DUDLEY & DUDLEY
[2009] FamCA 1064
•2 November 2009
FAMILY COURT OF AUSTRALIA
| DUDLEY & DUDLEY | [2009] FamCA 1064 |
| FAMILY LAW – PROPERTY – Application for financial orders – Husband no longer working as a professional after being diagnosed with depressive disorder – Where husband is in receipt of disability insurance payments – Where the wife argues entitlement to a percentage of the insurance payments – Contributions by the parties during the marriage – Superannuation entitlements – Add back considerations – Whether the legal fees of the husband and wife ought be added back – s.75(2) factors – Adjustments made in favour of the wife where husband has greater earning capacity – Matter adjourned to a later date – Where final orders to be made pending consent or further submissions | |
| Family Law Act 1975 (Cth) | |
| DJM v VJLM (1998) FLC 92 816 |
| APPLICANT: | Ms Dudley |
| RESPONDENT: | Mr Dudley |
| FILE NUMBER: | BRC | 12821 | of | 2007 |
| DATE DELIVERED: | 2 November 2009 |
| PLACE DELIVERED: | Brisbane |
| PLACE HEARD: | Brisbane |
| JUDGMENT OF: | Barry J |
| HEARING DATE: | 16 - 18 September 2008 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr Hamwood of Counsel appeared for the Applicant Wife |
| SOLICITORS FOR THE APPLICANT: | Dixie Ann Middleton & Associates |
| COUNSEL FOR THE RESPONDENT: | Mr Baston of Counsel appeared for the Respondent Husband |
| SOLICITORS FOR THE RESPONDENT: | Nita Stratton-Funk & Associates |
Orders
The proceedings be adjourned to 9.30 am on 2 December 2009 at the Brisbane Registry of the Family Court for further submissions on costs and the issuing of final orders in accordance with these reasons.
IT IS NOTED that publication of this judgment under the pseudonym Dudley & Dudley is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth)
| FAMILY COURT OF AUSTRALIA AT BRISBANE |
FILE NUMBER: BRC 12821 of 2007
| MS DUDLEY |
Applicant
And
| MR DUDLEY |
Respondent
REASONS FOR JUDGMENT
History
Background
The application before the Court is for final financial orders filed by the Wife on 6 November 2007.
The Wife seeks that the property of the parties be divided 65%/35% in her favour. The Husband initially proposed the property be divided 60%/40% in his favour but his Counsel indicated at the commencement of the hearing the Husband would accept an equal division of the assets.
Minutes of orders were lodged by the respective legal representatives. There is not a great deal of uniformity in the two drafts although each is quite detailed as to the orders required to unwind the parties’ complex corporate arrangements.
Marital History
The parties were married in 1975. The Husband, born in October 1952, and the Wife in February 1953, are aged 57 and 56 respectively at the present time. The parties separated in December 2006, making the length of the marriage approximately 32 years. The parties are now divorced however for the sake of convenience I will continue to refer to them as the Husband and Wife respectively.
There are four children of the marriage, the youngest of whom, M, born in 1987, at the time of the hearing remained partially financially dependent upon the Wife.
At the time of the marriage neither the Husband nor the Wife had completed their tertiary education. The Husband was undertaking a professional degree and the Wife, on completion of a Bachelor of Arts, was completing a post graduate Diploma. At this time, and for approximately the next two years, the parties lived rent free in a flat owed by the Wife’s father.
On completion of their qualifications in November 1976, the parties moved to Townsville for a year. At this time the Wife commenced work as a librarian – a position she held for two years before joining the Husband in T where he had been posted in 1978.
In 1980 the parties utilised a $10,000 loan from the Wife’s parents to purchase a property in Brisbane. This house was never occupied by the parties, but was sold to fund the purchase of another residence upon their relocation to Melbourne. Such relocation was necessary to allow the Husband to complete his qualifications.
The Husband began to practice his profession in 1986 from a suburban practice in Melbourne. The practice had been run down and considerable work went into its renovation by the parties. In the first year the practice was open, the Wife undertook its administration.
The parties relocated to regional Victoria in early 1990, selling the home and handing over the practice in Melbourne to purchase both a new home and practice in country Victoria.
The new practice also required renovation, and the Wife’s evidence that she was responsible for management of the renovations in the practice was not challenged.
During this time the Husband consulted with taxation specialists to establish structures that resulted in the creation of multiple trusts and companies. The Husband deposes in paragraph 25 of his affidavit sworn 15 May 2008 that by the time of separation the number of entities that had been accumulated totalled approximately six trusts and nine companies. The self-managed superannuation funds were established later in the same decade. In April 2002 the Husband was removed (by the Wife) as director of most of the companies, with the shares transferred to the children or herself. The Wife says she did so with the Husband’s knowledge in response to professional indemnity concerns.
I have no reason to doubt the Wife’s evidence in this regard. There was certainly nothing sinister in the transfer of the assets other than to protect the Husband in the event of a claim for professional negligence which may not be covered by his professional indemnity insurers. It was a common enough practice at the time.
In 1994 the parties again relocated, selling the properties in regional Victoria to allow the Husband to commence practice in northern Queensland.
Final separation occurred in December 1996 although there had been difficulties in the relationship for some years prior to that date. At the time of separation the Wife was principally living in Brisbane and the Husband continued to operate his practice in northern Queensland.
On 4 June 2007 the Husband, after being diagnosed with major depressive disorder, ceased practicing and thereafter received payouts as a result of his disability insurance cover with AMP. At the time of the hearing he was receiving $14,003 per month which was indexed. He will continue to receive such payments until the age of 60, thereafter the monthly payments reduce to a little over $9,000 per month.
Property Transactions since relocation to Northern Queensland
A family home was purchased at P Street by K Holdings Pty Ltd (trustee of the Dudley Unit Trust), and was renovated by both the parties. This property was sold after separation in March 2008, with net proceeds of $152,885.
A Unit in B Street was purchased by the Dudley Family Trust in July 2002. This property was used as a base for the children of the marriage throughout their university education and by the Wife before and after separation. This property was sold with the consent of both parties as set out in the Husband’s affidavit filed after the conclusion of the hearing in this matter. This development necessitates some further adjustments to the joint balance sheet other than those aspects already in issue.
A residence was purchased in N by the Dudley Property Trust in November 2003. This property subdivided by the Wife, with restoration undertaken by the parties was on-sold for a net capital gain of approximately $100,000 in October 2007.
A storage facility in G Street was purchased by the Dudley Superannuation Fund in September 2004. As I understand the position this property is still held and is to be retained by the Husband.
Three units at W Street were purchased in October 2005. Two of these units were renovated by the Wife and their son S and the third was renovated by the Husband and Wife. These units were sold in November and January of 2008 realising a capital gain of approximately $200,000.
The O property, the property the centre of the dispute in these proceedings was purchased by the L Trust in about September 2005. It was purchased with the intention of redevelopment initially as a wine bar/restaurant/nightclub (wine bar). There is contention between the parties regarding the renovations that did take place that I will deal with later in these reasons. At the present time the property is leased as office space.
In 2006 the Wife sought to purchase a property at H. The Husband did not agree to the acquisition and consequently the Wife’s father contracted to purchase the property, with the deposit paid by the Wife out of the Dudley Property Trust. These monies were repaid into the Trust approximately two months later. I accept the Husband’s account of events surrounding the dealings with the H property as set out in paragraphs 40 to 42 of his affidavit sworn 15 May 2008. I find the Wife’s account in relation to her dealings with the H property unconvincing.
Contributions
The initial contributions by each of the parties was of a minor nature and may be safely ignored having regard to the lengthy period of the relationship
Counsel for the Wife submitted the contributions to the date of hearing should be treated as equal. I do not recall any challenge to this proposition by the Husband’s Counsel.
I am prepared to find that the contributions pursuant to section 79 factors should be treated as equal.
In terms of salary contribution, the Wife worked full time for a total of two years during the marriage. She also received a salary from the Dudley Service Trust of $70,000 gross per annum up until October 2007. The Husband was undoubtedly the principal income earner in the marriage, working full time up until 4 June 2007.
The Husband accepts the Wife undertook the administration side of the Dudley Group and the professional practice. Further she was the primary carer for the children, and carried out the role of homemaker. The parties jointly undertook renovations during the marriage, and participated to some extent in the extra-curricular activities of the children.
Future Financial Prospects
The Husband will continue to receive payments under his AMP disability insurance at the current rate until such a time as he is able to work again or he turns 60, whichever is the earlier. It may be anticipated that if he does regain health he will receive a salary of approximately $200,000 a year until retirement. Dr F his treating psychiatrist opined the longer a professional practitioner remained out of practice the more difficult it would be to re-establish a successful private practice. I accept the force of this evidence.
The report of Dr C confirms the Wife suffers from chronic rheumatoid arthritis which significantly limits her prospects for work. She is currently employed at a school in Brisbane receiving $38,500.00 gross per annum. She also has a share portfolio that at the time of trial yielded dividends of approximately $5,798.00 per annum. If, as she contends, she retains the property at O she is also likely to have a gross rental income of $72,115.00 per annum. Although the Husband was initially opposed to the Wife acquiring the O property through the superannuation fund by the end of the hearing this option was not opposed.
Joint Balance Sheet
Exhibit 1 of the proceedings is the joint balance sheet prepared by the legal representatives. Many of the items in the balance sheet were the subject of agreement.
Item 1
Value of [Dudley] Pty Ltd
Wife’s value $6,524
Husband’s value $ 7,874
Husband’s value agreed
Item 2
[DE] Pty Ltd
Wife’s value $69,430
Husband’s value $72,038
Husband’s value agreed
Item 3
[X Holdings] Pty Ltd $ 0.00
Item 4
As previously noted in late 2008 or early 2009 the B Street unit was sold by the Husband for the sum of $620,000. In the joint balance sheet it had been valued at $575,000 with no regard to selling costs or capital gains tax.
Neither party sought to reopen the evidence as a result of this development nor did I find it necessary to do so despite an invitation to that effect from the legal practitioners, if I deemed it appropriate.
In relation to this fresh evidence I make the following calculations based on the unchallenged affidavit of the Husband filed 16 December 2008:
Sale price $620,000
Less commission $ 15,950
Legal fees $ 1,500
Capital gains tax $ 48,584
Total expenses/costs of sale $ 66,034
Net amount receivable $553,966
In the correspondence produced to the Court there did not seem to be agreement between the practitioners as to whether the net proceeds of sale should be held in the Husband’s solicitor’s trust account or whether it was to be paid to the bank in reduction of the significant liability the Husband had. I expect the settlement would not have taken place unless the bank’s wishes in this regard prevailed. Whether this assumption be accurate or not is not greatly relevant as I propose to bring into account the value of the B Street unit at a substituted figure of $553,966.
There is no evidence that the parties were intending to liquidate any other properties and accordingly no allowance has been made by me for estimated selling costs or taxation liabilities.
The parties were represented by experienced legal practitioners and I am confident that these aspects would have been addressed had they been a relevant issue.
When belatedly delivering these reasons I propose to call for any further submissions on the calculations I have made. If the Husband has lodged the relevant tax return for the Trust for the financial year ending June 2008 the actual amount of capital gains tax paid may be inserted into the equation.
It is appropriate to note at this point in time that whilst these reasons have been inexcusably late in being delivered I place on record that all observations on the evidence were recorded by me at the time and I have been able to refresh my memory from the detailed notes dictated at the time of or shortly after the hearing.
Item 9
In the course of the submissions Counsel for the Husband conceded it was appropriate to adopt the figure contended for by the Wife namely $19,100. However Counsel for the Wife argued the Court should adopt the figure of $28,000 being the amount the Husband in the course of cross examination said was the present balance in the account.
The Husband’s evidence on this aspect as to the balance in his operating account was to the effect:
“The last time I looked - -”
Neither side sought to tender the Husband’s current bank statements. As with any account I expect the balance would fluctuate during the course of a month with a high after the receipt of the AMP payment of $14,000 to a low immediately prior to the next payment.
The figures adopted by a Court reflects a snapshot taken at a given moment in time. In the joint balance sheet the Wife accepts the balance was $19,100. I am not prepared to accede to the submission of the Wife’s Counsel to increase this amount to $28,000 in the absence of the production of documents evidencing the general pattern of movements in the account.
Item 10
The Wife contended for the sum of $28,140. The Husband said this amount was included in the plant and equipment valuation for DE Pty Ltd as noted in item 2. This amount revealed a plant and equipment value at $98,795. I have had regard to the affidavit of Mr U who valued the Wife’s assets at the H residence together with the Wife’s motor vehicle and in addition valued assets described as redundant business assets and personal assets inspected at P Street and G Street.
I make the following observations. The valuation values the Wife’s vehicle at $15,500. In the joint balance sheet it is shown as $15,000.
In the absence of any submissions on the subject I propose to adopt the figure of $15,000.
The valuation of Mr U reveals a large array of items at the P Street and G Street properties. I have not sought to tabulate the numerous items as they are not identified as being owned by a company, a superannuation fund, the professional practice or by the parties individually. The items valued include equipment, motor vehicles, a boat valued at $4,500, a wine collection, furniture, paintings, garden equipment and the like.
In the absence of better evidence I am unable to make a finding but it appears to have been an aspect overlooked by the legal practitioners in the course of final submissions. I will hear submissions and/or additional evidence on this issue at a date to be fixed after the delivery of these reasons if the parties cannot otherwise agree between themselves.
I have a recollection the amount may have been conceded by Counsel for the Husband. I have also recorded an amount by my own notation on the joint balance sheet that the figure was to be substituted with a figure of $4,500 being the value of the boat which had been overlooked as a chattel item.
For present purposes I will allow the figure to remain at $28,150 based on my assumption that this figure was conceded by the Husband’s Counsel.
Items 20 and 32 – the E property
After separation the Husband relocated to Brisbane and acquired a property at E. This property has been valued at $742,200. The borrowings made by the Husband from his bank included funds for the acquisition of this property but also included an amount expended on legals ($30,000) together with the expenditure of considerable sums of money for a tractor and other equipment to be used on the property.
I propose not to have regard to this property either as an asset or as a liability.
In the fullness of time it may prove to have been a wise investment or a foolish one on the part of the Husband but it is one for which the Husband should accept sole responsibility.
The Wife did not contend otherwise.
Item 21 – Notional addbacks – Wife’s legal costs
The Wife’s legal fees paid to date total $103,175. It was conceded that I would not take into account $20,000 advanced to the Wife by her sister as this sum was used to pay the legal fees and had a corresponding liability. The evidence would indicate apart from this borrowing the Wife has paid her legals from the sale of assets to which reference has been made in the recital of the sale of assets post-separation early in this judgment.
In the circumstances I will bring into account the amount of $83,157 as an addback attributable to the Wife’s legal expenses.
Item 22 – Notional addback – Husband’s legal expenses
The legal expenses paid by the Husband total $90,104. The Husband’s legal fees as I noted were paid by a drawing of $30,000 from his line of credit which would have increased the liability to the bank. Although I have disregarded this as a liability, it falls in the same category as the Wife’s borrowing from her sister. In the circumstances I will disregard this amount as a notional addback as it is matched by an equivalent liability.
The balance of the fees paid (total $60,104) have been paid from the monthly income received from AMP.
It is not entirely clear how the figure of $91,104 was arrived at.
Exhibit 2 was the summary of the total amount of costs and outlays of the Husband. The payments appear to total $89,930. The difference is not significant. What is significant is whether the sum of $60,104 should be treated as an addback.In the decision of the Full Court (Baker, Kay and Morgan JJ) in DJM v VJLM (1998) FLC 92 816 at 85262 the Court noted:
“For reasons set out in Farnell section 117 provides that each party to proceedings under the Family Law Act shall bear their own costs unless the Court otherwise orders. Failing to add back monies expended by the parties on costs frequently has the effect of defeating the policy of section 117 by permitting the pool of available assets for distribution between the parties to be diminished by any monies that either of the parties have managed to spend on their costs up to the date of trial. We are of the view that the normal approach ought to be to add costs already paid back into the pool. Whilst there may be cases where that approach is inappropriate the reasons why it is not taken ought normally be spelt out.”
In a more recent determination by the Full Court (Finn, Kay and May JJ) in Chorn v Hopkins (2004) FLC 93 204 a review of the case law on this subject was undertaken. At paragraph 41 the Court noted:
“This decision is noted with reference to the earlier decision of Farnell this decision is not of particular assistance because it is unclear whether the funds already expended by the parties on legal fees were joint funds. It does however appear to support the proposition that post-separation borrowings to fund legal expenses should not be taken into account as a liability in calculating the net property of the parties.”
In discussing the decision of the Full Court in the matter of Marker (1998) FamCA 42, 1 May 1998, per Baker, Kay and Chisholm JJ the Full Court noted:
“43 We read the Full Court as here approving the adding back as a notional asset of monies in existence at separation which have subsequently been used to pa y legal costs, although the Court cautioned against the adding back the use of such monies for reasonable living expenses.
45.It is important in our view when considering what was said by
the Full Court in DJM concerning the adding back of legal fees, to
bear in mind that the fees in question in that case had been paid for
with funds which the Husband had been ordered to release to the
Wife to enable her to prosecute the proceedings. The
characterisation of the released funds had apparently been left to
the trial Judge. In those circumstances it could be expected that the
fees would be added back.
49. This decision (Farnell) establishes that in determining whether or not paid legal fees should in the exercise of the discretion be added back into the asset pool it is necessary to consider when and how the funds used to pay the fees have been accumulated.”
The head note in the decision of Chorn v Hopkins reads in paragraph 4:
“4. If the funds used to pay legal fees existed at separation and were such that both parties could be seen as having an interest in them then such funds were to be addedback as a notional asset of the party who was to have the benefit of it.
5. If the funds used to pay legal fees had been generated by a party post-separation from his or her own endeavours or received in his or her own right they would generally not be added back as a notional asset; nor would any borrowing undertaken by a party post-separation to pay legal fees be taken into account as a liability in the calculation of the net property of the parties.”
The Husband as noted receives $14,000 per month but as I understand the evidence he is required to pay taxation on this sum. If he had been using income surplus to his monthly needs to pay off his indebtedness to the bank this would not be taken into account as I have determined I will ignore this after acquired asset both as an asset and a liability.
It does seem somewhat unfair that the Wife’s legal fees of $83,000 are taken into account whilst the Husband’s legal fees in the amount of $60,000 are not, but the payment of the fees arises from completely different sources.
Conversely if the Husband had been banking the surplus funds instead of using the funds to reduce his indebtedness to the bank then under the approach taken by the parties (refer items 8 and 9 of the joint balance sheet) such monies would have been brought into account as an asset.
I note that the Husband’s solicitors in the joint balance sheet had allowed for $30,000 as being an amount that should be included as an addback. This appears to have been as a result of a mistaken apprehension it was a capital payment with no matching liability.
I propose to allow $30,000 as a notional addback being an after tax amount the Husband could have had in his account but for the payment of his fees.
As a general rule if a party has tightened his or her belt by making sacrifices in other areas to pay legal fees I would not include such payments as an asset but where the Husband was receiving a significant income it is appropriate some allowance be made by way of an addback.
Item 23 - $179,602 – “Amount overspent by Wife on [O] property”
This was the most contentious issue not only from a monetary point of view but also from the approach to it taken by the parties.
The Court had to deal with evidence of a number of experts reviewing the redevelopment renovations.
I am prepared to find that after the O property was acquired the Wife and some of her children planned to develop the premises as a wine bar. They further planned to operate the business as a family enterprise providing employment and presumably income for the family.
The quote for this development was in the order $1 million. The Wife says she kept the Husband informed of developments in regard to the project. The Husband says he does not specifically recall being given documents from the Wife’s file when she visited northern Queensland.
The premises could have been renovated for lease as office premises for about $164,000. The Husband says there was an over expenditure in the sum of $179,000 in work carried out for the wine bar option.
I accept the Husband was panicking at the outflow of funds on this development. He was aware that the Wife was selling properties and using the funds to pay for the redevelopment.
On 18 September the Husband gave brief evidence on the issue of the extent of his knowledge of matters. He said:
“On the occasion that she is referring to we had had a very difficult time trying to have communication to find a way to negotiate a settlement, to proceed with the divorce in an orderly fashion. She had been spending large amounts of money with no reference to me and selling properties with no reference to me with regards to the settlement details and I was very unhappy about the probity of the financial arrangements and I was obviously very distressed about the whole process and could see a very large hole being opened up before me that I was largely responsible for and I discussed the issue with my solicitor, I discussed the issue with commercial solicitors who I use and they have looked at the whole process and what we had – well sorry I had been propelled by finding out that I had no control over most of the companies or most of the assets and she was going to do what she liked - -”
I find it likely the Wife intended to proceed with the wine bar development notwithstanding the quote given by her brother-in-law. The architect’s plans had been drawn with a project such as this in mind. It was primarily as a result of town planning issues linked with strenuous objections by neighbouring property owners and suggestions the development may be in conflict with heritage listing proposals that ultimately led to the plan to adopt option B, namely the cheaper more cost effective option of redevelopment as office space.
Counsel for the Wife argued the Husband’s Counsel could not demonstrate any loss to the parties. O property was purchased for $550,000. Its agreed value at trial was $910,000 a difference of $360,000. The estimates of work done as actual expenditure varied between $328,000 and $344,000. However this submission makes no allowance for what would be expected to be the increase in value in the period September 2005 to April 2008 with the steep increases in values attributable to the property market over that period in South East Queensland. I accept some of the renovation work which was done may have added value on a resale depending on the plans of the potential purchaser but I am unable to quantify same.
The sum of $179,000 was calculated on the Husband’s evidence, as follows:
Standard office conversion $164,000
Actual costs $344,000
Value for office upgrade conversion $290,772
Additional work solely attributable to wine bar $ 53,438
$344,000
Value of current office upgrade $290,772
Value of standard office conversion excess payment $126,164
Additional renovations attributable solely to wine bar $ 53,438
Additional costs $126,164
Extra work attributable solely to wine bar $ 53,438
Total $179,602
At paragraphs 53 to 60 of his trial affidavit the Husband sets out his account of the events surrounding the redevelopment of the O premises. By and large I found this account more reliable than that given by the Wife.
However, Counsel for the Husband was not prepared to categorise his argument for the notional adjustment of $179,000 as falling under the principle enunciated in the well known decision of Kowaliw (1981) FLC 91-092 a decision of Baker J.
I accept the submission by Counsel for the Wife – that there is no basis for a finding of bad faith on the part of his client in her somewhat entrepreneurial plans for the wine bar development. There is no evidence of negligence or recklessness to bring it into a category where it could be said the expenditure constituted a wasting of assets for which the Wife should bear sole responsibility. I expect the Husband was not included in all discussions but when he did become aware of various actions taken by the Wife he did voice his disapproval by means of solicitors letters. I expect because of his depression the Husband was wanting to avoid conflict at all costs.
Had the wine bar development gone ahead and been successful (a somewhat rosy scenario) I am confident the Husband would have expected an entitlement to the profit/capital gain. It is not sufficient for the money to be expended over the opposition of the Husband to bring the facts within the principles enunciated in Kowaliw. At law the parties had agreed to the Wife having control of the entities and the assets. She had overly optimistic plans of operating a business with her children which would bring in independent income for her but that is a far cry from holding her solely responsible for additional costs incurred. The Wife’s conduct could not be classified as a course of conduct designed to reduce or minimise the effective value or worth of matrimonial assets. At all times her aim was to maximise profits or returns on the investment but the wine bar option proved overly optimistic resulting in some over expenditure.
As a matter of record on balance I preferred the evidence of Mr BR to that of Mr OW in the various disputes as to the costings but for the reasons given I do not propose to treat the amount of $179,000 as an add back.
Liabilities
Item 23A – Visa Card
The Wife contends for $8,875, the Husband says $8,698 – a difference of $173.00.
I propose to adopt the Husband’s figure but the amount involved is insignificant.
Husband’s Amex Credit Card
The Wife contended for an indebtedness of $5,611, the Husband against interest claimed nil liability. It was agreed that the figure of $5,611 would be adopted.
ANZ Mastercard Credit Card – Husband as at 4 September 2008
The Wife contended for nil balance, the Husband for $9,222.
It is likely that the expenditure on this card was for items spent by the Husband post-separation. The Husband has to show some basis how the debt incurred was related to the assets of the parties. On my understanding the Husband has not particularlised the dates or the items expended on this credit card to justify its inclusion as a genuine liability other than as set out in sub-paragraph (b) under the heading “Liabilities” in his trial affidavit. He does not particularise the nature of the loan dating back as far as June 2006.
Item 26 – Amex Loan used for various matrimonial and business expenses
Wife’s value $32,354
Husband’s value $32,354
Agreed.
Item 27 – Husband’s debt to Dudley Pty Ltd
Wife’s value nil
Husband’s value nil
As per financial statements dated 30 June 2008 for Dudley Pty Ltd – agreed.
Item 28 – Dudley Pty Ltd
Wife’s value nil
Husband’s value $33,000
This amount as I understand it was already included in the Husband’s indebtedness in the sum of $811,000 to the bank which has not been taken into consideration for the reasons given previously. On my recollection this payment was the deposit on the E property. I will disregard this amount.
Item 28A – ANZ loan – margin loan re: shares, Wife as at 11 September 2008
Wife’s value $143,385
Husband’s value $143,385
Agreed.
Item 29 – Husband’s tax payable 2008
Wife’s value $10,260
Husband’s value $10,260
Item 30 – Net tax liability for the children for the 2008 year
Wife’s value $4,091.87
Husband’s value $4,092
Per accountant’s estimate – agreed.
For reasons soon to be given I propose to omit this liability from the calculations.
Item 31 – Estimated wind up costs of entities, as per accountant’s estimate
Wife’s value $14,500
Husband’s value $14,500
For reasons soon to be given I propose to omit this liability from the calculations.
Item 32 - Current mortgage on E property
Wife’s value nil
Husband’s value $811,153
Not agreed – after separation acquisition.
Item 33 – Outstanding accountants fees
The Wife contended the liability was $45,500. The Husband contended $27,500. I propose to simply take this liability out of the equation and order the parties to pay equally any liability to their accountant.
Item 34 – Wife’s debt to her sister for legal fees and rent
I have already indicated I was prepared to accept the genuineness of the debt of $20,000 as an advance to the Wife to assist with her legal fees. The balance of $35,000 is said to be rent monies advanced to pay the rent on the H property. There are strong grounds for suspecting that the original plan was for the Wife to purchase the H property but was later advised that if she did so it may be taken into account as an asset. There was a hasty restructuring of the financial arrangements. The Wife was in receipt of income. I fail to see why living expenses such as rental income should be brought into account as a liability. Her sons were residing with her. There is no indication why they could not have assisted in contributing to rental payments. She had access to funds from the sale of properties which were used for some expenditure of a personal nature. I not propose to bring the liability to the Wife’s sister into account as it constitutes living expenses apart from the $20,000 expended on legal fees.
Superannuation
Item 35 – AMP as at 11 September 2008 (W)
Wife’s value nil
Husband’s value nil
Agreed.
Item 36 –Husband’s entitlement to Dudley Superannuation Fund
Wife’s value $ 947,282
Husband’s value $1,018,966
I was informed that the figure given by the Husband of $1,018,966 was the agreed figure.
Item 37- Wife’s entitlement to Dudley Superannuation Fund
Wife’s value $316,102
Husband’s value $340,018
I have no recollection of any submissions as to which figure is the correct figure to be adopted but for reasons set out later I have adopted the Husband’s figures.
financial Resources
Counsel for the Husband argued that there should be a notional capitalisation of the Husband’s entitlement pursuant to the disability payments that he currently receives. This submission appears to run counter to item 35 of the joint balance sheet.
He argued that the Husband’s entitlement pursuant to the insurance policy was a chose in action and accordingly should be treated as property.
There was no evidence led valuing this policy on an actuarial basis.
The submission by the Wife’s Counsel overlooks the fact that the chose in action is limited to a right to claim the next month’s payment, not a right to insist the insurance company makes any form of lump sum payment to cover the year or years ahead.
It also overlooks the obvious that if the Court was to accede to the submission and capitalise the value, it may well be that Dr V or some other medical specialist engaged by the insurance company would find the Husband has recovered sufficiently to allow an early return to work.
It is quite possible that with the cessation of these proceedings the Husband could make a rapid recovery from the depression he has suffered since shortly after the time of the separation.
Adjustment Pursuant To Section 75(2)
As noted the Wife seeks an adjustment of 15% in her favour on account of section 75(2) factors. The principal reason advanced is the Husband’s greater income stream whether derived from the disability pension or to be derived in the event he returns to professional practice.
At the time of hearing the Husband’s current income was $168,000 gross a year. He estimated he would pay tax of approximately $4,000 a month or $48,000 a year on this income. I am prepared to accept that as a reasonable estimate.
The Wife has an income of $38,500 from her employment. She had at the time of the hearing income by way of dividends from shareholdings but I expect with the downturn in the share market such income may be disregarded.
It is common ground that the Wife will receive the O property which is held as part of the superannuation assets. This will give a tax benefit to the Wife. So far as the income stream is concerned there is no liability attaching to this asset which would result in a heavy interest component as is common in many similar forms of investments. The Wife will have certain overheads common to lessees of business premises but I anticipate she would receive a reasonable income from the gross receipts of approximately $72,000 a year.
I am prepared to find that the Wife has an entrepreneurial manner which would provide for the potential to engage in successful money making ventures in the future.
In her affidavit material the Wife takes full credit for significant capital gains realised on the acquisition and subsequent sale of various investments.
I propose to allow an adjustment of 10% in the Wife’s favour based primarily on the Husband’s higher earning capacity. The Wife had sought a 15% adjustment in her favour whilst the Husband argued for no adjustment.
Calculations
Assets
Reference to item number is to the joint balance sheet (exhibit 1)
Item 1 $ 7,874
Item 2 $ 72,038
Item 3 $ 553,966
Item 4
Item 5 $ 224
Item 6
Item 7 $ 213,729
Item 8 $ 335
Item 9 $ 19,100Item 10 $ 28,140
Item 11 $ 4,880
Item 12 $ 3,845
Item 13 $ 27,525
Item 14
Item 15
Item 16
Item 17
Item 18
Item 19 $ 3,975
Item 20
Item 21 $ 83,157
Item 22 $ 30,000
Item 23
Total Assets $1,048,788
Liabilities
Item 23A $ 8,698
Item 24 $ 5,611
Item 25
Item 26 $ 32,354
Item 27
Item 28
Item 28A $ 143,385
Item 29 $ 10,260
Total Liabilities $ 200,308
Net assets excluding
superannuation interest $ 848,480
I have excluded from consideration outstanding accountants fees and certain other items. Although the Wife pursuant to these reasons is to receive 60% of the available assets I see no reason why the accountants fees should not be paid on an equal basis. The amount involved was disputed and it was not resolved as at the hearing. I have not taken into account liability for the children’s tax for the 2008 financial year nor did I make any allowance for estimated wind up costs of entities. It is preferable in my view that these liabilities be shared equally and be paid for as to the actual amount.
I will put in place separate orders that the parties are to share equally in winding up costs and implementation of the Court orders. I will make an order that the parties be equally liable for the tax liability for the children for the 2008 financial year.
Superannuation
Item 35
Item 36 $1,018,966
Item 37 $316,102/$340,018
This was not resolved on my recollection but I have had regard to the draft calculations handed up by Counsel for the Wife in the course of his final submissions. Under the heading SSMF Counsel makes the calculation that the total value of the funds is $1,358,984. It would seem from this that he has adopted the Husband’s figure of $340,018 and I will proceed on the basis this is the correct amount.
Total Superannuation $1,358,984
Add Assets $ 848,480
Total $2,207,464Wife’s entitlement at 60% $1,324,478
Husband’s entitlement at 40% $ 882,986The Wife is to receive or has received:
O property $ 910,000
Shares $ 213,728
Bank $ 334
Car $ 15,000
(the car was valued at $15,500 but in the joint balance sheet it was shown as $15,000 and I have adopted this figure)
Jewellery $ 4,888
Furniture $ 3,845
Tax refund $ 3,975
Total $1,151,762
The Wife’s entitlement $1,324,478 less calculation as to what Wife has received or is to receive $1,151,762.
Husband to pay Wife $172,716.
Forgiveness of debt
I note affidavits were filed in October 2008 by the three children, annexing a Forgiveness of Debt Deed which had been executed by all of the parties.
Accordingly I am prepared to make the orders as sought by the parties extinguishing the children’s rights to the Trust and in any of the corporate entities.
Summary
I propose to adjourn this matter to 9.30 am on 2 December 2009. At that time I will make any additional adjustments to the calculations whether as a result of consent arrangements by the parties or by further submissions.
I will also hear submissions on the final form of orders.
I note by paragraph 28 of the Wife’s minutes of orders she sought an order:
“Each party shall provide to the other within 30 days of the date of his (sic) order, all records of the entities which each party is to retain pursuant to these orders save if already in the possession of the accountant but will direct the accountant to provide same to that person on his finalisation of the tax records.”
It would be helpful if the parties could reach as much agreement as possible in relation to the form of orders to be made. In the event agreement cannot be reached I will hear submissions on the competing proposals on the adjourned date.
It would be helpful if prior to the adjourned date written submissions relating to any adjustment of the calculations made and the form of orders could be filed.
It is not a Judge’s function to undertake the task of unravelling the parties’ network of companies.
By way of example, looking at paragraph 2 of the Wife’s minute of orders I expect I would need further evidence directed to that specific issue before I could be persuaded to make an order in that form, unless the Husband was to agree.
In calling for submissions on the adjourned date I am not interested in revisiting valuations previously agreed upon.
I certify that the preceding fifty-nine (59) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Barry
Associate:
Date: 2 November 2009
Key Legal Topics
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Family Law
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Negligence & Tort
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Damages
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Duty of Care
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