Properties Pty Ltd.
c)U Pty Ltd (“U Pty Ltd”), which was incorporated in July 2015. M Pty Ltd holds 100 per cent of the shares in U Pty Ltd, and the husband, Mr O and Mr C act as directors.
d)V Pty Ltd, which was incorporated in March 2016. The husband and Mr O both retain a 50 per cent interest in the company. Additionally, V Pty Ltd act as Trustee for the V Family Trust, which was established in May 2016. The husband and wife are the named beneficiaries of this Trust, and the husband is the appointer alongside his brother.
e)W Pty Ltd, which was incorporated in April 2016. The husband and Mr O both retain a 50 per cent interest in that company, and both are directors.
Through the husband’s business endeavours, the parties were able to live a lavish lifestyle. According to the wife, this included expensive holidays and designer clothing.
The parties first experienced difficulties in their relationship in late-2012 or early-2013, according to the wife. She claims that the husband informed her of his intention to end the marriage at this stage, although the parties did not formally separate.
In January 2015, the husband became a director of F Pty Ltd. At this time, 900 new ordinary shares were issued in F Pty Ltd, with the husband receiving 600 shares, or 60 per cent of the F Pty Ltd shareholding, 100 were issued to Mr C, 150 were issued to the husband’s brother and the remaining 150 were issued to Ms Q. The ASIC returns for these shares initially recorded the husband as beneficially holding these shares. However, the husband and Mr O gave evidence that he held them on trust for Ms Q. As pointed out below, the ASIC returns were eventually changed to reflect this. Initially, it appeared that the wife intended to argue that the husband’s interest in F Pty Ltd should be taken as his asset, held beneficially for the purposes of final hearing; however nothing was said either orally or in writing about F Pty Ltd by the wife in final submissions. Accordingly, it does not require further comment.
On about 3 December 2015, M Pty Ltd transferred its interest in Suburb L to U Pty Ltd.
In about December 2015, Suburb L was placed on the market for sale with an advertised price of $40,000,000. It was marketed as a site seeking residential development approval. Expressions of interest were sought privately. The husband was involved in the marketing for sale process. He agreed in cross-examination that he was satisfied enough with the level of interest to consider taking the Suburb L to market. One expression of interest was received, being an offer to purchase Suburb L for $25,000,000 subject to an option free period and rezoning. Another expression of interest was received at $25,000,000 but was subject to unclear conditions and further research. The husband said in cross-examination that he believed at that time these offers were too low. By March 2016, the real estate agent marketing report noted a serious expression of interest at $30,000,000; however, there was no evidence of any unconditional offers at $25,000,000 or any other figure.
No sale was achieved at $40,000,000 or at the lower figure of $25,000,000, or at all. Suburb L was withdrawn from sale on about 10 March 2016. On 9 March 2016, the husband and other proprietors of Suburb L entered into a Deed of Call Option granting the husband and Mr O as trustees for the M Executive Superannuation Fund, D Pty Ltd as trustee for the D Superannuation Fund, and B Pty Ltd as trustee for the C Family Trust Superannuation Fund an option to purchase Suburb L for $8,250,000. The Call Option commencing date was the 43rd day after the date of the Deed and the Call Option terminating date was 24 months after the Call Option commencing date. In cross-examination, the husband agreed that at the time he would have considered $8,250,000 on the open market as a “ridiculous” value (Transcript of Proceedings dated 18 August 2020, pg. 78 lines 4-5).
It was put to him that he entered the Call Option Deed to put Suburb L beyond the reach of the wife. The husband denied this. I point out here that the wife conceded no case was made by her that there was some collusive arrangement between the husband, Mr O and others to put matrimonial property beyond her reach by using the Call Option Deed. The point the wife sought to make was that $8,250,000 in the Call Option Deed could not be taken as any evidence of the value of Suburb L as at March 2016. I accept that much is correct.
In July 2016, the parties separated on a final basis. The husband left the parties’ home in Suburb H and the wife has retained the benefit of living in that property since.
By August 2016, the husband had purchased another property in his sole name at X Street, Suburb BB (“Suburb BB”) for $2,700,000 (excluding stamp duty and acquisition costs). This purchase was funded partly from the husband’s savings, and from a loan in the sum of $630,000 from M Pty Ltd, while Mr O paid $135,000 for a deposit and loaned an additional $665,000. These loans were interest free and have since been repaid.
On 13 February 2017, the wife commenced proceedings in this Court, seeking final property orders. The parties were thereafter divorced on 23 October 2017.
The husband continued to engage in his commercial activities following separation.
The husband’s post-separation actions in relation to F Pty Ltd appeared, for a time at least, to be contentious, although ultimately disappeared as an issue. In February 2017, the husband filed a request to ASIC to record that his 600 ordinary shares in F Pty Ltd were held for Ms Q rather than beneficially. Thereafter, on 13 September 2017 all of the husband’s shares in F Pty Ltd were transferred into the names of Mr O and Mr C. The husband’s brother and Ms Q also transferred their interest, meaning that Mr O and Mr C together held 100 per cent of the shares of F Pty Ltd.
In addition, the husband claims to have gifted significant sums to both Ms Y and Ms Z in December 2017; this involved the husband purportedly obtaining a $1,000,000 loan from Mr O to provide to the children.
The husband has repartnered with Ms CC. He commenced cohabitation with her in May 2019, and currently pays her $2,500 per week by way of rent.
The proceedings
As previously mentioned, the wife commenced these proceedings in February 2017, seeking final property orders in relation to the husband only.
It was agreed early in the proceedings that the husband’s interests in M Pty Ltd and Suburb L should be valued by an expert, and one was appointed by consent in March 2017. Additionally, Ms DD was appointed as an expert to value the corporate and trust interests of the husband (“the entities”) on 19 June 2017. After this date, Ms DD married and her surname changed to “EE”. Ms EE continues to use “Ms DD” as her professional name, and as such will be referred to as “Ms DD” throughout this judgment.
Following an Application in a Case made by the wife in August 2017, and by consent orders were made on 5 September 2017 for the husband to pay any expenses relating to health insurance, motor vehicles and in relation to Suburb H. Additionally, the husband was ordered to pay the wife a lump sum payment of $100,000, and $2,500 per week by way of spousal maintenance.
The parties were referred to a Conciliation Conference, however no agreement was reached.
Eventually, on 28 November 2019, the matter was listed for a five day trial before me in August 2020.
Litigation funding continued to be an issue for the wife, and on 30 January 2020 orders were made by consent for the wife to receive $497,000 by way of partial property settlement.
On 1 May 2020, the husband filed an Application in a Case, seeking to proceed on an undefended basis. He claimed that the wife had failed to comply with the orders of the Court, specifically making complaints about the wife’s inability to engage in mediation or make any offers of settlement.
Following the husband’s application, the parties attended mediation on 18 May 2020. The mediation was unsuccessful.
On 19 May 2020, the wife filed a Response to the Application in a Case. She sought updated valuations, further disclosure and sought to join D Pty Ltd, B Pty Ltd (as trustee for the C Family Trust), M Pty Ltd, the executors of the estate of the late Ms Q, and F Pty Ltd to the proceedings. In particular, she sought declaratory relief against the third parties, as well as disclosure.
The husband’s May 2020 Application in a Case and the wife’s Response were listed for interim hearing before me on 20 May 2020. On this date, orders were made by consent for the wife to amend the final relief she sought to join the above-mentioned third parties, and for updated valuations or for first valuations to be prepared. The balance of the wife’s Response was adjourned for hearing on 9 July 2020.
It is important to note here that on 6 July 2020, the wife filed an additional Application in a Case for leave to rely upon an adversarial expert to value a number of properties, including Suburb L, and for the provision of further litigation funding (amounting to over $1,000,000), as well as a number of other orders. This application, and its outcome, is important background to the application brought and heard on the fourth and fifth days of trial, as discussed in detail later in these reasons.
The matter then came back before me on 9 July 2020 for interim hearing. By this time, the wife abandoned most of the relief that she sought in her Application in a Case, including leave to rely upon the evidence of an adversarial expert. She simply pressed orders for further litigation funding. Following the delivery of an ex tempore decision, I ordered that the husband pay to the wife the sum of $600,000 by way of partial property settlement: Dovgan & Dovgan and Anor [2020] FamCA 589. The balance of the wife’s Application in a Case from 6 July 2020, as well as the husband’s Amended Application in a Case filed 2 July 2020 and all relevant Responses, were dismissed.
On 23 July 2020, the wife filed a Notice of Discontinuance seeking to discontinue her claim against B Pty Ltd as trustee for the C Family Trust, as well as her claim against F Pty Ltd. These parties were officially removed from the proceedings on 6 August 2020, leaving the husband, the wife, and D Pty Ltd as the parties to the proceedings.
The trial commenced before me as scheduled on 17 August 2020.
matters in Dispute
I set out above at [3] how Senior Counsel for the wife articulated the main issues at the opening of the trial. By the end of the trial, and in their closing submissions, Senior Counsel for all parties agreed that the issues in dispute in this matter, although significant and complicated in themselves, were relatively limited. There are five broad areas of debate.
D Pty Ltd
The wife maintained her contention that the husband is the controlling mind of D Pty Ltd, and that D Pty Ltd is his “alter ego”, notwithstanding the technical legal or equitable ownership. Consequently she argues that the assets held in D Pty Ltd’s name should be regarded as assets of the husband as a party to the marriage and included in the asset pool. The husband and D Pty Ltd dispute this. They contend that Mr O is the true controlling mind of D Pty Ltd, and the husband has no legal control of, or right to, any assets owned by D Pty Ltd, either itself or on trust.
Although the husband made submissions on the basis that the transfer of shares in F Pty Ltd was an issue under this heading, as already mentioned, the wife ultimately made no submissions about the shareholdings in F Pty Ltd. I therefore take the view that it is therefore no longer an issue, if it ever was.
Suburb L and the Deed
As previously discussed, the husband signed the Deed in March 1999. In final submissions, the arguments about the effect of this document shifted. As I understood his argument, the husband did not press a trust argument, at least not with any conviction. Rather, the husband contended the document recorded or acknowledged an enforceable promise that he would pay D Pty Ltd one-third of his share of the net proceeds of sale, if ever Suburb L was sold. This, according to the husband, should be included on the balance sheet as his contingent liability.
In final submissions, D Pty Ltd maintained its trust argument but as a fall back adopted the husband’s arguments about the Deed acknowledging an enforceable promise. D Pty Ltd seeks a declaration to the effect that the husband holds one-third of his interest in Suburb L, being a 15 per cent interest in the property, on trust for D Pty Ltd. Somewhat inconsistently with his enforceable promise argument, the husband does not resist such a declaration being made.
The wife denies the Deed either creates any trust or embodies any enforceable promise. She resists any declaration being made. She also accepted that, if her argument that D Pty Ltd is the “creature” of the husband succeeds, the arguments about the effect of Deed creating a trust become irrelevant, because the 15 per cent purportedly held on trust would be accounted for in the asset pool in any event.
The value of Suburb L
Issues regarding the value of Suburb L occupied almost the majority of hearing time and are of some difficulty. Suburb L was valued by an expert, Mr NN, in two separate reports. According to his answers to questions sent by Barkus Doolan dated 17 August 2020,[1] and which relate to his August 2020 report, the value of Suburb L is approximately $12,500,000 (excluding GST).
[1] Exhibit 3.
The wife contends that this valuation cannot be relied upon, for a range of reasons discussed in detail later in these reasons, but which included the contention that Mr NN failed to understand or adopt long settled valuation principles, settled in the High Court, and he failed to take into account the possibility of rezoning the property for residential development, as may be an option pursuant to a [NSW] Urban Transformation Strategy. She argued the Court should be satisfied the value of Suburb L should be much greater than $12,500,000 (excluding GST).
On 19 August 2020 (being the fourth day of trial), the wife filed in Court an Application in a Case, foreshadowed early in the trial, for the appointment of an adversarial expert to value Suburb L. The detailed circumstances are explained below. A significant amount of time at trial was taken to deal with this Application. Judgment was reserved at the end of trial, and will be discussed further below.
The value of M Pty Ltd
The parties were in dispute as to the value of M Pty Ltd, which was valued by Ms DD.
Specifically, the husband argued that the value arrived at by Ms DD was incorrect in two respects; firstly because of the effect of the remuneration expert, which the husband argues would affect the amount paid by a new purchaser to hire new staff, and secondly because M Pty Ltd requires approximately $1,500,000.00 in working capital, which was not properly reflected in Ms DD’s report.
The wife disputes the husband’s assertions, and argues that the valuation included in Ms DD’s report should be adopted.
The appropriate adjustment of the property
As noted, the husband and wife both argue that they should retain 60 or 57.5 per cent of the net assets available for distribution.
proposals
As set out in in the wife’s Case Outline filed 14 August 2020, the wife’s proposal is as follows:
THE COURT NOTES:
1.The following definitions apply for the purposes of these Orders:
1.1.“Entities” means the following:
1.1.1.W Pty Ltd;
1.1.2.Dovgan Investment Trust;
1.1.3.Dovgan Trust;
1.1.4.Dovgan Trust & C Family Trust;
1.1.5.T Pty Ltd;
1.1.6.FF Pty Ltd;
1.1.7.GG Pty Ltd;
1.1.8.V Pty Ltd;
1.1.9.HH Limited;
1.1.10.JJ Limited;
1.1.11.M (Administration) Pty Ltd (Deregistered);
1.1.12.M Trust;
1.1.13.M Pty Ltd;
1.1.14.M Pty Ltd & Mr Dovgan & Mr C Partnership;
1.1.15.M Services Trust;
1.1.16.KK Pty Ltd;
1.1.17.D Pty Ltd;
1.1.18.F Pty Ltd;
1.1.19.J Investments Pty Ltd;
1.1.20.U Pty Ltd;
1.2.“Suburb H property” means the property situated at and known as G Street Suburb H, in the State of New South Wales, being the whole of the land contained in Folio Identifier … of which the husband and wife are registered proprietors as joint tenants and which is unencumbered;
1.3.“husband” means Mr Dovgan;
1.4.“wife” means Ms Dovgan.
THE COURT ORDERS:
2.Within 28 days of the date of the making of these Orders and contemporaneously:
2.1.the wife shall do all acts and things and sign all documents presented to her by the husband as are necessary to:
2.1.1.transfer to the husband the whole of her right, title and interest in her shares in J Investments Pty Ltd ABN: …;
2.1.2.assign to the husband the whole of her right, title and interest and liability (if any) in any loan account (credit or debit) and/or unpaid distributions she may have in any of the Entities;
2.1.3.relinquish all her right, title and interest in respect of any trust controlled by the husband, whether such interest may be actual, contingent or otherwise.
2.2.The husband shall do all acts and things and sign all documents necessary to:
2.2.1.transfer to the wife the whole of his right, title and interest in the Suburb H property;
2.2.2.pay or cause to be paid to the wife or as she directs such sum as is necessary so as to effect an overall adjustment of the assets and liabilities of the parties such that the wife receives 60% and the husband receives 40% of the net property pool.
3.The husband indemnify and keep indemnified the wife against any liability of any nature which the wife has at any time arising in any way in respect of any of the Entities whether:
3.1.by reason of the wife having been an employee, director, officer and/or shareholder of any of the Entities;
3.2.pursuant to any guarantee given by the wife in respect of any liability of any of the Entities;
3.3.in respect of the receipt by the wife of any money from any of the Entities;
3.4.in respect of any liability of any of the Entities, or otherwise.
4.The husband hereby indemnifies the wife from and in respect of all actions, claims, suits and demands as may be made against the wife in relation to all liabilities in the name of the husband.
5.The wife hereby indemnifies the husband from and in respect of all actions, claims, suits and demands as may be made against the husband in relation to all liabilities in the name of the wife.
6.Except as otherwise provided for by these Orders, each of the husband and wife release the other from all debts owing from one to the other.
7.Each of the parties is the sole legal and beneficial owner of all items of property, including real estate, monies, shares, insurance policies, superannuation and pension entitlements, rollover funds, motor vehicles, furniture, furnishings and personal effects, presently in the name, possession or control of each of them respectively otherwise than provided for by these Orders.
8.In the event that either party refuses or neglects to execute any Deed or instrument necessary to give effect to these Orders then the Registrar of the Court be appointed pursuant to Section 106A of the Family Law Act 1975 (Act) to execute such Deed or instrument in the name of the defaulting party and to do all acts and things necessary to give validity and operation to the Deed or instrument, and the defaulting party shall pay the costs of the non-defaulting party in relation thereto.
9.The wife have leave to amend this Amended Initiating Application on the husband providing full disclosure of his financial circumstances.
10.The husband pay the wife’s costs of and incidental to these proceedings.
11.A declaration that all of the property held by D Pty Ltd as trustee for the Dovgan Investment Trust and the Dovgan Trust forms part of the property of the parties for the purposes of sections 4, 75 and 79 of the Act.
12.An order under Part VIIIAA or section 114 of the Act that until final payment is made by the Husband in accordance with the order in paragraph 2.2.2 herein, D Pty Ltd as trustee for the Dovgan Investment Trust and the Dovgan Trust be restrained from causing or permitting or acquiescing in:
12.1.any amendment or alteration to the terms of the Dovgan Investment Trust or the Dovgan Trust; and
12.2.any distribution of income or capital from the Dovgan Investment Trust or Dovgan Trust other than to the husband for the purposes of satisfying his liabilities to the wife under the order in paragraph 2.2.2 herein.
13.In the event that the husband fails to make payment in accordance with the order in paragraph 2.2.2 herein within the time prescribed by the order in paragraph 2 herein, an order under Part VIIIAA or section 114 of the Act compelling D Pty Ltd as trustee for the Dovgan Investment Trust and Dovgan Trust to do all things and execute all documents necessary to cause that entity to make a capital distribution in favour of the husband forthwith in such sum as the Court may deem appropriate for the purposes of satisfying the husband’s liabilities to the wife arising from the order in paragraph 2.2.2 herein.
14.An order than any such distributions as is made in accordance with paragraph 12.2 or 13 herein is to be held on trust by the husband for the benefit of the wife, and that forthwith upon receipt of the said distribution the husband pay such sum to the wife or at her direction.
15.An order that the Third Respondent pay the wife’s costs of and incidental to the application against it.
16.Such further or other orders as the Court considers appropriate.
As set out in “Exhibit 5”, the husband’s proposal is as follows:
1.The following definitions apply for the purpose of these Orders:
1.1.“Entities and Trusts” means the following:
1.1.1.W Pty Ltd;
1.1.2.Dovgan Investment Trust;
1.1.3.Dovgan Trust;
1.1.4.T Pty Ltd;
1.1.5.V Pty Ltd;
1.1.6.V Trust;
1.1.7.M Pty Ltd;
1.1.8.J Investments Pty Ltd.
1.2.“Suburb H property” means the property situated at G Street, Suburb H, in the State of New South Wales, being the whole of the land contained in Folio Identifier … of which the husband and wife are the registered proprietors as joint tenants and which is unencumbered;
1.3.“Husband” means Mr Dovgan;
1.4.“Wife” means Ms Dovgan.
2. IT IS NOTED, that the Wife’s matrimonial property she will retain the following assets:
Suburb H property
$ 6,000,000.00
CBA Smart Access Acc #...95
$72,260.00
Personal effects
$17,815.00
Jewellery
$19,850.00
Motor vehicle 1
$20,000.00
Total
$6,129,925.00
3. IT IS NOTED, that the parties agree that the Wife has had the benefit of interim distributions as follows:
Partial property settlement payments
$455,000.00
Wife’s legal fees paid
$697,000.00
Further interim payment to the Wife for legal fees (22.5.20)
$250,000.00
Partial property settlement payment pursuant to orders made 09.07.20
$600,000.00
Total
$2,002,000.00
THE COURT ORDERS:
Payment to the Wife and Transfer of Suburb H property to the Wife
4. That within 120 days of the date of these orders the Husband pay to the Wife the sum of $7,178,444.31 (“the Wife’s payment”) and simultaneously with such transfer the parties shall do all acts and things and sign all documents as are necessary to the transfer to the Wife the whole of the Husband’s right, title and interest in and to the Suburb H property free of any encumbrance.
5. It is noted that the Wife’s payment reflects an adjustment that provides for the wife to receive 42.5% of the asset pool as recorded by the Balance Sheet annexed hereto and marked with the letter “A”.
Realisation Costs in respect to facilitating the Wife’s payment
6. That to give effect to Order 4 the Husband upon filing his income tax returns for the year ended 30 June 2020, the Husband must upon the issue of a Notice of Assessment in his name particularising the income tax payable by him for the financial year ended 30 June 2020 do all acts and things and sign such documents as are necessary to cause a dividend to be declared by M Pty Ltd in the name of the Husband in the sum of $4,480,699;
7. In the event the Court does not accept all of the realisation costs including income tax and CGT, expenses as provided for in the balance sheet submitted by the Husband, then to the extent that any asset is sold or an interest disposed of by or at the direction of the husband or a related entity of the husband to give effect to the payment of the Wife’s payment to the wife, then in respect of any sale and as a set off against the Wife’s payment
7.1.The husband shall cause a copy of all documents referable to the sale and the receipt of the proceeds, to be provided to the wife;
7.2.The husband shall serve on the wife a working sheet, certified by a chartered accountant to be correct, that sets out the costs of marketing and preparation of the property for sale, any commission on sale, auction and agent fees, legal fees and an estimate of the tax of the vendor and or the husband as a beneficiary of a trust in receipt of proceeds of sale and/or top-up tax payable by the husband in the event that sale proceeds are then distributed to the husband from a corporate entity
7.3.The wife shall pay to the husband an amount equal to the percentage that her overall settlement reflects as against the asset sold, and this shall be a set off as against the [principal sum] payable to the wife [By way of worked example – the wife is awarded 42.5% overall. To pay part of the principal sum, the husband elects to sell an asset and the court NOTES that he is at liberty to sell such assets as he elects to satisfy judgment and the principal sum, and realisation and tax costs of the sale are $100,000. The amount of the wife’s share of same and the set off is therefore $42,500.];
Return of Husband’s belongings and transfer of assets
8. That upon payment being made in paragraph 4 the Wife hereby indemnifies the husband from and against all expenses associated with the Suburb H property including but not limited council rates, water rates and the like.
9. That simultaneously with the payment referred to in paragraph 4 the Wife sign all documents presented to her by the husband as necessary to:
9.1.transfer to the husband the whole of her right, title and interest in the J Investments Pty Ltd
9.2.Assign to the husband the whole of her right, title and interest and liability (if any) in any loan account (credit or debit) and/or unpaid distributions she may have in any of the Entities and Trusts.
9.3.make available for collection y the Husband from the Suburb H property, the following items
9.3.1.1.The husband’s clothing and personal belongings that remain in the master bedroom and the study;
9.3.1.2.The husband’s sporting equipment (save the treadmill which shall remain with the wife) and vehicle parts;
9.3.1.3.All electrical tools;
9.3.1.4.The guitar in the lounge room;
9.3.1.5.The signed surfing poster in the rumpus room;
9.3.1.6.The large artwork in the atrium opposite the study.
General
10. That except as otherwise provided for in these Orders, the Husband and the Wife shall each respectively be solely responsible for all and any debts and/or liabilities incurred in that party’s sole name or jointly with any other party and/or in relation to any of the assets to which each party is entitled pursuant to these Orders and in the future.
11. The husband shall be the sole legal and beneficial owner of and the Wife has no interest in the Entities and Trusts.
12. Each of the parties is the sole legal and beneficial owner of all items of property, including real estate, monies, shares, insurance policies, super entitlements, motor vehicles, furniture, furnishings and personal effects, presently in the name, possession, or control of each of them respectively otherwise than as provided for by these Orders.
13. In the event that either party refuses or neglects to execute any deed or instrument necessary to give effect to these Orders then the Registrar of the court be appointed pursuant to Section 106A of the Family Law Act, 1975 to execute such deed or instrument in the name of the defaulting party and to do all acts and things necessary to give validity and operation to the deed or instrument.
14. All previous Orders stand discharged from this date
15. That all costs be reserved and listed for directions on a date after delivery of reasons for judgement.
IT IS NOTED: the Husband will seek that the wife pay his costs on an indemnity basis.
As set out in their Case Outline, the Third Respondent’s proposal is as follows:
(a)an order that all final and interim applications concerning the third respondent be dismissed; and
(b)a declaration that the first respondent holds 3/20 of his interest in the property at K Street, Suburb L (being the whole of the interest contained in folio identifier …) as bare trustee for the third respondent in its capacity as trustee for the Dovgan Investment Trust; and
(c)an order that the applicant pay the third respondent’s costs of and incidental to these proceedings on the indemnity basis with the payment of such costs to be stayed until 14 days after the date of the making of a final order pursuant to Section 79 of the Family Law Act as between the applicant and the first respondent.
the material relied upon
The wife relies upon the following;
a)her Amended Initiating Application filed 27 July 2020;
b)her Trial Affidavit filed 28 July 2020;
c)her Financial Statement filed 8 July 2020;
d)her Tender Bundle; and
e)her Application in a Case filed in Court on 19 August 2020, with supporting material, discussed later in these reasons.
In addition to these documents, and for the assistance of the Court, the wife has provided a Case Outline, dated 14 August 2020, as well as a written summary of her Counsel’s closing submissions on 21 August 2020. These documents have also been considered.
The wife was required for cross-examination. She was questioned on the first day of trial via Microsoft Teams. Her cross-examination was brief. I generally accept her evidence, to the extent it bears on the issues in dispute.
The husband relies upon the following;
a)his Response to the Initiating Application filed 13 March 2017;
b)his Trial Affidavit filed 6 July 2020;
c)his Affidavit in Rely filed 11 August 2020;
d)his Financial Statement filed 6 July 2020; and
e)his Tender Bundle.
In addition to these documents, the husband provided a Case Outline, also dated 14 August 2020, as well as a written summary of his Counsel’s opening statement and closing submissions. These were considered.
The husband was required for cross-examination, and did so. He appeared in person on the first and second days of trial. He was generally a satisfactory witness.
The third respondent relies upon the following (as specified in the Case Outline, dated 16 August 2020):
a)the Affidavit of Mr O Dovgan filed 6 July 2020;
b)the Affidavit of Mr LL filed 6 July 2020;
c)the Affidavit of Mr O Dovgan filed 14 August 2020;
d)the Affidavit of Ms P Dovgan filed 14 August 2020; and
e)the Affidavit of Ms MM filed 14 August 2020.
In addition to these documents, and for the assistance of the Court, the third respondents have also provided an Amended Case Outline, sent to the Court 16 August 2020. This has also been considered.
Mr O was required for cross-examination, and presented in person on the second day of trial. I note here that the wife made submissions about the fact that Mr O was present in Court during the husband’s cross-examination. However, I do not consider it necessary to express any general view about Mr O’s evidence. Ultimately, the way the issues were joined and argued, particularly concerning the decision making in D Pty Ltd, there was no serious factual dispute which would require the Court to form a view about the reliability of his evidence. Mr LL, an accountant for D Pty Ltd, was also required and made himself available on the second day of trial via telephone.
The third respondent’s remaining witnesses were not required for cross-examination.
I otherwise note that this is a matter involving an extensive amount of expert evidence. These expert reports were tendered together in a bundle marked “Expert Evidence Court Book” and filed by the solicitors acting for the husband. This Expert Evidence Court Book included the following affidavits, which were all read without objection:
a)the Affidavit of Mr NN, who was engaged by the parties to value Suburb L as well as a property located in Suburb PP, filed 2 July 2020 and including reports from August 2017;
b)the second Affidavit of Mr NN filed 14 August 2020, including an updated report in relation to the above mentioned properties;
c)the Affidavit of Mr QQ, who was engaged by the parties to value a property at RR Street, Suburb SS QLD, filed 12 August 2020;
d)the Affidavit of Mr TT, who was engaged by the parties to value UU Street, Suburb VV QLD, filed 13 August 2020;
e)the Affidavit of Mr WW, who was engaged by the parties to value the property in Suburb BB as well as Suburb H, filed 14 August 2020;
f)the Affidavit of Mr XX, a remuneration expert, filed 21 July 2020; and
g)the Affidavit of Ms DD, who was engaged by the parties to value the entities of the husband, filed 13 August 2020.
In addition to their Affidavits, Ms DD and Mr NN also provided answers to questions put to them by the parties pursuant to rule 15.65 of the Family Law Rules 2004 (Cth) (“the Rules”). These answers were in evidence.
Mr NN, Mr WW, Mr XX and Ms DD were all cross-examined. Both Mr WW and Mr XX presented via telephone, whilst Ms DD and Mr NN appeared in person. I will discuss the oral evidence of experts as necessary in the course of these reasons.
The balance of the expert witnesses were not required for cross-examination, as the values proposed by them have been accepted by all parties. .
Throughout the trial, a variety of documents were handed up and accepted as exhibits.
Exhibit Label
Document
Tendered by
A
Wife’s Electronic Court Book
Applicant Wife
B
Suburb L Property Documents (binder)
Applicant Wife
C
Small Bundle of AF Real Estate Documents
Applicant Wife
D
Letter from Mr NN on YY Valuers letterhead to Ferrer Lawyers on 17 August 2020, and questions from Ferrer Lawyers to Ms DD dated 15 August 2020
Applicant Wife
E
Joint Balance Sheet
Joint
1
Husband’s Electronic Court Book
Respondent Husband
2
Planning Certificate dated 3 July 2020
Third Respondents
3
Letter from Mr NN on YY Valuers letterhead to Barkus Doolan on 17 August 2020
Respondent Husband
4
Letter to Ms DD from Barkus Doolan dated 14 August and Ms DD’s response dated 17 August 2020
Respondent Husband
5
Final Minute of Orders Sought by the Respondent Husband and Balance Sheet of the effect of the Proposed Orders
Respondent Husband
The Law
Part VIII of the Act sets out the legislative provisions relating to property orders that may be sought when parties are or were married. The central provision is s 79 of the Act, which gives the Court power to make such orders for alteration of property interests as it considers appropriate.
Section 79(2) of the Act provides that:
The court shall not make an order under this section unless it is satisfied that, in all the circumstances, it is just and equitable to make the order.
Section 79(4) of the Act set outs the factors to be taken into account in considering what order, if any, should be made (these will be discussed in more detail below).
Section 80 grants a range of specific powers to the Court to make orders adjusting property interests. Specifically s 80(1) is in the following terms:
The court, in exercising its powers under this Part, may do any or all of the following:
(a) order payment of a lump sum, whether in one amount or by instalments;
(b) order payment of a weekly, monthly, yearly or other periodic sum;
(ba) order that a specified transfer or settlement of property be made by way of maintenance for a party to a marriage;
(c) order that payment of any sum ordered to be paid be wholly or partly secured in such manner as the court directs;
(d) order that any necessary deed or instrument be executed and that such documents of title be produced or such other things be done as are necessary to enable an order to be carried out effectively or to provide security for the due performance of an order;
(e) appoint or remove trustees;
(f) order that payments be made direct to a party to the marriage, to a trustee to be appointed or into court or to a public authority for the benefit of a party to the marriage;
(h) make a permanent order, an order pending the disposal of proceedings or an order for a fixed term or for a life or during joint lives or until further order;
(i) impose terms and conditions;
(j) make an order by consent;
(k) make any other order (whether or not of the same nature as those mentioned in the preceding paragraphs of this section), which it thinks it is necessary to make to do justice; and
(l) subject to this Act and the applicable Rules of Court, make an order under this Part at any time before or after the making of a decree under another Part.
Section 81 is also relevant, although the Full Court has held it is neither a head of power nor an absolute requirement; it reflects a policy of making orders which finally determine the financial relationship between the parties and avoid further proceedings, but this is only to be taken “as far as (is) practicable”: In the Marriage of Crapp (No 2) (1979) FLC 90-615; (1979) 5 Fam LR 47; (1979) 35 FLR 153; [1979] FamCA 17.
Section 81 is in the following terms:
In proceedings under this Part [i.e. Pt VIII], other than proceedings under section 78 or proceedings with respect to maintenance payable during the subsistence of a marriage, the court shall, as far as practicable, make such orders as will finally determine the financial relationships between the parties to the marriage and avoid further proceedings between them.
The approach to be taken
The decision of the High Court in Stanford & Stanford (2012) 247 CLR 108; (2012) FLC 93-518; (2012) 47 Fam LR 481; [2012] HCA 52 (“Stanford”) at [36]- [40] (per French CJ, Hayne, Kiefel and Bell JJ) made clear that the starting point for the determination of what is just and equitable for the purposes of s 79 is the determination, according to ordinary legal and equitable principles, of the existing legal and equitable interests of the parties in the property that is to be settled. This fundamental starting point was confirmed more recently in Hsiao v Fazarri (2020) 61 Fam LR 465; [2020] HCA 35. In Hsiao at [66], and Nettle and Gordon JJ commented:
… So much follows from the text of s 79(1)(a) of the Family Law Act itself, which refers to altering the interests of the parties. But just as importantly, it is the statutory imperative to take into account the considerations stipulated by the legislature, including, critically, the existing interests of the parties, that characterises the power conferred by s 79 as judicial power. Consequently, proper consideration of existing interests is of fundamental importance…
[emphasis in original, footnotes omitted]
Prior to Stanford, parties generally relied upon the “four step process” set forth in Hickey & Hickey & Attorney General for the Commonwealth of Australia (2003) FLC 93-143; (2003) 30 Fam LR 355; [2003] FamCA 395 to structure the determination of an application under s 79, as summarised:
1. Identify and value the parties’ property, liabilities and financial resources at the date of the hearing;
2. Identify and assess the contributions of the parties as referred to in s 79 of the Act and determine the contribution based entitlements of the parties expressed as a percentage of the net value of the property of the parties, whether examined on a global approach or an asset by asset approach;
3. Identify and assess the other factors relevant including the matters referred to in s 75 of the Act, and determine the adjustment (if any) to be made to the contribution entitlements at step two; and
4. Consider the effect of the above and resolve what order is just and equitable in all the circumstances of the case.
The Full Court of the Family Court of Australia in Bevan & Bevan (2013) 29 Fam LR 387; [2013] FamCAFC 116 (“Bevan”) has held that the decision in Stanford has not overruled the four step approach. Rather, Stanford serves as a reminder that the four step process “merely illuminates the path to the ultimate result” being “no more than a shorthand distillation of the words of a statute which has but one ultimate requirement, namely not to make an order unless it is just and equitable to do so” (Bevan at [71]-[72]).
The Full Court in Bevan also summarised three “fundamental propositions” laid down by the High Court of Australia to provide “useful guidance to trial judges in approaching the task under s 79” at [73] as follows:
1. Determination of a just and equitable outcome of an application for property settlement begins with the identification of existing property interests (as determined by common law and equity);
2. The discretion conferred by the statute must be exercised in accordance with legal principles and must not proceed on an assumption that the parties’ interests in the property are or should be different from those determined by common law and equity;
3. A determination that a party has a right to a division of property fixed by reference only to the matters in s 79(4) and without separate consideration of s 79(2), would erroneously conflate what are distinct statutory requirements.
The High Court has held that the very fact of separation and the termination of the relationship affects assumptions about property during the existence of a marriage or de facto relationship, and may lead to the ready satisfaction of just and equitable requirement: Stanford at [41]-[42]. Where the parties conduct the case on the basis that it is just and equitable to make some form of adjustment, the Court will not need to discuss the s 79(2) issue: Fielding and Nichol [2014] FCWA 77 at [43] per Thackray CJ. Here the parties accept it would be just and equitable to make some form of property adjustment. In this matter, the just and equitable requirement has been satisfied by the issues joined and the way the case was conducted.
I will therefore approach the determination of this matter by first identifying the assets and liabilities of the parties, then by dealing with s 79(4) factors, including s 75(2).
The assets, liabilities and superannuation interests as at the date of hearing
As already noted, the main issues in dispute concerned what assets and liabilities should finally lie on the balance sheet, as determined according to ordinary legal and equitable principles.
Suburb L
As already noted, there are two central issues in relation to Suburb L; the first concerns its value. The wife argues that the single expert valuation evidence of Mr NN should not be accepted, and she should be given leave to rely upon the evidence of an adversarial expert, with time to prepare such evidence. The second is whether, pursuant to the Deed, either the husband holds a 15 per cent interest in Suburb L on trust from D Pty Ltd, or the Deed expresses an enforceable obligation for the husband to pay D Pty Ltd an amount equivalent to one-third of the net proceeds received by him upon any sale of Suburb L.
It should be emphasised that the value of Suburb L has a significant impact on another issue, namely, the value of the husband’s interest in M Pty Ltd. This is because, although M Pty Ltd no longer directly owns a share of Suburb L, U Pty Ltd now owns 50 per cent of Suburb L, and M Pty Ltd owns 100 per cent of the issued shares in U Pty Ltd. The value of M Pty Ltd’s shares in U Pty Ltd is referrable to the value of Suburb L.
a) The valuation of Suburb L and the wife’s Application in a Case
The issues raised by the wife’s challenge to the evidence of Mr NN concerning the value of Suburb L and her Application in a Case require some detailed discussion.
Some Relevant Procedural History up to the wife’s Application in a Case
Mr NN was jointly appointed as an expert pursuant to Part 15.5 of the Rules to value both Suburb L and OO Street, Suburb PP NSW. He received specific instructions on 2 May 2017 following a letter sent by the wife’s then solicitors and signed on behalf of the husband.
No issue was taken with Mr NN’s valuation of OO Street.
Mr NN’s original valuation of Suburb L was provided to the parties on 18 August 2017. It was not filed with the Court until 2 July 2020. In this report, Mr NN placed a market value on Suburb L of $10,800,000.00 (GST exclusive). There was no challenge to his methodology in reaching this value, or any other aspect of this report, until July 2020.
The wife’s then current solicitor, Mr AD, was retained by her on 28 May 2020. He agreed in cross-examination that between May 2020 and 3 July 2020 he “had a conversation” with Mr ZZ, of AB Valuers Pty Ltd, but did not officially retain him, to “critique” the reports of experts already filed in the proceedings, including the first report of Mr NN (Transcript of Proceedings dated 20 August 2020, pg. 25 line 28).
As already noted, on 6 July 2020, the wife filed an Application in a Case seeking, amongst other things, orders which would allow for the appointment of an adversarial expert in relation to Mr NN’s expert valuation evidence. Although Mr AD said he did not retain Mr ZZ, at some point prior to 3 July 2020 he clearly did; Mr ZZ swore an affidavit on 3 July 2020 for the purposes of this Application in a Case (“3 July affidavit”). This affidavit gave commentary on Mr NN’s valuation of Suburb L, as well as many other expert reports which are now not relevant.
It is important to stress here that in relation to Suburb L, Mr ZZ expressed the view in his 3 July affidavit that Mr NN, in his first report, may have made a number of errors, in that he may not have valued the property on a highest and best use basis, may have incorrectly identified the property, had not identified appropriate comparative sales, did not explain his yield figure of 7 per cent, and failed to take account of potential rezoning of the property for high density residential use, in accordance with the [NSW] Urban Transformation Strategy 2016-2023. Mr ZZ expressed the view that this potential rezoning could have a material impact on value. Mr ZZ pointed to the fact that in 2016, Suburb L had been marketed for sale by D Pty Ltd seeking offers in excess of $40 million, as discussed earlier in these reasons (see above at [27]), which also lead him to question the value reached by Mr NN in his first report in August 2017.
At paragraph 11 of his 3 July affidavit, Mr ZZ specifically stated that he proposed to undertake, or supervise other valuers with relevant geographical knowledge to undertake, valuation reports of the properties the subject of single expert valuation report in the proceedings, including Suburb L. In particular, at paragraph 11(b) and (c) Mr ZZ gave the following evidence:
11. In order to assist the Court, I propose to undertake…
… (b) Where an opinion is expressed that the values reached in each of the previous valuation reports is materially different from that based upon relevant research and due diligence (i.e. at least greater than 10% in the valuations), preparation of comprehensive valuation reports, as at current market value, of those properties.
(c) With respect to [Suburb L], provide three valuation reports:
(i) On an ‘as is’ basis, as at the date of previous valuation (18 August 2017) – including a detailed critique of the YY Valuers Valuation;
(ii) On the basis of ‘highest and best use’ – taking into account the development potential of the site, as at today’s date, reflecting the current market value of the subject property; and
(iii) If required, a comprehensive hypothetical feasibility assessment of the subject property reflecting the potential to re-develop the subject property in accordance with the proposed re-zoning under the [NSW] Urban Transformation Strategy 2016.
The matter came before me on 9 July 2020. As already noted, the wife did not press her proposed orders for leave to rely upon any adversarial expert. Her application in this respect was dismissed. Orders were made for litigation funding in the total amount of $600,000 (see [48] above), and the parties agreed that the existing single experts in the proceedings should prepare updated reports.
With respect to this agreement about expert evidence generally, in my reasons at [13] I noted as follows:
…I note that I was informed that the husband and wife had reached agreement that further authorisations were to be given to existing experts in the proceedings for the purpose of updating experts’ reports. But that agreement was specifically made on the basis that it was without prejudice to the wife’s right to seek the appointment of adversarial experts in the future.
In the meantime, the parties jointly wrote to Mr NN on 9 July 2020, requesting an updated valuation in relation to both Suburb L and the Suburb PP property. In this letter, marked annexure “B” in Mr NN’s second affidavit filed 14 August 2020, the parties make it clear to Mr NN that the updated report requested would have to be produced in a timely manner, as the valuations proposed would be used by the other single expert, Ms DD, in her updated report to value the entities.
I note that the letter sent to Mr NN on 7 July 2020 on its face claims to be a joint request for an updated report. According to the version attached to Mr NN’s affidavit, it does not appear as though the wife’s solicitor has signed the bottom of the letter. Nonetheless, there was no suggestion that the instructions for the updated report were unilateral, and therefore I take the letter as being jointly requested.
Mr NN produced an updated report dated 23 July 2020. He valued the Suburb L property at $12,750,000.00 (excluding GST). This updated report was attached to an affidavit of Mr NN which was sworn on 13 August 2020.
Questions to Mr NN
Both the wife and the husband, through their solicitors, then put questions to Mr NN pursuant to rule 15.65 on 14 August 2020. Mr NN provided his answers to these questions by letter dated 17 August 2020, that is, the first day of the trial.
In his response to questions put to him by the husband’s solicitors, Mr NN reassessed his valuation to be $12,500,000.00 (see Exhibit 3), a reduction of $250,000 from the value given in his updated report. The difference arose from discrepancies in the figures for net rental income provided to Mr NN. He explained this as follows:
[t]here appears to be some minor discrepancies with the information provided and therefore if a net rental income of $845,000 per annum can be confirmed, I will adopt this as the net rental figure. Applying the capitalisation rate of 6.75%, a valuation for $12,518,518 is reflected. For the purposes of this valuation, I have adopted a figure of $12,500,000 – Excluding GST. (Exhibit 3, pg. 3 [21]).
I point out here that, whilst the wife contends that Mr NN’s valuation of Suburb L is flawed, this assertion does not relate to the use of an $845,000 per annum rental figure. The criticisms relate to other asserted problems.
In her questions to Mr NN, the wife provided to him a copy of a report from a town planner, Mr AC dated 25 May 2018 (annexure ‘C’ to the affidavit of Mr AD filed 19 August 2020), and asked him to consider it. Mr AC’s report gave evidence about the likely process, based on his experience and expertise, which may lead to a rezoning of Suburb L site. Mr AC’s report makes clear that Suburb L is situated in the Urban Transformation Area and is subject to the [NSW] Urban Transformation Strategy, and the [NSW] Urban Transformation Implementation Plan 2016-2023 and Planning and Design Guidelines. Mr AC points out that the implementation plan has factored in the complexities involved with the transformation of the aread and defined a “Precinct Release Process” over the 5 years to 2023 (affidavit of Mr AD filed 19 August 2020, pg. 37 at paragraph 4.4.1).
Importantly, Mr AC also points out that Suburb L is not located within the “initial release phase” of the precinct redevelopment, that is, in the period 2016 to 2023. Any proposal which departs from the “staging and sequencing identified by the Implementation Plan 2016-2023” would have to be assessed against what is called the “Out of Sequence Checklist”. Mr AC goes on to express the opinion that:
It is my opinion that the current implementation timing does not preclude the [owners of Suburb L] from submitting a planning proposal for rezoning at any time. However, the need to satisfy the Out of Sequence Checklist criteria adds a significant element of additional risk. The suite of studies necessary to respond to the checklist would also attract significant cost (affidavit of Mr AD filed 19 August 2020, pg. 38-39).
Mr AC estimated such costs to be in the range of $310,000 to $600,000 (affidavit of Mr AD filed 19 August 2020, pg. 52).
Mr AC then expressed the following conclusion:
The Implementation Plan does not identify the site within the initial release phase of the Strategy (2016 – 2023). The Plan does not specify the expected timing for the site’s future rezoning.
The Implementation Plan requires any proposal for rezoning that is not scheduled for release in the 2016 – 2023 phase address the Out of Sequence checklist as part of any planning proposal. The Out of Sequence checklist requires preparation of additional investigative studies including an Integrated Infrastructure Delivery Plan, Stakeholder Engagement Report and Economic feasibility investigation. It is beyond the scope of this report to comment with certainty on the ability of a Planning Proposal to satisfy the Checklist, however on balance, if proposed as a single parcel Planning Proposal, it is my opinion that satisfaction of the Checklist is extremely unlikely and has the potential to result in infrastructure costs exposure which would render out of sequence release as unfeasible.
Subsequent to 2023, prospects for lodging a Planning Proposal will likely be improved as strategic planning within the PRCUTS progresses to Stage 2 Releases. If the subject site is not still within the Out of Sequence area at that time, a Planning Proposal could be lodged with relatively high degree of certainty of a successful outcome. Such a Planning Proposal would be capable of being gazetted within approximately 18 to 30 months, including application preparation time (affidavit of Mr AD filed 19 August 2020, pg. 51)
It is clear from the evidence of Mr AC’s report, which the wife relied upon, that the Suburb L site is highly unlikely to be the subject of any rezoning before 2023, and, after that time, any rezoning would be contingent upon the site being removed from an Out of Sequence area, or the owners spending the necessary substantial sums of money to put forward a Planning Proposal. There was no evidence which would permit me to form a view as to the likelihood of either contingency being satisfied.
Percentages of net assets at hearing
Consequently, on the basis of my findings and conclusions, if there was no property adjustment, the applicant would hold 13 per cent (rounded) of the parties’ net assets and the respondent 87 per cent (rounded), including the jointly held assets, the Suburb H property and J Investments. Neither party argues it would be just and equitable to leave this position undisturbed. I agree.
I turn now to consider the application of Part VIII of the Act and ss79 & 75(2).
Contributions under section 79
I will deal first with s 79 of the Act. Section 79(4) of the Act sets out the considerations to be taken into account by the Court in determining what order should be made under s 79 of the Act in property settlement proceedings.
The approach to the assessment of contributions has been stated many times. In Norbis v Norbis (1986) 161 CLR 513; [1986] HCA 17 at 523, Mason & Deane JJ said :-
Although it is natural to assess financial contributions under s. 79(4)(a) by reference to individual assets, it is also natural to assess the contribution of a spouse as homemaker and parent either by reference to the whole of the parties’ property or to some part of that property. For ease of comparison and calculation it will be convenient in assessing the overall contributions of the parties at some stage to place the two types of contribution on the same basis, i.e. on a global or, alternatively, on an “asset-by-asset” basis. ...
As already noted above, the husband contended that the Court should use two asset pools, quarantining the addbacks in a separate pool. I have rejected this approach for the reasons given above at [336]. Neither party argued that I should adopt an asset by asset approach. I take a global approach to the assessing the financial contributions of the parties.
In accordance with s 79(4) of the Act, the Court must consider all the contributions, both financial and non-financial, to the acquisition, conservation and improvement of the parties’ assets as well as to the welfare of the family during cohabitation and after separation. The Court must consider the contributions in an overall sense: Norman & Norman [2010] FamCAFC 66; Hickey (supra); In the marriage of Kowalski (1993) FLC 92-342; (1992) 16 Fam LR 235; G & G (2000) FLC 93-043; (2000) 26 Fam LR 592; [2000] FamCA 1075. A broad approach is preferred, rather than reference to precise mathematical calculations: In the Marriage of Burke (1981) FLC 91-055; (1981) 7 Fam LR 121, although an evaluation of each party’s respective contributions is necessary: JEL & DDF (2001) FLC 93,075; (2000) 28 Fam LR 1; [2000] FamCA 1353. Assumptions about equality of contributions should not be made. Separate assessment of matters occurring after separation is not necessary in arriving at an assessment of contributions: Sippel & Sippel [2004] FamCA 201.
In Dickons v Dickons (2012) 50 Fam LR 244; [2012] FamCAFC 154 the Court expressly rejected the notion that there must be a relationship between contributions and what they produced in terms of property, and at [14] - [22] discussed at some length the appropriate way to consider and weigh all contributions:
14. As is plain from earlier decisions of this Court, regard must be had to the use made of contributions of various types so as to compare the contributions made by each of the parties during the course of, and over the length of, their relationship (see, for example, In the Marriage of Pierce (1998) FLC 92-844). But that is an entirely different proposition to, as it were, causally linking contributions with their asserted financial “product” or “value”. The former recognises that the nature, form and extent of contributions made by each of the parties might differ; the latter suggests that the absence of a causal link counts as no contribution at all.
15. The search for a causal link might be seen to come instinctively to the necessary inquiry and all the more so when regard is had to s 79(4)(a) which refers to financial contributions made “...directly or indirectly...” “...to the acquisition, conservation or improvement of any of the property ...” and goes on to also refer to the financial contribution made “...otherwise in relation to any of that last-mentioned property...” The terms of that sub-paragraph might, naturally enough, be seen to suggest a causal link between those contributions and the “financial product” which those contributions of that type are said to have produced. That same requirement might also be seen to suggest that relevant contributions of that type can be seen to be quantifiable – or, at least, conceptualised – in monetary terms, in contradistinction to contributions made pursuant to s 79(4)(c).
16. While that apparent “causal connection” might be seen in s 79(4)(a) (and (b)), no such connection is apparent from the terms of s 79(4)(c); contributions of that latter type are not linked by the words of the sub-paragraph to the “...acquisition, conservation or improvement of any of the property...” or, indeed, to “property” at all. This is not a legislative oversight; the 1983 amendments to the Act which inserted the current s 79(4)(c) were specifically intended, relevantly, to remove any suggestion that there needed to be a causal link between contributions of that type and any particular asset or property. The Explanatory Memorandum to the Family Law Act Amendment Bill 1983 provides, at Clause 36, that a specific purpose of the re-casting of s 79(4) was, relevantly, to:
... revise sub-section 79(4) to remove the possibility of an interpretation of the sub-section requiring that there be a nexus between a spouse’s contribution and a specific item of property in section 79 proceedings ...
17. Within that context, then, it is self-evident that financial contributions (whether direct or indirect) can be made to a relationship that have an effect on the property of the parties without those financial contributions finding their way directly into, or being directly linked to, specific property or, indeed, directly to the totality of the property available for distribution at the time of trial. Financial contributions can be made to the “...acquisition, conservation or improvement...” of property “...directly or indirectly...” (s 79(4)(a). Emphasis added). A financial contribution can be made indirectly by, for example, the use by parties of income or assets for purpose A freeing up the use of other income or assets for purpose B. Moreover, a particular financial contribution might have been used wholly in discretionary expenditure which, but for that contribution, would not have been available to the parties or would have required borrowings or a diminution of capital. Such a contribution can also, in that way, be seen, for example, as an indirect contribution to the conservation of property. Indeed, the principles discussed for example in In the Marriage of Kowaliw [1981] FamCA 70; (1981) FLC 91-092 and In the Marriage of Townsend [1994] FamCA 144; (1995) FLC 92-569, can be seen as an exception to that general proposition.
18. Any and all such contributions, whether or not they sound in, or are directly linked to, the property available for distribution, should be considered and assessed together with the nature, form and extent of all other contributions of all types contemplated otherwise by s 79(4).
19. That is true of assets or income generated within the relationship and it is equally true of assets or income coming from outside of the relationship (for example, as here, in the form of inheritances). In the same way, s 79(4) specifically requires the Court to take into account contributions made to the welfare of the family (and substantively and “...not in any merely token way...”; see, Mallett v Mallett [1984] HCA 21; (1984) 156 CLR 605 at 636 per Wilson J) notwithstanding that those contributions may not be, or cannot be seen to be, directly linked to the available property at trial, or any increase or decrease in the value of the property.
20. Put another way, consistent with authority, the s 79 discretion involves as a necessary requirement that “... trial Judges weigh and assess the contributions of all kinds and from all sources made by each of the parties throughout the period of their cohabitation and then translate such an assessment into a percentage of the overall property of the parties or provide for a transfer of property in specie in accordance with that assessment.” (In the Marriage of Aleksovski [1996] FamCA 111; (1996) FLC 92-705 at 83,437). In Aleksovski, Kay J outlined the well-known “gold bar” analogy and said “[w]hat is important is to somehow give a reasonable value to all of the elements that go to making up the entirety of the marriage relationship” (at 83,443).
21. Those same principles can be expressed as saying that the requirements of the section are met by approaching the assessment of contributions holistically and by analysing the nature, form, characteristics and origin of the property currently comprising that to which s 79 applies, and, in turn, analysing the nature, form and extent of the contributions (of all types) contemplated by s 79). That task is also undertaken by reference to the nature and form of the particular marriage partnership manifested by the particular circumstances of this particular marriage. Is it, for example, a relationship, as Deane J put it in Mallett at 640-641 “...where the parties have adopted the attitude that their marriage constituted a practical union of both lives and property...” or is it, for example, a union where parties lived very separate domestic and financial lives?
As the husband pointed out, a number of Full Court authorities, following Dickons, have recently confirmed that where the parties have been married for a long period of time and one party to the marriage introduces property or other assets, a "holistic" assessment of the parties contributions is required; all contributions must be weighed collectively and so it is an error to segment or compartmentalise the various contributions and weigh one against the remainder: Jabour & Jabour [2019] FamCAFC 78 at [31] - [87]; Horrigan & Horrigan [2020] FamCAFC 25 at [35] - [ 49]; Barnell & Barnell [2020] FamCAFC 102 (“Barnell”) at [30] - [43]; Benson & Drury [2020] FamCAFC 303 at [35]. Where there has been a long marriage this evaluation occurs often with respect to disparate kinds of contribution made over a substantial period; such evaluation, having regard to its subject matter, inevitably involves value judgments and matters of impression: Lovine & Connor and Anor (2012) FLC 93-515; [2012] FamCAFC 168; at [40]; Barnell at [30].
Below is a discussion of the evidence and my findings in relation to the relevant contributions under s 79(4) of the Act. I note here that s 79(4)(f) and (g) are not relevant in the circumstances of this case.
(a) the financial contribution made directly or indirectly by or on behalf of a party to the marriage
Initial contributions
M Pty Ltd was the subject of some dispute in relation to initial contributions.
M Pty Ltd was in existence at the start of the relationship. While there was generally no dispute that M Pty Ltd has been the key to and source of the parties’ wealth, there was a dispute as to its significance at the start of the relationship. The husband argued that his evidence showed he had expended a good deal of effort on establishing and building up M Pty Ltd prior to the marriage. In oral argument, the wife did not accept that when the husband brought M Pty Ltd to the relationship it was a valuable business. She pointed to the fact that D Pty Ltd purchased 4,500 shares in M Pty Ltd from the husband for $4,500 in November 1989.
However, the evidence of the husband, which was not challenged, shows that between 1985 and 1989 he and Mr C worked installing equipment by day and paperwork at night, drawing minimal wages. The husband lived with his parents. He also worked at night taking calls for emergency repairs. At the time the parties commenced their relationship, M Pty Ltd had 40 employees. I am satisfied that M Pty Ltd was a sound and profitable business at the time the parties began cohabitation.
An initial contribution has to be weighed against all the other relevant contributions of the parties, but the use made of this initial contribution is relevant: Pierce v Pierce (1999) FLC 92-844; [1998] FamCA 74 at [28]. M Pty Ltd was clearly the springboard for the creation of the parties’ wealth during the marriage.
Apart from M Pty Ltd, the husband brought some other modest assets to the relationship with qualifications and experience. There was no dispute that the wife brought very little in the way of assets or money to the relationship.
Financial contributions during the relationship
There was no material dispute that the husband provided all the financial contributions during the 27 year marriage. The wife did not work. There was no suggestion she could not work, but she did not work. The husband funded the expenditure for the family, as well as cleaners and gardeners. M Pty Ltd was the source of money to fund this expenditure.
The husband purchased the family home at Suburb AG unencumbered in May 1990. He was able to do so through funds available from M Pty Ltd. The parties’ home at Suburb S was later purchased from the sale proceeds of the property at Suburb AG, and further dividends from M Pty Ltd.
It should be recorded that in the 31 years since its incorporation, M Pty Ltd has continued to expand. It presently has some 153 full time employees. I take account of the fact that although the husband managed the business of M Pty Ltd, he did so with the assistance of Mr O and Mr C. However, it was the husband’s involvement in M Pty Ltd that brought the wealth it created to the relationship.
Financial contributions post-separation
After separation, the husband has paid almost all the expenses of the wife, including credit cards, utilities, repairs and maintenance to the Suburb H property, insurances, motor vehicle expense and telephone. As already pointed out the husband has paid partial property settlement amounts of $1,055,000, and $947,000 towards the wife’s legal fees, which have been treated as addbacks.
The wife has made cash withdrawals of $116,000 and $256,200.
(b) the contribution (other than a financial contribute on) made directly or indirectly by or on behalf of a party to the marriage to the acquisition, conservation or improvement of any of the property of the parties to the marriage or either of them
While there was no dispute that the husband made the overwhelming financial contributions through M Pty Ltd, by the same token there was no dispute the wife made the overwhelming contribution as a homemaker and primary carer of the children. The wife argued, and I accept, that her contribution as parent and homemaker freed the husband to pursue his work in managing and developing M Pty Ltd, to pursue investments and business interests, and thus contributed to the creation of the parties’ wealth. The father also argued that he made a real contribution to the care of the children from time to time.
(c) the contribution made by a party to the marriage to the welfare of the family constituted by the parties to the marriage and any children of the marriage, including any contribution made in the capacity of homemaker or parent
I repeat my comments at [359] above.
(d) the effect of any proposed order upon the earning capacity of either party to the marriage
The proposed orders will not affect the earning capacity of either party. The wife is 60 and has not worked for some 30 years. I accept the prospects of her obtaining employment, even if she wanted to, are extremely remote. On the other hand the husband will continue to enjoy his business interests and work in M Pty Ltd without any real alteration.
Assessment of contributions
The wife argued that the contributions should be assessed as equal. She argued that the husband laid too much emphasis on his financial contributions. I am unable to accept this submission. I accept that while the husband worked at developing M Pty Ltd, the wife made a considerable contribution in making a home, caring for the children and freeing the husband from many domestic responsibilities, notwithstanding that he undertook such responsibilities from time to time. But the standard of living of the family and the parties’ assets was built on the husband’s interest in and work in M Pty Ltd. The wife’s ability to make a home and care for the children was facilitated by the money the husband brought to the marriage.
Taking account of all the above considerations, I assess the wife’s contribution entitlement at 31 per cent, and the husband’s at 69 per cent.
I now turn to s 79(4)(e) and such of the s 75(2) factors as are relevant.
Section 75(2)
The Act requires me to take into account the matters referred to in s 75(2) of the Act, so far as they are relevant, when considering what orders should be made in these proceedings. The Full Court has made clear that any adjustment to the parties’ contribution-based entitlements by the application of factors prescribed by s 75(2) should be determined inclusively after considering all relevant factors; not by aggregating incremental adjustments in respect of each relevant factor: Tomasetti & Tomasetti (2000) FLC 93-023; [2000] FamCA 314 at [107]–[114]; Benson & Drury [2020] FamCAFC 303 at [36]. The relevant matters to be so taken into account on these facts are, as follows:
(a) the age and state of health of each of the parties;
The wife is 60 and the husband 59. Both are in reasonable health.
(b) the income, property and financial resources of each of the parties and the physical and mental capacity of each of them for appropriate gainful employment;
I have already spent considerable time setting out the assets and liabilities of the parties.
I return here first to the question of the value of Suburb L. I have accepted the valuation of Mr NN at $12,500,000 for the purpose of the balance sheet. However, the evidence satisfies me that I cannot ignore the possibility, or as Mr ZZ characterised it, the likelihood, of an increase in the price achievable, above $12,500,000 if Suburb L is sold in the future. I have reached this conclusion on the basis of the husband’s perceptions of the value of Suburb L in 2016, the contingent expression of some interest in the vicinity of $25,000,000 in 2016 and Mr NN’s acknowledgement that his value is likely to be less than the market value. While the husband did not concede the value is likely to be higher than $12,500,000, he agreed in submissions it would be no less, and there was some potential for a higher value. I consider it appropriate to take account of this in making adjustments under s 75(2) in favour of the wife. As discussed extensively already, I am unable to place a precise value on this potential and, in my view, authority does not require me to do so. I note here also that it was not argued there was there is likely to be a significant change in the financial circumstances by Suburb L being sold in the near future to make it reasonable to adjourn the proceedings under s 79(5) of the Act, a power which, as Gordon J pointed out in Tomaras at [61], is consistent with the dual objectives of finality and justice in Pt VIII of the Act.
Next, there is the husband’s undoubted likelihood of enjoying the plenitude of the very large asset holdings of the DIT and DT. It was common ground that these assets should be understood as a large financial resource of the husband. As already noted, Ms DD’s value for the assets of the DT was $5,452,230, and for the DIT was $6,162,430. The evidence establishes that the husband can expect to receive a large proportion, if not the bulk, of these assets in some form or another, but over his lifetime. The wife described this as “massive”. I agree. The wife enjoys nothing equivalent. It should, however, be made clear that the timing of any distributions to the husband is not clear and I take account of the possibility that other discretionary objects, within the extended family, may also receive distributions.
The husband will continue to enjoy significant value of his interest in M Pty Ltd, the income it brings him, and the capital gains and revenue from the Suburb L partnership. He will continue to generate income through his employment with M Pty Ltd, utilise his business interests for future investment and business ventures.
I am satisfied that the wife has no prospect of future gainful employment. While it was common ground she should receive the Suburb H property, her income will be derived from investing the money received under the Court orders.
The husband has substantial superannuation while the wife has none.
(d) commitments of each of the parties that are necessary to enable the party to support:
(i) himself or herself; and
(ii) a child or another person that the party has a duty to maintain;
I do not add anything under this head beyond what has already been said about the assets and liabilities of the parties.
(e) the responsibilities of either party to support any other person;
The wife gave evidence that she provides for the needs of her mother, who lives in a care home. She buys her food and washes her clothes.
(g) where the parties have separated or divorced, a standard of living that in all the circumstances is reasonable;
The parties clearly enjoyed an affluent standard of living during the marriage. There are sufficient assets available for this standard to be maintained through the orders of the Court.
(h) the extent to which the earning capacity of a party would increase by enabling that party to undertake a course of education or training or to establish himself or herself in a business or otherwise to obtain an adequate income;
Neither party proposes to undertake a course of education.
(j) the extent to which a party has contributed to the income, earning capacity, property and financial resources of the other party;
I do not add anything under this heading beyond what has already been said about the wife’s contribution to freeing the husband to develop M Pty Ltd and pursue investments.
(k) the duration of the marriage and the extent to which it has affected the earning capacity of a party;
The marriage was of some 27 years duration. As noted already, the wife devoted herself to her role as homemaker and primary carer of the children. She has been out of the work force for nearly 30 years. I am satisfied the length of the marriage has compromised the earning capacity of the wife.
(m) if either party is cohabiting with another person--the financial circumstances relating to the cohabitation;
The husband has commenced cohabitation with Ms CC. He pays her $2,500 per week in rent, and has lent her $416,000.
(o) any fact or circumstance which, in the opinion of the court, the justice of the case requires to be taken into account
It is necessary here to return to the Deed. I have already discussed this above at [230] -[255]. The husband argued that the cost to him of his obligation to pay one third of his share of the proceeds of sale of Suburb L was too large to ignore and a significant adjustment should be made in his favour to take account of it. He claimed it was certain he would make such a payment on the sale of Suburb L. I concluded the Deed imposes a moral or familial obligation on the husband to deal with the proceeds of sale of Suburb L as clause 2 of the Deed acknowledges, but not a legal obligation to do so. I considered the authorities concerning contingent liabilities above at [253]. The question for the purposes of s 79(4)(e) is whether a moral or familial obligation should be should be brought to account.
In the circumstances of this case on balance I am also unable to conclude to the moral or familial obligation acknowledged by clause 2 of the Deed is likely to result in the husband paying one-third of his share of the proceeds of sale of Suburb L to D Pty Ltd. I do not accept such a payment is certain. The family ties which clearly connect the husband’s interest in the Suburb L partnership and D Pty Ltd suggest that, if Suburb L is sold, the manner in which the husband’s share of the proceeds will be dealt with is just as likely to be determined at the time of settlement in discussion with Mr O. However, I note that the husband honoured clause 1 of the Deed. This is some indication that if Suburb L is sold, the husband may similarly make payment in accordance with clause 2 of the Deed. But, as already pointed out, clause 1 acknowledged an existing debt, and even so, the largesse received by the husband from D Pty Ltd as trustee suggests if he made such a payment, the benefit of it may possibly ultimately return him indirectly from a trust distribution. Accordingly, I am not satisfied any adjustment should be made in the husband’s favour by reason of clause 2 of the Deed.
I also take account of the possible tax or other costs of realisation of unspecified assets, possibly falling on the husband, as discussed above at [322]. I accept the husband is likely to be required to sell assets to meet the obligations of the Court’s orders.
Assessment of section 75(2) factors
The wife submitted that the Court would attribute an adjustment to the wife for s 75(2) factors so as to give her overall 60 per cent of the matrimonial pool. On my assessment of contributions, this would require an adjustment for s 75(2) factors of 29 per cent. The husband submitted that the wife would be entitled to 42.5 per cent of the pool, requiring an adjustment of 11.5 per cent.
However, on weighing the relevant factors, while I do not consider 27 per cent is warranted, I am satisfied the wife should receive a significant adjustment of 22 per cent in her favour. While I have carefully weighed all the s 75(2) factors that I have referred to, the wife’s age, likely difficulty in obtaining paid employment, lack of superannuation, the needs of her mother and the considerable financial resources of the husband, particularly the potential from an increase in the value of Suburb L and the assets of the DIT and DT which do not appear on the balance sheet, discussed in detail in these reasons, combine to satisfy that an adjustment of this size is just and equitable. In reaching the percentage adjustment of 22 per cent, I have given careful consideration to the husband’s likely liabilities for tax. Accordingly, the assets of the parties will be divided 53 per cent to the applicant and 47 per cent to the respondent.
As is well established in relation to s 75(2) adjustments, the real impact or value of the adjustment in money terms is ultimately the critical issue, not its expression as a fraction or percentage of the overall assets Clauson & Clauson (1995) FLC 92-595; [1995] FamCA 10 at 81,911; Adair & Adair [2019] FamCAFC 70 -at [66]; Simons & Simons [2020] FamCAFC 128 at [18].
I have determined the net value of the property owned by the parties is $39,498,845, inclusive of superannuation and addbacks. On the basis of a 53/47 per cent division, the wife would be entitled to receive assets with a value of $20,934,388 and the husband assets with a value of $18,564,457.
There was no dispute the wife should receive the Suburb H property outright and unencumbered, nor that she should transfer to the husband her 10 per cent interest in J Investments. In addition there was no dispute the wife should retain some cash at bank, personal effects, jewellery and a motor vehicle. Consequently, in addition the wife requires a payment of $12,802,462 from the husband to receive her entitlement.
On a 53/47 percentage division, with the wife to receive Suburb H and the husband a further 10 per cent of J Investments, the applicant and respondent will have the assets and liabilities, as set out in the below table.
Assets and liabilities to be retained by the applicant
Value ($)
G Street, Suburb H
$6,000,000
CBA #...95
$72,261
Personal Effects
$17,815
Jewellery
$19,850
Mercedes
$20,000
Subtotal
$6,129,926
Addbacks
$2,002,000
Subtotal
$8,131,926
Payment from Husband
$12,802,462
Total:
$20,934,388
Assets and liabilities to be retained by the respondent
Value ($)
Interest in J Investments Pty Ltd $371,024 X Street $3,750,000 Suburb L Partnership $4,954,567 M Pty Ltd $13,401,840 W Pty Ltd $50 V Pty Ltd $50 CBA #...77 $179,713 CBA #...17 $61,811 Term Deposit #...02 $4,819,002 Term Deposit #...11 $394,321 Barkus Doolan Trust Acct $265,666 V Family Trust $326,654 J Investments Loan Acct $566 Loan to DT $576,000 Boat $480,000 Loan to Ms CC $416,000 Personal Effects $14,315 Surfboards $1,400 Jewellery $12,407 Sports motor vehicle $45,000 Motorcycles $8,000 Shares, listed $81,145 Shares, unlisted $100,000 Loan to friend $40,000 Jetski $2,000 Subtotal $30,301,531 Addbacks $517,934 M Executive Superannuation $2,142,122 Subtotal $2,660,056 Total Assets $32,961,587 Less Liabilities -$1,594,668 Subtotal $31,366,919 Payment to the wife -$12,802,462 Total Assets after Adjustment $18,564,457
Is the Outcome just and equitable?
The court must not make an order under s 79 unless it is satisfied that, in all the circumstances, it is just and equitable to make the order.
The Full Court of the Family Court of Australia in Manolis & Manolis (No 2) [2011] FamCAFC 105 considered the relevant provisions of the Act in relation to this fourth step. At paragraphs [65] and [66] the Full Court made the following observations, which I adopt and follow:
It can be seen that power to make orders in regard to property is not exhausted after the third step. It is not until orders are made that the power is exhausted. The exercise of power pursuant to s 79 of the Act remains subject to the overarching requirement of justice and equity imposed by s 79(2) until it is exhausted…
… The section does however oblige the court to “stand back” from its preliminary determination, and consider its impact. So doing may inform the terms of the orders appropriate to produce a just and equitable outcome in those terms. It may result in a re-consideration of s 79(4) and or s 75(2) factors, and a different outcome. Whatever the scope of s 79(2), the court’s determination with respect to it cannot be dependent upon findings or conclusions which are irreconcilable with those recorded in the context of a consideration of s 79(4) or s 75(2)…
The High Court of Australia in Stanford (supra) commented at [36] on the meaning of “just and equitable” as follows:
The expression “just and equitable” is a qualitative description of a conclusion reached after examination of a range of potentially competing considerations. It does not admit of exhaustive definition. It is not possible to chart its metes and bounds.
I also take account of the caution expressed in Stanford (supra) at [40] that to conclude that making an order is "just and equitable" only “because of and by reference to various matters in s 79(4), without a separate consideration of s 79(2), would be to conflate the statutory requirements and ignore the principles laid down by the Act”.
I am satisfied the proposed outcome is just and equitable. The marriage was long. I accept the husband will shoulder the burden of ongoing liabilities and costs of realisation of assets, some of which are presently unknown but will be substantial. But the husband’s likely enjoyment of the plenitude of the DIT and the DT, the potential of Suburb L, his retention of his business interests, and sources of significant revenue and potential for investment, as well as his substantial superannuation, far exceed the resources of the wife who has no superannuation or earning capacity at the age of 60 years. While the husband made the overwhelming financial contributions during and after the marriage, the wife’s non-financial contributions have also been significant. The proposed outcome will see the wife have a home to live in and substantial financial resources to allow significant investment and to generate a future level of income consistent with the parties’ standard of living during the marriage, while the husband will continue to enjoy access to substantial wealth, supporting his standard of living.
Since the husband may need time to take the necessary steps to effect a payment of $12,802,462, I consider it reasonable to permit payment to be made in two tranches, the first of $9,000,000 within 45 days, and the balances within 90 days of the date of the Court’s orders. Although I have declined to make orders under Part VIIIAA, some security for this payment should be ordered by restraining the husband from dealing with two term deposits except for the purposes of complying with the Court’s orders, and until he does so. I accept this of itself does not fully secure the adjustment in favour of the wife, but my findings about the assets of financial resources of the husband show in the event the husband defaults, which I consider unlikely, there will be ample assets available to enforce payment to the wife, if necessary.
I will also make orders for the husband to collect his personal property from the Suburb H property.
Costs
Section 117 of the Act sets out that each party shall bear his or her own costs, subject to the considerations in s 117(2) of the Act.
Any order for costs must also be determined in light of the substantive judgment and the relative success or failure of the parties. This is something that can only be addressed after judgment has been delivered.
The Court proposes to make the orders and directions in relation to any application for costs that might be made as set forth in the orders at the commencement of these reasons.
I certify that the preceding three hundred and ninety eight (398) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Harper delivered on 14 May 2021.
Associate:
Date: 14 May 2021
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