Emmerton & Manwaring
[2023] FedCFamC2F 476
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 2)
Emmerton & Manwaring [2023] FedCFamC2F 476
File number: ADC 4841 of 2017 Judgment of: JUDGE BROWN Date of judgment: 28 April 2023 Catchwords: FAMILY LAW – PROPERTY – marriage of 28 years – during marriage parties operated a small business and were primary producers – during business husband attended to technical aspects of business whilst wife attended to administration and accounts – business incorporated – parties had associated family trust which acquired real properties – wife trustee of trust – during the parties’ marriage company made loans to each spouse – whether loans compliant with provisions of Income Tax Assessment Act – Part 7A tax liability – since separation company has continued to make loans to the husband – husband has allegedly failed to pay other tax assessed as due to the company – ATO has made a statutory demand – following four day trial is it possible to assess parties’ liabilities to ATO – should liabilities be considered in general terms pursuant to section 75(2)(o) – just and equitable – matters to be considered Legislation: Family Law Act1975 (Cth) Pt VIII, ss 75(2), 79, 80
Income Tax Assessment Act 1936 (Cth) Div 7A
Cases cited: Bevan & Bevan [2013] FamCAFC 116
Biltoft & Biltoft (1995) FLC 92-614
NHC & RCH (2004) FLC 93-204
Clauson v Clauson (1995) FLC 92-595
DJM v JLM (1998) FLC 92-816
Ferraro v Ferraro (1993) FLC 92-335
Hickey & Hickey & Attorney-General (Intervener) (2003) FLC 93-143
Lee Steere v Lee Steere (1985) FLC 91-626
Prince & Prince (1984) FLC 91-501
Rodgers & Rodgers (No 2) [2016] FamCAFC 104
Russell & Russell [1999] FamCA 1875
Stanford v Stanford [2012] HCA 52
Strahan v Strahan (2010) 42 Fam LR 203
Trevi & Trevi [2018] FamCAFC 173
Wardman & Hudson (1978) FLC 90-466
Division: Division 2 Family Law Number of paragraphs: 156 Date of hearing: 17, 18, 19, 20 April 2023 Place: Adelaide Counsel for the Applicant: Mr Dillon Solicitor for the Applicant: Tindall Gask Bentley Counsel for the Respondent: Mr Heinrich Solicitor for the Respondent: Starke Lawyers ORDERS
ADC 4841 of 2017 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN: MS EMMERTON
Applicant
AND: MR MANWARING
Respondent
order made by:
JUDGE BROWN
DATE OF ORDER:
28 April 2023
THE COURT ORDERS THAT:
1.That within 21 days each party do instruct their accountant, as soon as is practicable and in any event within 14 days, to advise the Australian Taxation Office of their personal non-current and non-compliant Division 7A loan balances within B Pty Ltd.
2.All correspondence between the ATO and the parties (and/or their advisors and solicitors) be in writing and the solicitors for the other party be copied into that correspondence.
3.In the event the correspondence (as referred to herein at paragraph 2) is not in writing, the other party’s solicitors be notified in writing of any conversations between the tax office and the party (and/or his advisors and solicitors) within 7 days of that conversation taking place including a detailed note of any offers to settle or to reduce the taxation liability, both personal and relating to B Pty Ltd.
4.The husband be restrained and an injunction be granted restraining the husband from making drawings that impact on any current and future Division 7A loans from the business B Pty Ltd.
5.Forthwith upon the making of the Order herein, the property situate at C Street, Suburb D Volume … Folio … ("the C Street, Suburb D property") be listed for sale.
6.Mr E at F Real Estate at Suburb G shall be appointed to sell the said properties upon such terms as the parties shall agree and in absence of agreement as he shall nominate.
7.The sale price of the C Street, Suburb D property shall be set as recommended by the agent although not less than $500,000.00.
8.The net proceeds of the sale of the C Street, Suburb D property be applied in the following order and priority:
(a)To pay all costs, commissions and expenses of the sale and any council and water rates and maintenance levies outstanding in respect of the C Street, Suburb D property ("the outgoings") and in the event of arrears on the outgoings at the time of settlement the arrears are to be paid from the proceeds of the sale of the C Street, Suburb D property;
(b)To discharge the H Pty Ltd Mortgage ending in '…23';
(c)To pay any outstanding arrears owed to Mr J by the husband in the sum of $2,695.00 by way of an interim property settlement to their husband; and
(d)The balance then remaining by way of bank cheque payable to the Tindall Gask Bentley Trust Account until agreement by the parties or by Order of this Honourable Court.
9.The following be paid from the proceeds of the sale of the livestock from the K Street, Town L property currently held in the Trust Account of Tindall Gask Bentley in the sum of $49,292.84 in the following order and priority:
(a)The amount owed to Mr J for his invoice to provide evidence on 19 April 2023 at the trial of the within proceedings (invoice number …05 dated 18 April 2023);
(b)The amount owed to Company M for its invoices dated 27 and 28 February 2023 for the updated valuation of the parties' properties; and
(c)The balance then remaining to be divided equally between the parties.
10.An injunction be granted restraining the parties from further encumbering any property owned by the parties either in their sole name, jointly or in the name of the Manwaring Family Trust.
11.The respondent file and serve his written submissions on or before close of Registry filing on 19 May 2023.
12.The applicant file and serve her written submissions on or before close of Registry filing on 2 June 2023.
13.The respondent file and serve any written submissions in reply on or before close of Registry filing on 9 June 2023.
14.The written submissions as referred to herein paragraphs (11) & (12) must include the following:
(a)The final orders each seek;
(b)Which property they wish to retain and the mechanics of such retention and how other items of property are to be realised;
(c)A balance sheet (including proposed add backs and the legal basis on which they are sought);
(d)The factual issues in dispute and what evidence supports the findings each seeks to be made from that evidence;
(e)The factors which support findings in respect of contributions sought by each party and how those contributions should be assessed in percentage terms;
(f)What further distributions should be made, in percentage terms, in respect of matters arising under section 75(2) particularly section 75(2)(o); and
(g)A list of authorities on which they rely
15.Further consideration of the matter is adjourned to 22 June 2023 at 10:00am for counsel to speak to their written submissions NOTING the proceedings will be conducted face to face at Court.
Note: The form of the order is subject to the entry in the Court’s records.
Note: This copy of the Court’s Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 10.14(b) Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 10.13 Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).
Section 121 of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish proceedings that identify persons, associated persons, or witnesses involved in family law proceedings.
IT IS NOTED that publication of this judgment by this Court under a pseudonym Emmerton & Manwaring has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
JUDGE BROWN:
INTRODUCTION
These reasons relate to competing applications for settlement of matrimonial property, which have been on foot since October of 2018. Regrettably, they have been much delayed and each party concerned has incurred ruinous legal costs.
A trial has now occurred, which occupied four days, during which each party gave evidence, as well as a chartered accountant, Mr J and the husband’s treating medical practitioner, Dr N.
These reasons are directed towards resolving some interim issues, which arose during the trial, particularly whether the Court can fairly deal with the division of the parties’ not insignificant assets, whilst there is uncertainty about their joint and individual liability to the Australian Taxation Office. In addition there are some issues engaged about an interim or partial property settlement.
BACKGROUND
The parties to the proceedings are Ms Emmerton (now Ms Emmerton) ‘the wife’ and Mr Manwaring‘ the husband’. The wife is 56. She has remarried and has employment as an admin assistant, earning a salary of approximately $72,000.00 per annum. Her health is good. Mr O, her husband is employed receiving a salary of around $65,000.00 per annum.
They split their household expenses and live in a house purchased by them in the period post separation, largely with borrowed funds. It is valued at $740,000.00 and subject to a mortgage of $472,000.00.
The husband has also remarried. He is now 60. He and his treating occupational physician have given evidence that his health is currently poor and as a consequence his capacity to work limited. It is his case that his current wife and his two step children aged 15 and 12 years and his recently born daughter, aged 2 years are all economically dependent upon him. He lives in the parties’ former family home located at P Street, Suburb Q, which he wishes to retain.
The parties married in 1988. They have two adult children, aged 29 and 26 respectively. The parties separated, in difficult and controversial circumstances, in November 2016. They divorced on 21 March 2018.
During the course of their lengthy marriage (28 years), the parties were able to accrue significant assets, mostly in the form of real property. The source of their wealth was a business in which they both worked. It was the type of business which accountants typically term a mum and dad business.
The business was B Pty Ltd, which manufactured building products. Its corporate structure was created in 2001. The husband is and was its sole director; with each spouse holding one share. There are no other shareholders.
The husband was involved in the technical side of the business. The wife, who had been a customer service officer, was concerned with accounting and office management. In his recent evidence, Mr Manwaring conceded that accounts were largely beyond him.
It is the wife’s case that the administration of the business in currently in disarray. The husband agrees the business is not currently tracking well but attributes this to his compromised health and the fact that he has been distracted from it by these rancorous proceedings.
From its inception the business, after a period of shared frugality between the parties in its early years, seems to have prospered. It employed staff, including the parties’ children. The parties took advice as to how the business should be structured, particularly how to minimise tax.
The husband became interested in pursuing opportunities as a primary producer. A trust was started – The Manwaring Family Trust – which acquired residential properties as investments, which were rented. The wife was its trustee and she managed its affairs. A farm was also acquired, which was stocked with livestock. At other times it was cropped. It too was owned by the family trust.
The parties opened bank accounts. They had income streams from three sources – from their rental properties; the farm; and primarily their business. They had living and business expenses. The various entities, which they controlled had obligations to pay mortgages, which had been taken out to acquire the various properties, including the farm. The business had an overdraft, which was secured against the farm.
On any view, their financial affairs were not without their complexities. Necessarily, whilst their business prospered, the parties and the entities which they controlled incurred liability for tax and were responsible for reporting such obligations to the Deputy Commissioner of the Australian Taxation Office.
In late 2018, in the affidavits which each party filed to commence these proceedings, both the wife and the husband sketched the criticisms they had of the other in respect of the other’s financial mismanagement of their mutual affairs. However, at this early stage, it was their shared position that, given the length of their marriage and their equally significant but disparate contributions, their assets should be divided equally. This is no longer the wife’s position.
It is my apprehension, that these criticisms have essentially remained the same in the period approaching five years which has followed, other than that they have festered and their consequences intensified. It seems to me that it is only recently, in the four day trial, that the Court has started to come to grips with assisting the parties to disentangle their financial relationship with one another and enable them to move on – it being axiomatic that they are incapable of doing this themselves.
These reasons for judgment are not directed to the final resolution of the case. Following the evidence, it seemed to me that their remained serious obstacles to the Court being able to resolve the matter fairly. The chief difficulty being the absence of definitive evidence regarding how much tax is outstanding and how it is referable to each of the parties, both before and after they separated.
In this context, some comparatively minor controversies have arisen, which the parties themselves cannot completely resolve and which therefore fall to the Court. I indicated to the parties that I wanted to think about these issues over the forthcoming long weekend and would provide some brief written reasons. These are those written reasons, which are provisional in nature and therefore any findings, which arise, are subject to correction at a later stage, if appropriate.
In her Initiating Application, the wife characterised the husband as being very difficult to deal with and as a person who did not apply proper financial rigour to his operation of the business after separation, removing funds from it and not accounting to her all the authorities properly for it.
Essentially she asserts that the husband has only withdrawn funds from the business, whilst attending to only the bare minimum of its other financial obligations, particularly in respect to paying rates, mortgages and tax, which has led to a significant diminution of the parties’ shared wealth since separation.
For his part, the husband asserts that the wife mismanaged the parties’ financial affairs up to separation and he inherited a mess, which he has tried to sort out as best he can. He also characterises the wife as unduly delaying the proceedings because of her grasping nature. Essentially, each blames the other for the delay. Regrettably, the Court process has also not always been helpful to the parties.
As I will detail in due course, it is comparatively easy to delineate the major assets of property available to be distributed between the parties and allocate a value to those items. In addition, apart from tax, the parties’ liabilities are also relatively easy to delineate. The parties have different views regarding how their respective contributions should be assessed.
The wife’s position is that due to issues of coercion and control, exerted upon her by the husband during their marriage, the Court should accept that her various contributions, both for the business and as the home maker and parent, were provided in significantly onerous circumstances.
Family lawyers refer to this type of contribution as a Kennon Contribution. It was not raised at the outset of the proceedings and Mr Manwaring, although he acknowledges his conduct during the marriage was not always beyond reproach, denies that he was coercively violent towards the wife. He resists there being any additional weighting of property being allocated to the wife on this basis.
More significantly, it is the wife’s position that she should be allowed a further distribution of assets, in her favour, as a consequence of what she would characterised as the husband’s waste of matrimonial assets, through financial mismanagement and/or on account of the significant additional legal costs, to which she has been put, which she attributes to the husband’s derelict conduct of these proceedings.
Essentially, as I understand her case, she asserts that the parties’ assets should be divided 70/30% in her favour as a consequence of these various considerations either individually or sum. This additional percentage is based on what she asserts is the overall justice and equity of the parties’ current financial situation.
On the other hand, it is, I think, the husband’s case that the parties’ contributions should be regarded as essentially equal. However, it has recently become his case that he is physically debilitated after a lifetime of manual labour, which has involved him suffering several industrial accidents, particularly falls, which preclude him from returning to work in the building industry, which necessarily must involve him climbing ladders. In this context, Dr N has characterised him as being a significant fall risk.[1] Mr Manwaring suffered such a fall as recently as March of this year.
[1] See Annexure -1 to affidavit of Dr N filed on 18 April 2023.
Until recently, as I understand the husband’s case, he wished to continue working in the business and continue primary production. In these circumstances, he wished to retain the farm, premises from which the business has operated together with the parties’ former family home, which the wife vacated at separation. In these circumstances, he entered into discussions with a mortgage broker to borrow a large sum of money.
Whether this remains the case is a subject of some controversy. The wife has long remained concerned that the husband has deliberately run down the business and, once these proceedings have been concluded – potentially to her detriment – the husband will resuscitate the business and negate, to his advantage, some loans which it is owed by the parties. However, Mr Manwaring’s more recent position, in the light of Dr N’s recent evidence is that he will not return to full time work.
In these circumstances, although I have not as yet received a detailed submission from Mr Manwaring’s counsel, it would appear to be his current position that if the Court is to depart from an equal division of assets, any such departure should favour him because of his compromised health and its implications for his capacity to earn an income.
On the other hand, it is the wife’s position that the husband has belatedly provided this medical evidence and she has reason to believe that the husband has been intent on running down the business, which he will resurrect after these proceedings have been finalised, allowing him to retain what was previously a successful and remunerative business.
As these brief introductory comments indicated, this is a matter which is replete with acrimony, mutual suspicion and, in my view, is also one marked by an inability of the parties themselves to cooperate to reach an appropriate outcome, which is to their mutual benefit.
Although the parties are relatively well off, it makes no objective sense for the wife to have incurred a sum of approximately $350,000.00 in legal costs; whilst the husband’s costs are said to amount to a sum of approximately $165,000.00. I fear that these sums may be under rather than over estimations.
BRIEF CHRONOLOGY OF THE PROCEEDINGS
I was the initial docket judge and so must assume some responsibility for the delays in the matter. At an earlier stage, the parties were referred to several mediations and indeed I was told, as I recall, that the matter had or was close to being resolved. However any hope for a consensual resolution dissolved. In these circumstances, a trial was fixed for October 2020. This trial did not proceed because of the fact that the husband had not attended to his taxation returns.
Another trial was fixed for April 2021. That trial was co-listed with a children’s matter, which proceeded. At this stage, the parties were able to agree on the sale of a number of assets, including livestock from their farm and other farming equipment. At this stage, as I recall, the parties’ lawyers were sanguine about the prospects of resolution and the case was adjourned to 26 May 2021 with a note that if a consent minute was provided, the subsequent mention date would be vacated.
However, once again, this optimism was misplaced and a further trial date was allocated for early 2022. During the period leading up to the trial, the case was subject to a rolling process of case management conducted by a judge outside of the Adelaide Registry. Throughout this process, issues regarding disclosure appear to have become more pressing as were issues relating to the parties’ liability for what is colloquially known as top up tax and more properly mischaracterised under the taxation legislation as Division 7A Loans.
In these circumstances, on 6 August 2021, amongst other orders, Judge Boyle made these orders:
Upon provision of the documents referred to in paragraph two (2) herein:
The parties and Counsel properly instructed for Mediation meet with [Mr R] of [Firm S] at their joint expense to receive advice as to any Division 7A Loan implications; and
The parties and Counsel properly instructed for Trial participate in Mediation with [Mr T] of [U Lawyers].
As is self-apparent, this process did not result in a resolution of the matter, which remained on course for a final hearing scheduled for May of 2022. By this stage, for administrative reasons, which were not subject to any involvement by the parties themselves, the case was docketed to another judge of the Adelaide Registry, Judge Parker.
In the lead up to this trial, issues arose regarding the failure to maintain the mortgage secured against the parties’ farming property, which is located at K Street, Town L and which the parties refer to as K Street, Town L.
The relevant mortgage was to Bank V and the relevant amount of arrears was approximately $41,000.00. In addition, it was asserted that council rates, in an amount of approximately $22,700.00 had not been paid.
It was the wife’s position that the husband remained in effective control of the farm and it was his delinquency, which had led to the mortgage and rates not being paid. In these circumstances, she sought the sale of the property in order to avoid a mortgagee’s sale.
Mr Manwaring resolutely opposed the sale of K Street, Town L as it was his then preference to retain the property. He also sought time to bring the Bank V arrears up to date. In these circumstances, it appears to be the case that Judge Parker adjourned the issue to the trial, which was scheduled for 9 May 2022.
The Court record indicates that the trial scheduled for May of 2022 before Judge Parker, did not proceed. In lieu thereof, the parties took place in a Judicial Mediation before her Honour, which did not assist the parties to reach a final resolution.
In these circumstances, Judge Parker transferred the further hearing of the case to a Judge in Division 1 of the then recently amalgamated Federal Circuit and Family Court of Australia. The case was ultimately allocated to Justice Mead of Division 1.
In the lead up to the aborted trial in May of 2022. On 2 May 2022, the solicitors for the wife filed an affidavit of Mr R, a Chartered Accountant, who was asked to provide advice as to the parties’ potential liability in respect of Division 7A of the relevant taxation legislation.
Amongst other things, Mr R indicated that the Division 7A loans would crystallise when B Pty Ltd lodged its relevant taxation returns. One of the issues arising in this case centres on the reasons why these returns have not been done. As is I hope apparent, from these reasons, this is not a new issue.
On 18 August 2022, Justice Mead fixed the matter for trial, yet again, for 5 days commencing on 30 January 2023. She made directions regarding the preparation of an updated report, from Mr J, regarding the valuation of the business.
Although Mr J gave evidence before me, this updated report was not formally completed. However, it would seem to be the case that Mr J was provided with some financial records by Mr Manwaring. However, in his oral evidence before me, Mr J expressed some concerns about the overall reliability of the records concerned.
In this context, I was provided with a single page of a balance sheet for B Pty Ltd, as at 30 June 2022, which had apparently been provided to Mr J and on which was listed the amounts of various Division 7A loans made been 2011 and 2022.[2] However, this document did not allow Mr J to be able to express any degree of certitude that the figures were correct.
[2] See Exhibit A.
In addition, in the period leading up to the January 2023 trial, further controversies arose regarding K Street, Town L, which remained unsold. In these circumstances, the wife re-agitated her application that the property be sold.
In these circumstances, on 27 October 2022, Justice Mead directed the sale of K Street, Town L for a sale price of not less than $1.3m. The proceeds of sale were directed towards discharging the Bank V mortgage and a related overdraft for the business secured against the property, together with payment of the outstanding council rates. This sale has not proceeded, as yet.
At this stage, controversies arose regarding removal of a quantity of rubber tyres from the farm, which had been the subject of a prosecution by the Environment Protection Authority. It was the wife’s position that the tyres needed to be removed so that the property could be rendered more appealing to any prospective purchaser and the acquisition of the tyres, in the first place, was an imprudent decision solely attributable to the husband.
For his part, the husband did not agree asserting that the tyres had been acquired to provide rubber barriers for a race track, which his step children could enjoy when visiting the farm. It is the view of the wife, supported by evidence of a real estate agent (Mr W) that the stacked up tyres present a significant disincentive for any potential purchaser of the property.
The trial before Justice Mead could not proceed due to her Honour becoming ill. In these circumstances, the Chief Justice of the Court transferred the case back to Division 2 and after another judge discovered that he had acted for one of the parties in the past, it was listed back before me and I fixed it for the earliest available date, which was suitable both to me and the parties’ respective counsel.
This date was 17 April 2023. At this stage, I was told that although 5 days had been allocated for the matter in Division 1, it was anticipated that the matter could be confined to 3 days, which was all that was available so far as Mr Manwaring’s counsel, Mr Heinrich, was concerned.
Each party filed affidavit material, in anticipation of the trial before Justice Mead. In the wife’s case. This consisted of the following:
·An affidavit of herself filed 13 January 2022;
·An updated statement of financial circumstances filed 13 January 2022.
At an earlier stage of proceedings, the wife had filed affidavits from the following:
·Her current husband, Mr O, filed 19 April 2022, in which he set out his financial circumstances and the nature of his financial relationship with the wife;
·In addition, she had filed an affidavit of the parties’ son, Mr X, filed on 27 April 2022, in which Mr X set out his perception of the nature of his parent’s relationship with one another and his involvement in the K Street, Town L property.
The husband filed the following documents, in anticipation of the January 2023 trial:
·An affidavit filed on 20 January 2023;
·An updated statement of his financial circumstances filed on 20 January 2023.
In the lead up to the recent April 2023 trial, and during its immediate course, the parties filed the following affidavits:
·An affidavit of the wife filed 12 April 2023 to which is attached up to date valuations of the parties’ various real properties;
·An affidavit of Mr W, an estate agent, filed 13 April 2023, in which he confirms that the K Street, Town L property was placed on the market on 5 January 2023 and he was appointed by the President of the Real Estate Institute of South Australia to conduct the sale. He assessed the property to be in a poor condition and subject to noxious weed infestation. It was originally advertised for sale at $2.2m but the price has been reduced to $1.6m. The highest offer currently made is one of $1.45m, which was not acceptable to the prospective purchaser’s financier;
·A further affidavit of the husband electronically filed on 16 April 2023 (the Sunday prior to the trial date) together with an updated statement of his financial circumstances. The most significant aspect of this affidavit being its attachment of a statutory demand from the ATO;
·An affidavit of Dr N filed 18 April 2023;
·An affidavit of the husband’s solicitor filed 19 April 2023, in which he detailed various documents provided by him to the wife’s solicitor. The effect of the affidavit being an attempt to refute claims that Mr Manwaring had been remiss in his obligation to make a full and frank disclosure of his financial circumstances to the wife and those advising her.
THE VALUE OF THE PARTIES’ REAL PROPOERTY
In his most recent affidavit evidence and in his oral evidence to the Court, the husband has indicated that he largely accepts the various professional valuations, which the wife has provided in her recent affidavit material. In addition, there does not seem to be any controversy about the various amounts secured against these properties.
It is also agreed between the parties that B Pty Ltd, on the basis of Mr J’s expert evidence, currently has no value whatsoever. As previously indicated, it is the wife’s position that the husband’s activities, in the period since separation, have eroded the residual value of the business and this is a major factor which favours her and should result in her receiving 70% of the parties’ net currently identifiable assets.
The parties each have accrued superannuation – in the wife’s case about $141,500.00, in an industry fund; and in the husband’s case about $115,000.00 in a privately managed fund.
It is the wife’s case that her current home, jointly owned with Mr O, should be entirely excluded from consideration in the current proceedings given it was purchased after the parties separated and the provenance of the funds utilised to acquire it are not directly referable to the parties’ joint finances.
Otherwise, there are issues relating to various motor vehicles – not of significant value; the proceeds of sale of a caravan; and some issues regarding add-backs.
Council rates for K Street, Town L remain outstanding in an amount of $27,503.00 and there are liabilities for land tax in respect of various others of the parties’ real properties. The wife has significant personal tax liabilities in an amount of about $20,000.00.
The most significant aspect of the evidence provided by the husband, in his affidavit filed the day prior to the date scheduled for the recent trial to commence, is in the form of a director’s penalty notice for PAYG withholding amounts, issued by the Deputy Commissioner of Taxation on 25 July 2022.
Attached to this is the statutory demand, referred to above, from the ATO, seeking payment from Mr Manwaring, as the sole director of B Pty Ltd of an amount of $429,285.61. The statutory demand is dated 20 March 2023.
It is the wife’s case that she only became aware of this statutory demand, after she was provided with the husband’s affidavit, electronically filed on the Sunday morning prior to the commencement of the trial. To say that this was unsatisfactory, from her point of view, would be a major understatement.
At the present time, it is useful to identify the parties’ real property as follows:
Assets Value Former family home –P Street, Suburb Q $850,000.00 C Street, Suburb D $500,000.00 Y Street, Suburb Z $280,000.00 Y(2) Street, Suburb Z $270,000.00 AB Street, Suburb AC $650,000.00 K Street, Town L farm $1,300,000.00 Total Assets $3,850,000.00 Liabilities Value P Street, Suburb Q mortgage $262,788.00 C Street, Suburb D mortgage $117,883.00 Suburb Z mortgages (combined) $138,021.00 Second mortgages secured against Suburb Z properties $111,586.00 K Street, Town L mortgage $366,551.00 Overdraft $95,943.00 Total Liabilities $1,092,772.00 Net Real Property $2,757,228.00 ORDERS SOUGHT BY THE PARTIES
The value of the farm will be determined by its sale. I have adopted a conservative figure given the contents of Mr W’s recent affidavit. When the monies owed in respect of the mortgage; overdraft; and council rates; are accounted for, it seems probable that an amount of approximately $800,000.00 will be realised. However, I accept that this sum is far from certain.
As previously indicated, the catalyst for this Court ordered sale of the farm was the actions by Bank V to secure possession as a consequence of mortgage default. Mr Manwaring resolutely resisted the sale and in May of 2022 made a payment to Bank V in an amount of $41,000.00.[3]
[3] See letter from Finlayson’s to the wife’s solicitor dated 3 May 2022.
During the course of the recent trial, this sum was disclosed by Mr Manwaring. He advised that he had borrowed it from the self-managed superannuation fund of an acquaintance. Subsequently, the relevant loan agreement was produced.
This indicates that the principle attracts interest of $3,000.00 per month.[4] In his most recently filed financial statement, Mr Manwaring deposes that the amount of the loan in question is now $47,000.00.
[4] See Exhibit C.
At present, Mr Manwaring assesses his current recurrent income to be nil. This is as a consequence of a recent fall at work, which occurred in March 2023 and which is subject to a disputed worker’s compensation claim.
The AB Street, Suburb AC property is an office/warehouse facility from which B Pty Ltd has operated for many years. It is owned by the Manwaring Family Trust and is subject to the business overdraft secured against the farm.
It is Mr Manwaring’s evidence that he has entered into negotiations, via a mortgage broker based in Melbourne, to borrow $2,000,000.00. This is subject to an interest rate of 9% per annum and 15% per annum, if the loan goes into default.[5]
[5] See Exhibit 1 to the affidavit of the husband filed 20 January 2023.
At the time of his January 2023 affidavit, it was the position of the husband that he intended to keep working and, for this reason, he was desirous of retaining the AB Street, Suburb AC property, the former family home and, if at all possible, the K Street, Town L farm.
This would appear to provide the context for him applying for the above mentioned mortgage finance. Whether it was financially realistic for him to borrow this sum, subject to the attached interest rates, particularly in the context of the Bank V default, was not an issue which was examined in his evidence before the Court.
More recently again, in his oral evidence, Mr Manwaring indicated that he had come to the realisation that the AB Street, Suburb AC property needed to be sold - a position from which he has subsequently resiled. In this context, the wife relied on an email to her solicitors, from Mr Starke, solicitor for the husband, which read as follows:
This email is in relation to [AB Street, Suburb AC] SA that has been valued by [Company M] at $650,000.
Our client has had dealings with [AD Real Estate] at [Suburb AE] SA ([Mr AF] and [Mr AG]) who have indicated that they have a buyer for [AB Street, Suburb AC] SA for that price.
[Mr Manwaring] has instructed that he has no objections to the said property being sold.
The proceeds can then be used to discharge the mortgage over that property. If the event there is a surplus then the funds are to be invested in joint names.[6]
[6] See Exhibit E.
This is apparently no longer Mr Manwaring’s position or, if it was, it was the subject of a misapprehension by the wife and her solicitor. During the course of his oral evidence, he indicated that it was he and one of his associates, a Mr AH, who had indicated to the relevant estate agents a desire to buy the property for this sum.
Mr Manwaring deposed that Mr AH is a friend of his who rents a portion of the AB Street, Suburb AC warehouse from which he operates a business. Mr AH has available to him the sum of $650,000.00, which he would lend to Mr Manwaring, who would service the loan by rent to be collected from Mr AH.
I concede that I may have misconstrued what Mr Manwaring has proposed. In addition, I am perplexed that Mr AH would advance such a sum and then be willing to, effectively, service it himself by paying rent to Mr Manwaring. Mr Manwaring justifies the transaction on the basis that he has need for a reliable source of income going into the future.
It is the wife’s case that B Pty Ltd is the tenant of the AB Street, Suburb AC property, which is owned by the Manwaring Family Trust. As such, the business is required to pay rent to the trust, which it has not done for many years. She calculates the amount owing to be around $80,000.00.
The C Street, Suburb D property is also cross-security for the former family home at P Street, Suburb Q. The wife has no wish to retain it and is desirous of it being sold as soon as possible. She wishes to retain the two properties at Suburb Z. The husband is now 60. It is his case that his health is poor and his capacity to work limited. The husband now agrees C Street, Suburb D needs to be sold but disagrees about the amount of the reserve price.
If the wife retains these properties and the husband retains all the other real properties, other than the C Street, Suburb D property, this would result in the husband having to pay the wife a significant sum of money, which as I understand his case, he proposes to secure by way of mortgage funding.
It is the wife’s position that the husband should be held to his apparent acquiescence to the sale of both AB Street, Suburb AC and C Street, Suburb D. It is her case that the sale of the two properties is financially inevitable and the parties need to begin to sell their assets in a rational manner.
If the husband’s current contention is that he is intent on retiring from the operation of B Pty Ltd due to the deterioration of his health and his physical incapacity for the tasks involved in building work, it is difficult to see why he would he would want to retain the AB Street, Suburb AC property.
Those advising the wife appear to be somewhat incredulous as to why Mr Manwaring would borrow monies from acquaintances, at disadvantageous terms, to defray the Bank V debt; borrow a large sum of money at a high rate of commercial interest; and borrow monies from Mr AH to purchase the warehouse; if he is intent on stopping work. In general terms, it is asserted that his case does not appear to make commercial or indeed logical sense.
It is the husband’s case that the wife has not properly accounted to him for rents received by her, on behalf of the family trust, for the C Street, Suburb D and Suburb Z properties. Whether his legal advisors will be able to quantify this sum is not clear to me. As I understand the wife’s case, although she concedes she has received the rent, she has also maintained the mortgages concerned and paid tax as assessed in contrast to the husband.
DIVISION 7A TAX
Division 7A of the Income Tax Assessment Act 1936 (Cth) is directed towards the taxation of profits taken from private companies, in a non-taxable form, most commonly in the form of loans ostensibly made by the company concerned to individuals connected to it.
Where a private company makes a loan to a shareholder, during an income year, Division 7A can allow the Tax Commissioner to deem the company to have paid a dividend, which is assessable for tax in the hands of its recipients. Top up tax, arises if there is a difference between the rate of tax attributable to company earnings (30 cents in the dollar) and the highest rate levied on personal income (47.5 cents in the dollar).
As Mr J indicated, in his sworn evidence to the Court, it is not illegal for individuals associated with private companies to take loans from the company’s controlled by them. Difficulties, however, can arise if those loans are not compliant with ATO requirements or there is a lack of precision between legitimate business expenses and monies advanced for an individual’s personal expenditure. In addition, such loans must be repaid to the company in question within 7 years of accrual.
Essentially, the ATO approaches loans ostensibly made to a shareholder of a company to be a dividend payable to that shareholder, to which income tax attaches. Both Mr J and Mr R have alluded to the issue of Division 7A tax liabilities in their respective reports to the Court. As previously indicated, at an earlier stage of proceedings, the parties were directed to attend upon Mr R to discuss the issue with him.
In his report dated 12 August 2019, Mr J indicated that the parties had been renumerated approximately equal amounts of around $60,000.00 or less in the period up to 2018. In addition, at this stage, it was Mr J’s opinion that the parties appeared to have Division 7A debit loan balances. However, he was not in a position to indicate whether these loans were compliant. In this context, he opined as follows:
Suffice to say there may be a contingent liability but I am unable to commence on the existence or quantum of any liability.
In the event the loans are compliant, there is a potential exposure to “top up tax” in managing the loans. Based on the available information, it seems to me that any such liability may not be substantial. Advice from the external Accountant may be required.[7]
As at 30 June 2018, Mr J estimated the amount owing by the parties to the company as being $379,552.00.
[7] See report of Mr J dated 12 August 2019 at [64]-[65].
In his report, dated 11 April 2022, Mr R reported that he had the company’s account up to 28 January 2022. However, he had not performed a review or audit on these records and therefore was not in a position to assert to either their accuracy or completeness. In answer to the question, What is the quantum of the parties’ potential Division 7A liability?, Mr R wrote as follows:
Applying an average marginal tax rate of 34.5% across all years, an estimate of the Division 7A loan balances and potential tax payable of each balance being assess as a deemed unfranked dividend is: [8]
[table removed]
[8] See affidavit of Mr R filed 2 May 2022 at page 12.
Mr R further indicated that these loans had now crystallised. In this context, he advised that the parties should engage a tax lawyer to provide advice and assistance with the appropriateness of taking corrective action and an application to the Commissioner.
As at 6 April 2022, Mr R had been advised by Mr Manwaring’s accountant that he (the husband) was liable for income tax of $22,083.38 as at 30 June 2021 and B Pty Ltd owed $346,683.72 as at 1 April 2022.
The husband also concedes that he has failed to file Business Activity Statements for the business for at least the past two quarters and has not made superannuation guarantee payments, either for himself or other employees of the business.
In these circumstances, in my view, there is a lack of certainty regarding the overlap between the parties’ potential liability for Division 7A tax and the ongoing company tax, which is the subject of the recently issued statutory demand from the ATO.
As previously indicated, Justice Mead directed that the parties instruct Mr J to compile an up to date valuation report in anticipation of the trial scheduled for earlier this year. This report was not completed. However, Mr Manwaring’s accountant provided Mr J with some information, including the balance sheet to which reference has already been made.
In his oral evidence to the Court, Mr J indicated that the financial information, with which he had been provided, was, in his view, a mess. In particular, he had doubts about how the receivables/payables, in respect of the business had been constructed.
Mr J further indicated that, in general terms, the non-payment of group tax, by the company, had nothing to do with issues relating to tax potentially to do with the loan amounts taken by each of the parties, to which Division 7A might attach, in the hands of the parties themselves.
The relevant balance sheet indicated that the husband had been allocated Division 7A loans for the year ending 30 June 2022 in an additional amount of $74,132.05. Otherwise, the figures, in the balance sheet, appear to be largely consistent with those provided to Mr R.
THE ISSUES & LEGAL PRINICIPLES APPLICABLE
Part VIII of the Family Law Act1975 (Cth) deals with financial matters relating to marriages. Pursuant to section 79(1) the Court is authorised to make such order as it considers appropriate in order to alter the interest of the parties to a marriage in relevant property.
Pursuant to section 79(2) the Court is actively prevented from making an order altering proprietorial interests, unless it is satisfied that it is just and equitable to do so in all the circumstances prevailing. This follows from the use of the prohibitive words “must not” in the relevant section.
This was an issue analysed by the High Court in Stanford v Stanford.[9] In the case, the majority stated that:
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.[10]
[9] Stanford v Stanford [2012] HCA 52.
[10] Stanford v Stanford [2012] HCA 52 at [36].
Accordingly, whether it is just and equitable to make any individual property order, under the provisions of section 79(2), must depend upon the Court’s analysis of the idiosyncratic circumstances of each particular case which comes before it. It is not an issue to be approached in a formulaic manner or on the basis of any assumptions regarding contribution issues.
The process to be followed for the division of the parties’ property is well-established by law.[11] The relevant legal principles are primarily contained in sections 79(4) and 75(2) of the Family Law Act 1975. I am required to follow a number of specific steps.
[11] See Lee Steere v Lee Steere (1985) FLC 91-626; Ferraro v Ferraro (1993) FLC 92-335;
In the first step, I must ascertain what are the parties’ assets and liabilities available to be divided between them. The normal or usual rule is that those assets are to be determined as at the date of trial.[12]
[12] See Wardman & Hudson (1978) FLC 90-466; and Biltoft & Biltoft (1995) FLC 92-614.
However, as will be indicated in greater detail in due course, the Court is not obliged to include an uncertain or imprecise liability. This is the central issue in the current matter, centring as it does on the uncertainty surrounding the Division 7A loans owed to B Pty Ltd and other of the husband’s tax liabilities.
In the second step, I must ascertain the contributions, which each party has made towards the pool of assets, which has been identified, following the first step. Contributions fall into two broad categories.
The first kind is contributions to the property: financial contributions and non-financial contributions, 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 that relationship.
The second kind is contributions to the welfare of the family: in the words of the section, “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.”[13]
[13] See Family Law Act1975 at section 79(4)(c).
It is clear from the authorities that this second kind of contribution must be given appropriate weight and is not to be treated as a token matter or as a contribution which is inherently less valuable or important than a financial contribution to property.
At this second step stage, the task set for me requires the balance and comparison of a multiplicity of contributions, many of which are necessarily different in nature, within the framework of a marriage. Many contributions in a marriage, such as being a homemaker, do not result in the direct acquisition of assets. They are also difficult to value in absolute dollar terms.
The third step involves the assessment of the parties’ prospective needs, by reference to the factors set out in section 75(2) of the Family Law Act 1975. As indicated above, pursuant to section 75(2)(o), the Court is entitled to take into account any fact or circumstance which, in the opinion of the court, the justice of the case requires to be taken into account.
It is the wife’s case, as I understand it, that considerations of justice and equity are likely, on balance to dictate, that an allowance be made in her favour, after the assessment of contributions, on account of what she would characterise as the husband’s improvident use of joint property in the period after separation. It is also her case that this provides the Court with a mechanism to deal with the Division 7A loans, if these cannot be delineated with precision.
Finally in determining what order the Court should make under section 79, the Court must be satisfied that in all the circumstances, it is just and equitable to make the relevant orders. Overall, it is the justice and equity of the actual orders that the Court must consider.[14]
[14] See Russell & Russell [1999] FamCA 1875 at [80].
Accordingly the so called fourth step is for the Court to take a step back and examine whether the orders it proposes are just and equitable. These considerations must also inform each of the preceding steps.[15]
[15] See Hickey & Hickey & Attorney-General (Intervener) (2003) FLC 93-143 at 78,386 [39] and Bevan & Bevan [2013] FamCAFC 116 at [60].
Regrettably, my impression of the husband’s case is that he has left its preparation to the last minute and is in something of a state of denial about what is and is not financially feasible for him. In these circumstances, it is hardly surprising that the parties are unable to cooperate with one another and so avoid the lamentable impact of these proceedings upon them, particularly in the form of costs, which on the basis of my rough mud map of their net assets, amount to around 20% of them.
After hearing four days of evidence, against a background of significant delay and each party incurring large liabilities for legal costs, I was greatly concerned at the apparent lack of cooperation between the parties and their inability to focus on what appeared to me to be a slowly unwinding financial crisis about them, which I likened, I hope not unduly fatuously, to a slow moving train wreck.
My major concern, notwithstanding the expenses incurred and the weight of documents filed, was that there was no obvious bottom line as to what the parties – individually and collectively – owed to the ATO and what periods it referred to – that is before and after separation.
In these circumstances before I believed I would be in a position to approach how the parties’ not inconsiderable assets should be divided, it was incumbent on them to jointly approach the ATO to determine, if possible, what was the exact extent of their liability and the most effective way to pay it.
At first blush, the sale of assets would appear to be the most obvious course. In addition, as Mr R opined, it might be necessary for an accountant/tax lawyer to be engaged who could re-construct the loans and deduct legitimate expenses from them.
In this context, if the ATO could be satisfied the parties were cooperating with it, it might be mollified into compromising the debt. The aim being to enable the parties and ultimately the Court to be able to deduct the amount of debt from the relatively easily calculated assets of the parties and give each of them (and indeed the Court) a degree of certainty about the effect of the orders made.
In this context, Mr Heinrich, counsel for Mr Manwaring, advised me that his instructing solicitor, Mr Starke, had approached the ATO in order to successfully obtain its agreement to refrain from acting in respect of its statutory notice for the time being. I was concerned that it might be possible for Mr Manwaring to negotiate some compromise of the debt, particularly in terms of penalties and interest, which might conceivably be prejudicial to the wife.
Regrettably, any hope that the parties would be able to agree on the mechanics of such an approach and the timeframe to be applied, proved to be illusory. I was at pains to point out to the parties’ respective legal representatives that I required detailed submissions from each of them in respect of the taxation issues and how the Court should approach them, particularly in respect of its construction of the relevant asset pool.
I appreciate that this is likely to take some time. I am also painfully aware that the parties have already incurred very great costs, to which such submissions will only add. However, at the same time, it appeared to me to be not unreasonable that some further information be obtained from the ATO in this regard.
I am also aware that the exercise envisaged by section 79(4) of the Family Law Act 1975 is not to be approached by reference to a strictly mathematical or accountancy approach in all cases.[16] However, the usual orthodoxy, over a number of years, has been for the Court concerned to identify the property of the parties concerned, value such property and deduct from such value the liabilities of the parties or either of them.
[16] See Prince & Prince (1984) FLC 91-501 at 79,076.
As indicated above, it is the submission of counsel for the wife that it is open to the Court to approach the parties’ potential taxation liabilities (and by extension those of B Pty Ltd) in an inchoate manner by reference to section 75(2)(o) as picked up by section 79(4)(e) of the Act rather than by strictly calculating them and them deduction the resulting amount from the parties’ tangible assets.
These were issues discussed by the Full Court in Rodgers & Rodgers (No 2).[17]The Full Court recognised that:
What emerges from the authorities is that while there might be a “rule” the application of which is appropriate in the vast majority of cases, the manner in which a particular liability should be treated is, ultimately, dependent upon the nature of the liability, the circumstances surrounding the liability and the dictates of justice and equity shaped by each.
The usual practice or “rule” sits comfortably and conformably within that rubric – in many cases, perhaps almost all, liabilities will be deducted from the “gross” value of the property because it will be clear (and even if not expressly stated, determined) that the justice and equity of the case demands that the liabilities should be met by the parties in the proportions in which the court determines the property is to be divided.
[17] Rodgers & Rodgers (No 2) [2016] FamCAFC 104 at [40] – [41].
In the context of this usual practice, the Full Court recognised that there would always be exceptional cases, where it should not be applied. Such cases included those in which liabilities were vague, uncertain or unlikely to be enforced or ones in which it would not be just and equitable for them to be strictly tabulated.
In the present matter, although the exact quantum of the Division 7A debts is vague, it seems improbable that their operation will not be enforced, at some stage, by the ATO. I also concede that it is far from clear, given the not inconsiderable period since the parties separated, how the ATO will approach the loans owed by each of the parties concerned to the business.
In NHC & RCH[18] the Full Court recognised that a decision as to whether both parties should bear responsibility for taxation debts of one party to the marriage was to be decided by reference to what was just and equitable. It would appear to me to be necessary in order to determine what is or is not equitable to have some idea of the overall quantum of the relevant debts before turning to its apportionment between the parties concerned.
[18] NHC & RCH (2004) FLC 93-204 at [71].
Up until their separation in late 2016, and perhaps for the following few years, it might be conceivably open to the Court to approach the issue of the loans made to each of the parties, standing in the accounts of B Pty Ltd as being debts to be shared between the parties as part of the vicissitudes of the economic life of the parties.[19] However, in more recent times, such an approach is obviously more open to challenge.
[19] See DJM v JLM (1998) FLC 92-816, at 85,261.
In these circumstances, I propose to make the orders formulated by Mr Dillon, counsel for the wife, in respect of the parties approaching the ATO and instructing their accountant to determine what is the current extent of personal non-current and non-compliant Division 7A loan balances with the business. In addition I accept that it makes sense that the wife and her solicitors be copied into such correspondence and each party be advised of the contents of all relevant discussions arising between the solicitors/accountants and the relevant officers of the ATO.
As I am at pains to point out, it is my provisional view that I require more detailed evidence regarding the extent of the parties’ joint and individual liabilities to the ATO before it can be determined in what proportions the parties’ existing assets should be divided. Essentially, at this stage, I am more attracted to adopting the conventional approach – that is the identification of liabilities and then their apportionment to the parties concerned.
It would be my preference that this evidence is available concurrently with the parties’ final written submissions and perhaps within the context of an agreed balance sheet of assets and liabilities (or at least one in which the areas of controversy had been narrowed). However, I also appreciate it may take some time to obtain and/or the information provided may not necessarily be conclusive.
If it cannot be obtained the Court will have no other option other than to approach potential liabilities in a general manner. There can be no doubt that the Court has authority to dispense with the usual practice. In Prince & Prince[20] (cited with approval in Rodgers) Evatt CJ said as follows:
While some liabilities are charges upon the property which can be accurately assessed at a certain date, others are at large, or have not been precisely determined, e.g. tax liabilities. In some cases the amount of the liability can only be estimated generally. The Court can make an allowance for a particular liability if appropriate to do so. In some cases there are sufficient uncertainties as to the alleged liability to lead the Court to disregard it entirely or partly. In other cases, the Court may take the view that because of the circumstances surrounding the incurring of the liability it ought in justice and equity to be wholly or partly disregarded in determining the appropriate order to make under sec. 79 as between the parties to the marriage. Such a result could be reached where a spouse had incurred a liability in deliberate or reckless disregard of the other party’s potential entitlement under sec. 79
[20] Prince & Prince (1984) FLC 91-501 at 79,076.
A balance needs to be struck between obtaining this evidence, which is likely to be helpful to each of the parties and, in my view, to the overall probity of the Court’s processes, and the obvious desirability of these long running proceedings coming to an end. In this context, I propose allowing the husband 21 days to make his submission; with the wife to respond within a further 14 days and the husband being able to reply within a further 7 days.
If it is helpful and the parties agree more time is required, this time frame can be advanced by mutual agreement. I will then list the case for 22 June 2023 at 10:00am to enable each party to make oral submissions in support.
In their written submissions, I will direct each party to specify the final orders each seek, particularly which items of property they wish to retain and the mechanics of such retention and how other items of property are to be realised; delineate a balance sheet (including any proposed add backs and the legal basis on which they are sought); indicate what are the factual issues in dispute and what evidence supports the findings each seeks to be made from that evidence; the factors which support findings in respect of contributions sought by each party and how those contributions should be assessed in percentage terms; and what further distributions should be made, in percentage terms, in respect of matters arising under section 75(2) particularly section 75(2)(o).
In addition, I will direct the parties refer to any particular legal considerations in support of their various contentions and specify any authorities on which they rely. As previously indicated, it would obviously be helpful if they could agree a final balance sheet and what items can be sold.
In this context, I note the recent comments in Trevi & Trevi[21] in which the Full Court has reiterated that the Court’s authority to add back is both discretionary and exceptional in nature. It should only occur when, in the particular circumstances of the case concerned, considerations of justice and equity require it.
[21] Trevi & Trevi [2018] FamCAFC 173 at [30].
A more difficult controversy arises in respect of any future loans being made to the husband from the business. The wife seeks an injunction in this regard to restrain the husband from making any such drawings and them being allocated as Division 7A loans. The husband opposes such an injunction asserting that he needs to defray his recurrent living expenses.
It seems to me that the husband is likely to continue to access monies in the various accounts of the business, which has been received by the business from its clients, as he has done since separation. This can be denoted as wages and may include worker’s compensation, when his claim is accepted. I will make the injunction sought by the wife in respect of further loan agreements bearing in mind the timeframe which has been specified for the parties to attempt to crystallise these issues with the ATO.
As previously indicated the parties agree that the C Street, Suburb D property needs to be sold, as does K Street, Town L. Orders have been made in respect of the latter property but its progress to a concluded sale appears problematic. The parties disagree about a reserve price for the former – the wife proposing one recommended by the agent but not less than 10% below the agreed valuation of $500,000.00.
The husband does not agree to any such latitude. Clearly, if the parties are going to agree on anything, which is certainly cannot be a given, it is likely to be that they should get the best possible prices for their real estate. I will make the reserve $500,000.00.
Another issue concerns whether there should be some form of interim property distribution. This arises in the context of monies being held in trust in an amount of $49,292.84 relating to the sale of livestock from the K Street, Town L farm. The wife wishes to pay the accounts of the property valuer; Mr J; and her pressing tax debt of $17,435.92; with the balance to remain in trust. The husband wishes any balance to be divided.
The wife’s tax debt is payable within a fortnight or so. The husband’s case is that he is bereft of income due to his recent injury and the deferral of his worker’s compensation claim. Balancing these concerns I will make the orders as proposed by the husband. The proceeds of the sale of C Street, Suburb D and K Street, Town L will more than offset the sum in question.
The final issue concerns whether the Court should make an additional order directing the immediate sale of the AB Street, Suburb AC warehouse. It is opposed by the husband on the basis that he may wish to retain the property as part of his entitlements. Given the extent of the pool and the value of the property, such an outcome cannot be definitively ruled out.
As with all issues to do with property settlement, both on an interim and final basis, the defining consideration is what is the justice and equity of the outcomes proposed. Section 80 of the Act provides the Court with what are described as general powers.
In particular section 80(1)(h) empowers the Court to make an order pending the disposal of proceedings. However, it is clear that the same principles, set out above, apply both at the interim and the final hearing stage. In addition, pursuant to section 80(1)(k) the Court is authorised to make any order which it considers is necessary to do justice between the parties.
In Strahan, apropos the making of an interim property order, the Full Court said as follows:
Once a court proceeds to exercise the power in s 79 of the Act, being in the substantive phase, a court is required to undertake consideration of the matters in section 79(4) including by reference to s 79(4)(e) the matters in section 75(2) so far as they are relevant. However consideration of such matters may be brief and if it is established that ‘it seems likely to the Court that…the applicant…will be likely to receive by way of property settlement a sum sufficient to cover the advance, that would seem to be sufficient to enable the order sought to be made’.[22]
[22] See Strahan v Strahan (2010) 42 Fam LR 203 at 230 [137].
In the current matter, I am not persuaded it would be just and equitable to make an order for the immediate sale of the AB Street, Suburb AC property given Mr Manwaring’s wish to retain it notwithstanding my concern that this may not be financially workable for him. I reach this view given the value of the other items of property in the pool and the fact that I hope the final disposition of the matter is imminent. I will also make the injunction sought by the wife restraining the parties dealing or disposing further of assets other than in the terms of these orders or as agreed between them.
For all these reasons, the orders of the Court are as set out at the commencement of these reasons for judgment.
I certify that the preceding one hundred and fifty-six (156) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Brown. Associate:
Dated: 28 April 2023
Clauson v Clauson (1995) FLC 92-595; and Hickey & Hickey & Attorney-General (Intervener) (2003) FLC 93-143 at 78,386.
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