Fagan & Fagan (No 3)
[2025] FedCFamC1F 13
•20 January 2025
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 1)
Fagan & Fagan (No 3) [2025] FedCFamC1F 13
File number: MLC 1377 of 2022 Judgment of: CARTER J Date of judgment: 20 January 2025 Catchwords: FAMILY LAW – PROCEDURAL – Oral application made by the husband to adjourn the trial so the corporate entities could be wound up – Application dismissed.
FAMILY LAW – PROPERTY – Where the parties were not in agreement as to the pool – Where the husband asserted his initial contributions far outweighed those of the wife – Where the husband asserted payment to the wife would require the wind up of all corporate entities – Where the husband failed to adduce expert evidence to support that assertion or the costs of doing so prior to the commencement of the final hearing – Where at the conclusion of the evidence further orders were made for the provision of expert evidence regarding how the payment to the wife could be funded and the taxation consequences and costs of doing so – Further expert evidence adduced – Where the expert did not assert payment to the wife would require the wind up of the corporate group – Pool divided equally between the parties.
FAMILY LAW – CHILD SUPPORT – Where the Court is satisfied it is appropriate to consider the application – Where the parties agree there should be a departure order – Where the parties do not agree as to the quantum or length of period – Where in the special circumstances of the case it would be unjust and inequitable for the administrative assessment to remain in place – Where it is otherwise proper to make a departure order for 12 months.
FAMILY LAW – COSTS – Wife sought costs in relation to Application in a Proceeding brought by her whilst judgment reserved – The parties reached an agreement on a number of issues the day the matter was listed – No order as to costs.
Legislation: Child Support (Assessment) Act 1989 (Cth) ss 98, 114, 116, 117
Family Law Act 1975 (Cth) ss 75, 79, 81, 90, 117
Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) ch 7, r 7
Family Law (Superannuation) Regulations 2001 (Cth)
Superannuation Industry (Supervision) Regulations 1994 (Cth) regs 5, 7
Cases cited: Bevan v Bevan (2013) 279 FLR 1
Dickons v Dickons (2012) 50 Fam LR 244
Elgin & Elgin (2015) 54 Fam LR 31
Stanford v Stanford (2012) FLC 93-518
Van der Linden & Kordell [2010] FamCAFC 157
Division: Division 1 First Instance Number of paragraphs: 214 Date of last submission/s: 12 November 2024 Date of hearing: 23 – 24 April 2024 Place: Melbourne Counsel for the Applicant: Mr Sweeney Solicitor for the Applicant: Kenna Teasdale Lawyers Counsel for the Respondent: Mr Brown KC & Ms Fisken Solicitor for the Respondent: Sayer Jones ORDERS
MLC 1377 of 2022 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN: MS FAGAN
Applicant
AND: MR FAGAN
Respondent
ORDER MADE BY:
CARTER J
DATE OF ORDER:
20 JANUARY 2025
THE COURT ORDERS THAT:
PROPERTY
The husband’s election
1.Within 30 days, the husband elect whether:
(a)to pay the wife the sum of $5,650,928 less the sum of $12,000 (“the payment”) or
(b)to sell the property at J Streett, Suburb K (“J Street”) and/or the property at L Street, Suburb M (“L Street”) in order to facilitate the payment to the wife of such sum as is necessary to achieve an equal division of the parties’ pool as set out in Annexure A less the sum of $12,000.
2.In the event the husband elects to pay the wife the payment in accordance with Order 1(a), the husband pay or cause the payment to be made within 90 days of the date of these orders (“the date”).
Election to sell
3.In the event the husband elects to sell J Street, the husband forthwith do all acts and things and sign all documents as required in his capacity as sole director of N Pty Ltd as trustee for N Trust;
(a)To cause the sale of J Street on such terms and conditions as agreed between the parties and in default of agreement:
(i)the agent be appointed by the President of the Real Estate Institute of Victoria;
(ii)the conveyancer be appointed by the President of the Law Institute of Victoria;
(iii)the terms and conditions of the sale be as recommended by the selling agent; and
(iv)the sale price be not less than $10,000,000; and
(b)At the settlement of the sale of J Street, apply the proceeds of sale as follows:
(i)first to meet the costs, commissions and expenses of the sale;
(ii)secondly to discharge the mortgage to the Australia and New Zealand Banking Group Limited (“ANZ bank”) secured against the title to the property; hirdly, to pay any Capital Gains Tax liability arising from the sale of the property (anticipated to be approximately $528,554);
(iii)fourthly, to the wife such of the proceeds of sale as is necessary to achieve an equal division of the parties’ assets as set out in Annexure A, less the sum of $12,000; and
(iv)the balance, if any, to N Trust.
4.In the event the husband elects to sell L Street, the husband forthwith do all acts and things and sign all documents as required in his capacity as sole director of N Pty Ltd as trustee for N Trust:
(a)To cause the sale of L Street on such terms and conditions as agreed between the parties and in default of agreement:
(i)the agent be appointed by the President of the Real Estate Institute of Victoria;
(ii)the conveyancer be appointed by the President of the Law Institute of Victoria;
(iii)the terms and conditions of the sale be as recommended by the selling agent; and
(iv)the sale price be not less than $1,025,000; and
(b)At the settlement of the sale of L Street, apply the proceeds as follows:
(i)first to meet the costs, commissions and expenses of the sale;
(ii)secondly to discharge the mortgage to the ANZ bank secured against the title to the property;
(iii)thirdly, to the wife such of the proceeds of sale as is necessary to achieve an equal division of the parties’ assets as set out in Annexure A, less the sum of $12,000 (unless that sum has already been deducted from the wife’s entitlement); and
(iv)finally, the balance, if any, to N Trust.
5.In the event there are insufficient funds from the sale/s pursuant to Orders 3 and 4, if applicable, to pay to the wife a sum necessary to achieve an equal division of the parties’ assets, the husband pay or cause to be paid to the wife any such shortfall contemporaneously with the settlement of the sale.
Discharges of mortgages
6.Contemporaneously with the payment to the wife pursuant to Order 2, or pursuant to Orders 3, 4 and 5 herein (whichever is applicable), the parties do all acts and things and sign all documents to:
(a)discharge the mortgage secured against the property at B Street, Suburb C (“B Street”) and the wife pay out or refinance the loan secured by the mortgage into her sole name; and
(b)discharge the mortgage secured against the property at D Street, Suburb E (“D Street”) and the husband pay out or refinance the loan secured by the mortgage into his sole name.
Sales in default
7.In the event the husband elects to pay the wife pursuant to Order 1(a) but fails to pay the amount in full by the date, the husband forthwith do all acts and things and sign all documents as required to cause:
(a)in his capacity as sole director of N Pty Ltd as trustee for N Trust to sell J Street (“default sale”) on such terms and conditions as agreed between the parties and in default of agreement:
(i)the agent be appointed by the President of the Real Estate Institute of Victoria;
(ii)the conveyancer be appointed by the President of the Law Institute of Victoria;
(iii)the terms and conditions of the sale be as recommended by the selling agent; and
(iv)the sale price be not less than $10,000,000;
(b)The proceeds of sale of the default sale to be applied by N Trust as follows:
(i)first, to meet the costs, commissions and expenses of the sale, including agents’ fees and commissions and conveyancing costs;
(ii)secondly, to discharge the mortgage to the ANZ bank secured against the title to the property;
(iii)thirdly, to pay any Capital Gains Tax liability arising from the sale of the property;
(iv)fourthly, to pay the wife the payment or such of the payment as remains outstanding together with interest at the rate prescribed by the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth); and
(v)finally, the balance then remaining be retained by N Trust.
8.In the event:
(a)the husband elects to sell J Street and/or L Street, but fails to comply with Order 5 herein, or
(b)in the event the sale proceeds from the default sale are insufficient to make the payment in full to the wife
then the husband do all acts and things and sign all documents to sell the D Street property (“D Street default sale”).
9.The D Street default sale shall be on such terms and conditions as agreed between the parties and in default of agreement:
(a)the agent be appointed by the President of the Real Estate Institute of Victoria;
(b)the conveyancer be appointed by the President of the Law Institute of Victoria;
(c)the terms and conditions of the sale be as recommended by the selling agent;
(d)the sale price be not less than $3,200,000.
10.The proceeds of sale of the D Street default sale be applied by the husband as follows:
(a)first, to meet the costs, commissions and expenses of the sale, including agents’ fees and commissions and conveyancing costs;
(b)secondly, to discharge the mortgage to the ANZ bank secured against the title to the property;
(c)thirdly, to pay any Capital Gains Tax liability arising from the sale of the property;
(d)fourthly, to pay the wife the payment or such of the payment as remains outstanding together with interest at the rate prescribed by the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth); and
(e)finally, the balance then remaining be retained by the husband.
Arrangements pending compliance
11.Pending compliance with these orders:
(a)the wife be solely responsible for the mortgage repayments on B Street and all expenses associated with the property including rates, taxes and insurances;
(b)the husband be solely responsible for the mortgage repayments on D Street and all expenses associated with the property including rates, taxes and insurances; and
(c)the husband be restrained from doing any act or thing to change the trustee or appointor of N Trust.
The Motor Vehicle 1
12.Within 14 days of the date of these orders, the husband do all acts and things and sign all documents required to cause the transfer to the wife, at the husband’s expense, of Motor Vehicle 1.
Joint accounts
13.Within 14 days of the date of these orders, the parties do all acts and things and sign all documents required to close all joint bank accounts held by them and divide the balance equally between them.
The wife to retain
14.The wife retain to the exclusion of the husband:
(a)her interest in B Street;
(b)the proceeds of sale of Motor Vehicle 2;
(c)Motor Vehicle 1;
(d)Motor Vehicle 3;
(e)the funds received by her pursuant to orders made by this Honourable Court on 31 August 2022, 27 January 2023, 20 July 2023, 15 January 2024, 24 April 2024 and 21 November 2024.
(f)the funds in her ANZ bank accounts ending …26 and …24;
(g)the furniture, chattels and personal effects in her possession and situated at B Street; and
(h)her superannuation entitlements with Superannuation Fund 1 and the entitlements to be rolled out of the Superannuation Fund 2 pursuant to these orders.
15.The wife be solely liable for and indemnify the husband in relation to any liability in her sole name including but not limited to the loan from her father and stepmother and any liability encumbering any item of property she is to retain pursuant to these orders.
The husband to retain
16.The husband retain to the exclusion of the wife:
(a)subject to Orders 8, 9 and 10, his interest in D Street;
(b)subject to orders for the sale of J Street, and/or L Street, his interest in F Pty Ltd, G Pty Ltd, N Pty Ltd as trustee for N Trust and O Pty Ltd as trustee of the O Unit Trust (collectively referred to as “the H Group”);
(c)Motor Vehicle 4;
(d)Motor Vehicle 5;
(e)Vessel 1;
(f)Vessel 2;
(g)Two recreational vehicles;
(h)Vessel 3;
(i)Vessel 4 (partial);
(j)the funds in his ANZ bank account ending …04;
(k)the furniture, chattels and personal effects in his possession and situated at D Street, save for the wife’s jewellery, clothing and other personal effects remaining at the property which shall be returned to her within seven days; and
(l)subject to the following orders in relation to superannuation, his entitlements in Superannuation Fund 2.
17.The husband be solely responsible for and indemnify the wife in relation to any liability in his sole name and all liabilities of the H Group, together with any liability encumbering any item of property he is to retain pursuant to these orders.
BY CONSENT IT IS ORDERED
Superannuation in the Superannuation Fund 2
18.Orders 18 to 25 inclusive of these orders (“superannuation orders”) are binding on the parties personally and in their capacities as Directors of P Pty Ltd (“the Trustee”) being the trustee of Superannuation Fund 2 (“the Fund”) AND in that capacity the parties acknowledge the Trustee has been afforded procedural fairness in respect of the superannuation orders.
19.In accordance with s 90XT(1)(b) of the Family Law Act 1975 (Cth) (“the Act”):
(a)Whenever a splittable payment becomes payable in respect of the wife’s interest in the Fund, the husband is entitled to the specified percentage, being 50 per cent of the wife’s interest in the Fund AND the entitlements of the wife are correspondingly reduced;
(b)Whenever a splittable payment becomes payable in respect of the husband’s interest in the Fund, the wife is entitled to the specified percentage, being 50 per cent of the husband’s interest in the Fund AND the entitlements of the husband are correspondingly reduced;
NOTING, for the avoidance of uncertainty, the net result is that the parties are each entitled to 50 per cent of the total amount in the Fund available to pay member benefits.
20.Order 19 has effect from the operative date, being the fourth business day after service of a copy of these orders on the Trustee.
21.The parties personally and in their capacity as Directors of the Trustee do all things necessary to give effect to these superannuation orders, including but not limited to:
(a)doing all acts and things and signing all documents as may be necessary to:
(i)sell the property known as and situate at Q Street, Suburb R, in the state of Victoria, being the whole of the property more particularly described in Certificate of Title Volume … Folio … (“Q Street”) pursuant to Orders 21 to 23 of these orders;
(ii)calculate, in accordance with the requirements of the Act, the entitlements created by Order 19 of these orders; and
(iii)pay the entitlements to the husband and the wife respectively whenever a splittable payment becomes payable.
(b)providing all the necessary instructions, direction, information, consents, and documents to the accountants for the Fund, being S Financial Services (“the accountants”), to give effect to these superannuation orders;
(c)providing the accountants with a signed, certified copy of these orders; and
(d)for the purposes of determining how relevant costs should be debited in accordance with reg 5.02 of the Superannuation Industry (Supervision) Regulations 1994 (Cth), the parties agree that it is fair and reasonable for the costs to be charged equally against the parties’ member benefits in the Fund.
22.The terms and conditions of the sale of the Q Street property be as agreed between the parties and in default of agreement:
(a)the agent be appointed by the President of the Real Estate Institute of Victoria;
(b)the conveyancer be appointed by the President of the Law Institute of Victoria;
(c)the terms and conditions of the sale be as recommended by the selling agent; and
(d)the sale price be not less than $1,260,000 unless otherwise recommended by the selling agent.
23.Upon settlement of the sale of the Q Street property, the proceeds of sale be applied as follows:
(a)first, to meet the costs, commissions and expenses of the sale, including agents fees and commissions and conveyancing costs;
(b)secondly, to pay any Capital Gains Tax liability arising from the sale of the property; and
(c)finally the balance then remaining be paid into the Fund’s bank account pending compliance with the remainder of these orders.
24.Upon service of the superannuation orders and as far as possible contemporaneously with the implementation of Order 21, the parties shall do all acts and things and sign all documents so as to:
(a)authorise the creation of a new interest in the husband’s name in the Fund;
(b)note receipt by the husband of a new interest calculated in his name in the Fund;
(c)remove and/or resign the wife from any office she holds in the Trustee;
(d)make a request pursuant to regulation 7A.06 of the Superannuation Industry (Supervision) Regulations 1994 (Cth), for the transfer and/or roll over the wife’s member benefits created by Order 19 of these orders to a complying superannuation fund as nominated by her;
(e)transfer and/or assign any shares held by the wife in the Trustee to the husband or his nominee;
(f)ensure the wife is resigned or otherwise ceased as a member of the Fund; and
(g)finalise all taxation affairs of the Fund up to the and including the date the wife exits the Fund.
25.Pending their full compliance with Order 24 of these orders and save for the purposes of giving effect to these superannuation orders:
(a)the parties will not deal with, charge, encumber or dispose of any item of property in the Fund or withdraw any amount from the Fund;
(b)the parties will not exercise any power with respect to Fund so as to:
(i)appoint a new Trustee;
(ii)admit a person as a member of the Fund;
(iii)make any application to the Trustee for the transfer or payment of member benefits, whether in whole or in part, other than in accordance with these superannuation orders;
(c)the parties will not make any binding death nomination or any other nomination where the effect of such nomination would render any part of their entitlement in the Fund a “non-splittable payment” within the meaning of the Family Law (Superannuation) Regulations 2001 (Cth); and
(d)the parties will not do any act or thing which would defeat, extinguish or reduce the entitlement of either of them in the Fund and/or pursuant to these superannuation orders.
26.The parties personally and in their capacity as directors of the Trustee of the Fund have liberty to apply with respect to these superannuation orders on seven days’ notice in writing.
BY THE COURT IT IS ORDERED
Miscellaneous
27.The order for the payment to the wife of the sum of $113,260 made 21 November 2024 by way of part property remains in full force and effect.
28.Each party has liberty to apply with respect to the terms and conditions and execution of the sales of any real property.
29.Unless otherwise specified in these orders and save for the purpose of enforcing any monies due under these or any subsequent orders:
(a)The parties each be solely entitled to the exclusion of the other to all other property (including choses-in-action) in the legal or beneficial ownership or possession of that party as at the date of these orders;
(b)the parties each forego any claims they may have to any superannuation, long service leave, redundancy, retirement, retrenchment, and like benefits belonging to, or earned by, the other;
(c)life insurance policies remain the sole property of the party as named in the policy;
(d)any joint tenancy of the parties in any real or personal estate is expressly severed; and
(e)the parties each be solely liable for and indemnify the other against any liability:
(i)encumbering any item of property to which either is entitled pursuant to these orders; and
(ii)in that party’s sole name, including, but not limited to, credit cards, loans, lease agreements and charitable commitments.
30.The parties (in their personal capacity and in their capacity as a director or officeholder of any entity) do all acts and things and sign all documents as may be necessary and required to give full force and effect to these orders.
Child support
31.Leave is granted pursuant to s 116 of the Child Support (Assessment) Act 1989 (Cth) (“the Child Support Act”) for the wife to seek a departure order in this Court.
32.Pursuant to s 117(2) of the Child Support Act, there be a departure from the administrative assessment of child support payable by the husband to the wife for the support of the children U born 2009, W born 2012, X born 2015, Y born 2017 and Z born 2018 for the period 20 January 2025 to 20 January 2026, the rate of child support is fixed at $250 per week per child in the wife’s care (being an annual rate of $65,000 in total);
33.The annual rate of child support payable by the husband to the wife for the support of each child pursuant to Order 32 be increased on 1 July 2025 in accordance with the variations in the consumer price index for Melbourne.
34.The payment of child support pursuant to Orders 32 and 33 shall be credited against any administrative assessment of child support.
Costs
35.The wife’s application for costs in relation to the Application in a Proceeding filed 24 June 2024 is dismissed.
Other
36.All extant applications are otherwise dismissed.
37.Pursuant to s 81 of the Act, the parties intend that these orders shall as far as practicable finally determine the financial relationship between them and avoid further proceedings between them.
Note: The form of the order is subject to the entry in the Court’s records.
Note: This copy of the Court’s Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 10.14(b) Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 10.13 Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).
Part XIVB of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish an account of proceedings that identify persons, associated persons, or witnesses involved in family law proceedings.
IT IS NOTED that publication of this judgment by this Court under a pseudonym has been approved pursuant to subsection 114Q(2) of the Family Law Act 1975 (Cth).
ANNEXURE A
B Street – wife
$2,068,421
D Street – husband
$3,200,000
Motor Vehicle 1 – wife
$15,000
Motor Vehicle 2 (sale proceeds) – wife
$35,000
Motor Vehicle 3 – wife
$50,000
Motor Vehicle 6 – husband
$8,000
Motor Vehicle 5 – husband
$1,000
Vessel 1– husband
$148,000
Vessel 2 – husband
$15,000
Recreational vehicles (x2) – husband
$6,000
Vessel 3 – husband
$20,000
Vessel 4 (partial) – husband
$8,000
Part property settlement (Orders 31 August 2022) – wife
$110,000
Part property settlement (Orders 27 January 2023) – wife
$500,000
Part property settlement (Orders 20 July 2023) – wife
$375,000
Part property settlement (Orders 15 January 2024) – wife
$70,000
Part property settlement (Orders 24 April 2024) – wife
$200,000
Part property settlement (Orders 21 November 2024) to be paid on or before 20 January 2025 – wife
$113,260
Trailer – wife
$3,000
Husband’s legal fees notionally added back
$458,662
F Pty Ltd – husband
$3,567,901
O Pty Ltd – husband
$41,929
G Pty Ltd – husband
$5,274,945
N Trust – husband
$2,294,891
In the event the J Street property is sold, such cash adjustment as is necessary to reflect whether the sale price was in excess of, or for less than $10,025,000
TBC
LIABILITIES
Mortgage over B Street – wife
($2,127,483)
Mortgage over D Street – husband
($366,866)
Funds owed to F Pty Ltd by the husband
Funds borrowed by the husband from F Pty Ltd and paid to the wife as part property
($375,000)
Funds borrowed by the husband from F Pty Ltd and paid to the wife by the husband as part-property pursuant to orders made 24 April 2024
($200,000)
Funds used by husband to fund further part property settlement pursuant to orders made 21 November 2024 (due to be paid 20 January 2025)
($113,260)
Funds owed to N Trust – husband ($1,341,735) less the funds N Trust owes to the wife $136,586
($1,205,149)
Funds owed to husband’s mother – husband
($70,000)
Costs, commissions and expenses of the sale in the event that J Street and/or L Street is sold
(TBC)
Capital Gains Tax owed by the husband in the event that J Street is sold – anticipated to be $528,554
(TBC)
REASONS FOR JUDGMENT
JUSTICE CARTER
INTRODUCTION
Final parenting orders were made by consent in relation to the parties’ six children on the first day of hearing. The parties were not able to resolve the property dispute. They were also unable to reach an agreement in relation to the wife’s child support departure application.
It was the wife’s position that the tangible pool should be divided 55 per cent to her and 45 per cent to the husband.
The husband’s trial material was prepared on the basis that the tangible pool should be divided 60 per cent to him and 40 per cent to the wife. However, at the commencement of the hearing the husband sought the trial be adjourned and orders made for the wind up of the H Group, and an equal division of the net proceeds after that process.
In relation to superannuation, the parties agreed their entitlements should be divided equally and provided a minute of consent orders in that regard.
THE H GROUP
The group is comprised of:
(a)F Pty Ltd. This entity principally transports products. The husband is the sole shareholder. He receives dividends on an annual basis and has been advanced sums by way of directors’ loans, which remain outstanding. The business owns a large number of transport vehicles. It currently leases J StreetJ Street, Suburb K (“J Street”), which is owned by another entity in the H Group.
(b)G Pty Ltd. F Pty Ltd holds 100 per cent of the shares in this entity. This entity historically generated revenue by leasing two aircraft to F Pty Ltd. However, the business has been wound down since 2022 and current revenue was described by the single expert valuer Mr T (“the single expert”) as immaterial. G Pty Ltd owns a vehicle valued at $375,000 and a dismantled vehicle valued at $70,000. The bulk of the value of G Pty Ltd is an unpaid present entitlement/loan receivable from N Pty Ltd as trustee for N Trust (“N Trust”) of about $4,890,000.
(c)N Trust. N Trust has a 50 per cent unitholding in O Pty Ltd as trustee of the O Unit Trust (“O Unit Trust”). The remaining 50 per cent unit holding in O Unit Trust is held by a third party (DD Family Trust). N Trust earns income from leasing commercial property and receiving trust distributions from O Unit Trust. N Trust previously owned a property at BB Street, Suburb CC (“BB Street”) – which it sold in about 2021. It now owns J Street (valued at $10,485,000 in December 2022 and revalued at $10,025,000 in February 2024) and L Street, Suburb M (“L Street”) (valued at $980,000, unencumbered in December 2022, and revalued in February 2024 at $1,025,000), which are leased to F Pty Ltd. I note the valuations completed in 2022 were those used for the purposes of the valuation of N Trust;
(d)O Unit Trust. This entity provides freight transport. Similarly to F Pty Ltd the primary stock transported is products, mostly from importers in Sydney to stores in Melbourne. This accounts for around 70 per cent of its revenue. The business is operated by a Mr DD, who is not paid a salary. Like F Pty Ltd the business enjoyed increased revenue during COVID-19, but the revenue has significantly declined since then, to lower than pre-COVID-19 levels.
(e)The husband owns 50 per cent of O Pty Ltd, another transport business. This company is the trustee of O Unit Trust which according to the husband generates income mostly from storage. N Trust holds half of the units in the unit trust, and Mr DD holds the balance. Distributions of profit are made annually to the unit holders.
The husband also operated other entities – EE Pty Ltd as trustee for the EE Unit Trust (“EE Unit Trust”) and EE Unit Trust Property. Those entities have been wound up and it is agreed they have no value.
It is not in dispute that these entities properly form part of the pool.
APPLICATION TO ADJOURN THE PROCEEDINGS
The parties used the first day the matter was listed to conduct discussions.
At the commencement of the second day of the hearing, when all negotiations regarding property had broken down, senior counsel for the husband asserted the matter could not proceed until the H Group had been wound up in its entirety, and the taxation consequences and realisation costs of doing so were determined.
It is most unfortunate it was only at the door of the Court that the husband changed his long-held position that he would not sell any assets and instead proposed the sale of multiple assets.
I heard and dismissed the oral application to adjourn the matter to enable the wholesale windup of the H Group, and now set out my reasons for doing so.
The husband had been on notice for a protracted period that the wife sought a substantial cash payment. He had every opportunity to file an application that properly articulated the orders he sought for the winding up of the H Group to effect a cash payment to the wife, and to adduce evidence that supported the need to wind up the group and the costs of doing so. However, in neither the Further Amended Response to Initiating Application filed on his behalf on 13 July 2023 nor the subsequently filed Final Further Amended Response to Initiating Application on 2 February 2024 did the husband propose the sale of any of the assets of the H Group or the entire group. His trial affidavit did not contemplate that either. Rather it was his position that he would retain the group.
It was not until an Outline of Case was filed on his behalf on 19 April 2024 that the husband raised the prospect of sales – and even in that document there was no articulation of the precise orders sought to effect a sale and division of assets. Rather, it was simply asserted that if orders for payment were made as sought by the wife, this would:-
[cause] a significant (as yet unquantified) reduction in the asset pool due to realisation costs and taxation consequences caused by the necessary sale of the underlying assets held by [the group];
and
There is a significant likelihood that the husband will be required to liquidate the businesses in order to finance a payment to the wife (particularly in the amount sought by her).
[emphasis added]
The orders sought as annexed to the husband’s Outline of Case again did not provide for the sale of any assets but proposed the payment of cash to the wife.
The orders proposed by the husband in the Minute put forward on day two of the trial included orders for the parties to sell, liquidate, realise and/or dissolve the H Group in its entirety, including:
(a)selling the J Street and L Street properties and paying the Capital Gains Tax on those sales;
(b)selling the plant and equipment of the H Group;
(c)appointing the husband’s nominated accountant to recommend the terms on which the beneficiary and/or loan accounts were to be assigned with the parties to accede to those recommendations;
(d)paying all costs, commissions, expenses (including taxation and any Division 7A consequences of the dissolution of the Fagan group;
(e)finalising the accounts for the H Group; and
(f)dividing the retained earnings of the H Group so as to give effect to an equal division of the parties’ assets.
This proposal made no provision for the fact that the husband had continued to operate the business following the date of valuation (as at 30 June 2023) and had continued to have the use of the funds from that business since then.
During the running of the trial, the husband sought to adduce evidence from his personal accountant who roughly estimated the tax and sales costs of selling up the H Group would be about $4,000,000, and another $160,000 to sell the property owned by the parties’ self‑managed super fund (“the SMSF”). However, no information was provided as to how these figures had been derived and I did not grant leave for the affidavit to be filed. There appeared to be little utility in allowing the husband to rely on an affidavit that did not comply with ch 7 of the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) (“the Rules”), was prepared during the running of the hearing, and sought to provide essentially a ‘rough estimate’ of the net cash position, without providing any detail as to how the calculation was made or the information upon which the calculation was based.
It was asserted by the wife’s counsel that the husband’s proposal for a wholesale wind up of the H Group was ill considered. It had never previously been the husband’s proposal to sell any of the group, all of which had been valued at considerable expense to the parties. Counsel for the wife further submitted a wholesale wind up was needless as there were ways in which the business and personal assets could be managed, to both maximise the pool available for distribution, preserve the group and the husband’s income, as well as to pay out the wife her entitlement.
Because the application was made so late, the parties had not appointed a single expert to give evidence as to the necessity or otherwise of the sales or wind up, the likely costs of doing so, or the most tax efficient way to approach the matter.
Despite this lacuna in the evidence, I formed the view that the trial should proceed.
First, I was satisfied I could determine the existing legal and equitable interest of the parties in the property as I am directed by the High Court in Stanford v Stanford (2012) (2012) FLC 93‑518 to do as a preliminary step. The parties had spent considerable sums on obtaining valuations – including all the entities within the H Group – which were not the subject of any challenge. I could hear and determine any disputes in relation to the pool as it currently exists. I could then determine whether it was just and equitable that those existing interests be altered. If so, I could assess contributions under s 79(4)(a) to (c) of the Family Law Act 1975 (Cth) (“the Act”), and I take into account the relevant factors in s 79(4)(d) – (g) of the Act and the s 75(2) factors of the Act.
In the event that the orders would require the sale of any asset or assets to effect a payment to the wife, the costs of such sales and any taxation consequences could be factored into the orders ultimately made. The Court frequently embarks on final hearings in circumstances where a sale of an asset may be required, and where there are tax liabilities that flow from that sale. Orders can be drafted to make appropriate provisions for those eventualities.
Further, the application had been on foot for more than two years. If the matter was adjourned, further material – and updated valuations of at least some assets – would likely need to be prepared. This would be costly. If the H Group was wound up, that would most likely be a lengthy process. Senior counsel for the husband estimated it could take six months to realise the group and crystalise the taxation liabilities. However, that struck me as an ambitious time frame.
Whatever period the matter would be adjourned whilst the proposed windup and sales took place, the wife would remain in difficult financial circumstances. She would continue to have limited funds to meet her needs, and the needs of the five children in her care for a protracted period and no resolution of the property dispute. At the time the application was made, the wife had no access to funds – which were controlled by the husband, and accessible to him. The wife would be obviously and significantly prejudiced by an adjournment.
Accordingly, I dismissed the oral application for an adjournment and the additional interim orders sought by the husband.
DOES THE H GROUP NEED TO BE WOUND UP?
However, after closing submissions and whilst judgment was reserved it became plain to me that I required expert evidence as to whether or not the H Group needed to be wound up in its entirety to effect the payment to the wife.
That is because in his oral evidence the husband asserted it was not possible for him to sell the ‘underlying assets’ out of the corporate group without triggering the necessity to wind up the H Group entirely. In particular, it was his evidence that a sale of J Street would cause a collapse of the group. He said the property was an ‘underlying asset’ of the group, the sale of which would affect the loans, and financial relationships between all the entities and the bank. He repeatedly said that it would not be financially possible to conduct the business after selling J Street as “it’s impossible if the bank’s got no security over anything”. He said the business loans were “substantial” and needed security. He also said he operated the business from J Street, and he did not know whether he could lease it back after selling it. At any rate he said the rental the business currently pays would increase if being paid to an unrelated third-party owner.
The wife did not agree there was any necessity for a wholesale wind up of the H Group. She continued to maintain that the husband’s proposal to divest himself entirely of the group was rash, unnecessary and made no financial sense. It was submitted on her behalf that the husband could arrange his affairs, including the sale of properties within the group, or borrowing against personal assets, to pay the wife her entitlement, whilst continuing to operate the business and preserving his income stream. Counsel for the wife submitted that the husband could – for instance – sell J Street the proceeds of which would make up the bulk of any payment to his client, and it was within the husband’s control and ability to make up the balance of the payment to her from other sources. It was the wife’s contention that if the husband chose to realise the group where it was unnecessary for him to do so, he alone should bear the taxation implications of that.
I accept the submission by counsel for the wife that a careful consideration of the balance sheets of the entities undermined the husband’s assertion that if J Street was sold, the entire group would collapse because of inter-entity financial relationships or because the property was an ‘underlying asset’ that provided security for other liabilities within the H Group. F Pty Ltd has a liability of just $58,998 to the Australia and New Zealand Banking Group Limited (“ANZ bank”). It does own vehicles subject to finance – but they provide their own security. N Trust owes $4,680,000 to the ANZ bank, but that liability is secured by J Street revalued at $10,025,000. L Street, revalued at $1,025,000 is unencumbered. The other entities within the group have nil bank liabilities according to the unchallenged valuation of the single expert.
However, I also accept it appears overwhelmingly likely that the husband will have to sell assets to pay the wife. There is no source from which he can immediately draw monies to make the whole payment to the wife. There is insufficient equity in the property at D Street, Suburb E (“D Street”) – and no evidence as to the husband’s personal borrowing capacity. If the husband was correct, and a wholesale wind up would need to occur I accept it would not be just and equitable that only the husband would be saddled with the costs and tax consequences of that.
The matter returned before me for mention on 4 July 2024. At that time I advised the parties I could not, without expert evidence, determine whether:
(a)it was possible for the husband pay the wife and continue operating the entities as asserted by her; or
(b)it was not possible to pay the wife without causing the entire group to be realised as asserted by the husband.
As already set out, despite ample opportunity, the husband had not adduced admissible evidence as to this issue, or the costs and taxation consequences in the event the entire group had to be wound up. However, that does not mean it would be appropriate to leave the financial burden of such liabilities at the feet of the husband. To that end, I note the observations of May J in the Full Court decision of in Elgin & Elgin (2015) 54 Fam LR 31. Her Honour said, at [156]:
156.Despite the well-articulated arguments on behalf of the wife, and the apparent failures of the husband to conduct his case, it cannot be regarded as just and equitable to uphold orders that do not take into account such a serious misstep as failing to allow for taxation consequences of a significant sum and ordering the husband to be responsible for the payment. Such an order cannot be said to be just and equitable.
Accordingly, I made orders for the single expert to provide a supplementary report on these aspects of the controversy. The order for a supplementary expert report was not made with the wife’s consent. It remained her position that the court already had sufficient evidence to determine the matter.
The parties were unable to agree on the wording of the letter of instruction. At a further mention on 8 August 2024 an additional order was made regarding the letter of instruction to the single expert. The letter was worded as follows:
It is accepted that the husband has to pay to the wife (in addition to what she retains in her name) an amount of $4,776,615 on the husband’s case or a sum of $6,788,401 on the wife's case. It is the wife’s case that this can be paid from the use of personal or corporate assets. It is the husband’s case that the payment is to be made from corporate assets only. The parties are to retain the assets held by them on the attached Balance Sheet which was adopted for the Trial other than the loan account at item 27 which is to be retained by the husband.
With this in mind you are engaged as the single expert to provide a report as at 30 June 2023;
1.what is the maximum quantum of payment that can be made to the wife from the group without causing the realisation of the group;
2.whether the realisation of the group is necessary to ensure that the wife obtains the payment as sought by either the wife or the husband;
3.if a realisation of the group is ordered, what are the costs and tax consequences of the realisation of the group; and
4.if a realisation of the group is not ordered, what is the most commercial and tax effective method of facilitating the payments sought by the wife or the husband.
That supplementary report was dated 22 August 2024 and filed under cover of an affidavit on 11 November 2024.
In that supplementary report the single expert said on the wife’s case the payment to her could be satisfied from the cash held by the H Group, and the proceeds of the sales of J Street, L Street and the net operating assets of F Pty Ltd. On the husband’s case the single expert said the payment to the wife could be met from cash held by the group and the proceeds of sale of J Street. The single expert did not consider whether the husband’s personal assets could also be used to facilitate any part of the payment and considered only the use of corporate assets to pay her out.
Both parties put questions to the single expert pursuant to r 7.26 of the Rules. The husband opposed the single expert responding to the questions posed by the wife on the basis that they were not questions for the purpose of clarification.
At a further mention on 12 November 2024 the husband asserted the single expert had not answered the fundamental question – namely whether the payment to the wife would require the entire group to be wound up as was contended by the husband, or whether the payment could be made to the wife from a mixture of personal and corporate assets without the necessity of a wholesale wind up. It was the husband’s contention that the letter of instruction had not directed the single expert to consider whether the H Group would need to be ‘wound up’ but referred to ‘realisation’ of the group. It was asserted this distinction was relevant as the single expert had responded in his report by dealing with the question of the realisation of particular assets held by the corporate entities and had not gone on to consider the consequences of such sales on the group as a whole. Accordingly, it was proposed that the single expert be directed to answer whether a wind up of the group would be necessary upon the sale of J Street. Notably, and somewhat inexplicably, this was not a question the husband had posed pursuant to r 7.26 of the Rules.
The wife’s position was that other than the calculation of Capital Gains Tax upon the sale of J Street, the supplementary single expert report ought not be admitted into evidence. She said the report was otherwise unnecessary to my determination. To the extent that the Court did admit into evidence, it was asserted the report provided a sufficient answer to the question I had identified and the matter could proceed to determination.
I agree that the supplementary report does provide a sufficient answer.
The question with which I was grappling was whether a payment to the wife would require the entire group to be wound up as was contended by the husband or whether the payment could be made from a mixture of personal and corporate assets without impacting the group to the extent that it would effectively trigger a requirement to sell all corporate assets and wind up the entire group.
Whilst the single expert stated there would need to be “an orderly realisation of assets to be undertaken to meet the payout to the wife” on the case of either party – he did not conclude that the entire group would need to be wound up to make the payment to the wife. He identified J Street as capable of being sold. He did not suggest that in doing so, the entire corporate structure would need to be wound up, as had been the husband’s repeated assertion. The single expert also identified that if the proceeds of that sale were insufficient to meet a payment to the wife, the property at L Street could also be sold. Again, the single expert did not suggest that the sale of that second property would require the entire corporate group to be wound up.
The single expert did say that if the sales of those properties were insufficient to meet a payout to the wife, it may be that F Pty Ltd needed to be sold, or the assets held by F Pty Ltd would need to be sold. However nowhere in his report did the single expert suggest that the sale of J Street alone, or the sale of both the J Street and L Street properties would impact the corporate structure to the extent that the entire group must be wound up.
In all the circumstances, I am satisfied that a sale of J Street and/or L Street can occur without triggering the necessity of the sale of all corporate assets and a wind up of the entire group.
I also note the position articulated in the husband’s Outline of Case – that:
There is a significant likelihood that the husband will be required to liquidate the businesses in order to finance a payment to the wife (particularly in the amount sought by her).
(emphasis added)
At the time the husband’s outline was prepared, the wife’s application was for a payment of $7,500,000 and a further $217,215. For the reasons which I will now set out, I do not find that the wife is entitled to a payment of $6,788,401, being her revised figure, as she proposed. On the pool as I have determined it and for the reasons to which I will shortly turn, the cash amount to be paid to the wife is $5,650,928. That figure will be adjusted to take into account the costs and commissions of the sale or sales of real estate and any capital gain taxation liability, and the costs order previously made against the wife. The amount I have determined the wife is to be paid is more than two million dollars lower than the amount sought in her Outline of Case (although I note the wife has or will have received a further $313,260 by way of partial property distributions since that time). This is relevant in circumstances where the husband’s case was that the ‘likelihood of a liquidation’ was significant given the amount the wife sought – and which was considerably more than the amount I have determined she is to be paid.
No formal application was made to admit the supplementary report of the single expert into evidence, and the wife opposed its admission. However I am satisfied it should form part of the evidence before me. There has also been no formal application made by either party to re‑open their case. There was no proposal to cross examine the single expert. The husband could have made these applications if he felt the report did not adequately address the issues. He did not do so.
BACKGROUND
The parties commenced cohabitation in around September 2006 or 2007. The precise date of cohabitation is not relevant to the issues I must decide. The parties were married in 2008.
The husband owned D Street at the commencement of the parties’ relationship. That was a vacant block of land on which the parties constructed the former matrimonial home in about 2008/2009. The husband also owned F Pty Ltd and operated a transport business through several entities throughout the marriage, as outlined. He also owned the property at Q Street, Suburb R (“Q Street”).
There are six children of the marriage. U is 15, V is 14, W is 12, X is nine, Y is seven and Z is five. V lives with the husband. The other five children live with the wife.
This was a second marriage for the husband. He entered into final consent orders with his first wife in late 2004. Pursuant to the terms of those orders the husband was required to pay to his first wife $600,000.
The husband’s first wife passed away in 2007. The husband said her estate then forgave him part of the liability that was then outstanding, reducing his then remaining liability to her from $150,000 to $115,000.
The parties separated for a few months in 2016, shortly after X was born. Y was born shortly after the parties reconciled.
In around 2020 the parties set up the SMSF. The ownership of the Q Street property from which the business operated was transferred to the SMSF for $567,795. Both of the parties also rolled the entitlements they had in other funds over into the SMSF. The wife contributed $136,334, and the husband $157,720. The husband asserted a further $202,500 was contributed by him to the SMSF to secure the purchase of the Q Street property. The business then commenced paying rent to the SMSF.
The husband said the work for his transport business grew dramatically during COVID-19. However, from around April 2021, he said a number of key contracts were lost, and the demand for transport reduced. In particular, the husband said one of the associated entities – EE Pty Ltd – lost contracts, costing the business about $150,000 annually in profit. The husband says he has effectively wound up EE Pty Ltd and the related entity (EE Unit Trust Property) which owned the commercial property in J Street that had been rented to EE Pty Ltd. The premises were sold to N Pty Ltd in the wind up. Neither EE Pty Ltd nor EE Unit Trust Property continue to trade and have been deregistered.
In 2021, the property at B Street, Suburb C (“B Street”) was purchased for $2,075,000. The wife said the parties had been looking for a suitable property for the preceding years, so that they could live closer to the husband’s work, and also to reduce the travelling required to attend to the children’s animals elsewhere. She said the parties were going to live in B Street and initially the plan was to sell D Street. The parties then agreed they would rent D Street out.
The husband does not agree. He described the purchase of B Street as a unilateral decision by the wife. However, the wife produced a text message conversation between the parties dated mid-2021 in which the wife wrote:
Hi
Just confirming with you that I am going to put in an offer for the [property] of $2,050,000 ! Terms would be 30-60 days and unconditional as it is stronger offer ? I know you don’t want to be involved but I need to know that this is ok with you!
Are you ok with me doing this today
Thanks
[Ms Fagan] (kissing face emoji)
(As per the original)
The husband responded:
Yes all good, as long as you get enough out of home ??([Suburb E]) and it’s going to be a move in the right direction for the kids .(kissing face emoji) Please remember we will still have a mortgage.
(As per the original)
The husband then conceded he agreed – reluctantly – to assist the wife in making the purchase. He said he agreed as the parties’ marriage was in difficulties at that time and he hoped purchasing the property would reduce the tension between them. At trial the wife said the reference to ‘getting enough out of [Suburb E]’ reflected the parties’ intention to sell D Street to fund the purchase of the B Street. The husband did not provide any alternative explanation for the text messages.
B Street was purchased in the wife’s sole name and subject to a mortgage (now $2,127,483) in the parties’ joint names. The sum of $50,000 was paid by way of deposit, and otherwise the purchase was fully financed by the mortgage.
The husband said the parties separated on 19 June 2021, when the wife moved with the children into B Street. The wife conceded the husband only visited her and the children at B Street occasionally and would not stay the night there. However, she said the parties did not separate until 12 December 2021, at which time the husband told her that he wanted to end their relationship. Again, nothing significant turns on the precise date of separation.
Also in 2021, the husband decided to sell the BB Street premises owned by N Pty Ltd. The property was sold in mid-2021 for $13,500,000. The net proceeds of just over $7,000,000 were applied as follows:
(a)to purchase the J Street property from EE Unit Trust for $7,200,000 in the name of N Pty Ltd. The husband said he currently uses that property to store stock for customers of F Pty Ltd. The husband did not depose the amount he contributed towards that purchase;
(b)to purchase the L Street property, in the name of N Pty Ltd. The husband said he and his staff are able to stay in those premises when travelling to Sydney for work. The property was purchased for $1,060,000. The husband did not depose the amount he contributed towards that purchase;
(c)$400,000 was paid into the offset account attached to the D Street / B Street properties. The bulk – if not all – of those monies were used by the wife.
The sale also resulted in a Capital Gains Taxation bill for N Pty Ltd of approximately $2,000,000.
In mid-2021, an architect was engaged to design a home on the B Street property. The wife said this was a joint agreement, prior to separation. That was denied by the husband who said he played no part in the design of the home – and never agreed to an entirely new build. It was the wife’s evidence that initially the plan was to extend and renovate the existing older residence on the property. However she said it was ultimately determined to be more appropriate to build a new home and demolish the existing dwelling.
The wife signed a contract with a builder in early 2023 for the construction of that new dwelling, with a total cost estimated at $1,842,183. The decision to enter that contract, and all negotiations, were made unilaterally by the wife. It was asserted by her counsel that at that time it was hoped the matter was close to finalisation as the parties had a compliance and readiness hearing scheduled for early 2023 and the matter was initially set down for trial shortly thereafter. However, the matter was subsequently transferred to Division 1 of the Federal Circuit and Family Court of Australia when it was estimated the matter would take five days. The matter was then listed before me.
The wife says the timber frame for the new dwelling has been built, but the construction has otherwise stalled. She and the children continue to live in the older residence, which the wife said is in disrepair.
The wife has had the benefit of part property payments pursuant to interim orders made during these proceedings. From those payments she had paid the sum of $501,009 towards the construction of the dwelling at B Street. The wife estimated she will need a further $1,078,677 to complete the build and further funds of around $70,000 for a pool.
THE EVIDENCE
The wife
When the wife’s trial material was drafted, she proposed the pool be divided 60 per cent to her and 40 per cent to the husband. However, at trial she asserted she was entitled to 55 per cent of the pool, and the husband 45 per cent. Essentially, it was her case that adjustment was appropriate on the basis that:
(a)whilst the husband’s initial contributions were greater than hers, that contribution has to be weighed in the context of the parties’ marriage that spanned over 15 years, and produced six children; and
(b)the wife has the primary care of the parties five youngest children. The care requirements of the children impact on her income earning capacity, which is significantly less than the husband’s.
The wife relied upon:
(a)Further Amended Initiating Application filed 8 February 2024;
(b)Her affidavit filed 8 February 2024;
(c)Financial Statement filed 8 February 2024;
(d)Her affidavit in reply filed 9 April 2024; and
(e)Outline of Case filed 19 April 2024.
The wife was subject to cross-examination. She gave her evidence in a direct and straightforward manner.
The husband
The husband’s position changed markedly in the running of the hearing. In his trial material he sought the entire funds paid to the wife as a result of interim orders be characterised as part property. However, he sensibly conceded the wife’s position as to the appropriate amount of the monies paid pursuant to Court order to be characterised as part payment. The husband previously estimated his initial contributions to be around $8,000,000. The retrospective valuations were obtained only shortly before trial and were not subject to challenge. These were instrumental in narrowing issues regarding the husband’s initial contributions.
The husband’s trial material proposed that the asset pool be divided 60 per cent in his favour. However, when the property aspect of the proceedings commenced before me on 23 April 2024, the husband sought an equal division of the net assets of the parties, with the parties’ entitlements to be calculated after the H Group had been liquidated and all taxation and other liabilities associated with that liquidation equally shared.
It was the husband’s case that an equal division properly considered;
(a)the husband’s significantly greater initial contributions; and
(b)the wife’s ongoing care of five children, and the husband’s ongoing care of one child.
The husband relied upon:
(a)Final Further Amended Response to Initiating Application filed 2 February 2024;
(b)Financial Statement filed 2 February 2024;
(c)His affidavit filed 2 February 2024; and
(d)Hix affidavit in reply filed 8 April 2024.
The husband was also cross-examined. He was a less impressive witness than the wife. He appeared at times to give his evidence in a way that was designed to support his case. For instance he insisted the parties could not afford the children’s extracurricular activities, and that the wife’s support of this despite the expense was “the main problem why we split”. However he also spent $35,000 on this activity for U after the parties’ separated. The husband then said that was “as an investment”, which he subsequently clarified was ‘an investment for [U]’.
Similarly, when asked if the wife worked hard raising the children, the husband responded “with help, yes” and then said she had babysitters, so her providing care for the children “wasn't by herself. We all worked hard to raise the kids”. He went on to say he was earning the income to pay for the babysitter, and again referred to the wife looking after the children “with the babysitter”. He reluctantly agreed that ‘as far as he knew’ the wife had worked hard at home, although he was not there to witness her care of the children as he was out working. He was able to concede it was an onerous burden to care for six children when he was away from home working long hours.
The parties also relied upon a raft of single expert reports, valuing the parties’ assets, including the H Group and the retrospective valuations of some assets. The single expert affidavits relied upon were:
(a)affidavit of Mr FF filed 18 April 2024;
(b)affidavit of Mr GG filed 18 April 2024;
(c)affidavit of Mr JJ dated 18 April 2024;
(d)affidavit of Mr HH filed 19 April 2024.
(e)affidavit of Mr T filed 19 April 2024;
(f)affidavit of Mr KK filed 19 April 2024;
(g)affidavit of Mr LL filed 19 April 2024; and
(h)affidavit of NN Valuers filed 19 April 2024.
In addition, the wife tendered an updated valuation report by Mr T dated 11 April 2024 that was subsequently filed on 29 November 2024.
None of these experts were required for cross examination and their evidence was unchallenged.
ASSETS, LIABILITIES AND FINANCIAL RESOURCES AS AT THE DATE OF FINAL HEARING
By the conclusion of the hearing, the parties were able to agree substantially on the current assets, liabilities, and financial resources of the parties. The issues that required my determination were:
(a)the appropriate value for B Street;
(b)how the $400,000 paid to the wife from the sale of the BB Street property in late 2021 should be treated;
(c)whether the husband’s ANZ bank account monies should be included in the pool;
(d)whether the wife had been overpaid tax and how that should be treated;
(e)whether the wife’s trailer should be included;
(f)whether the husband’s ANZ bank credit card liability should be included; and
(g)how to treat the costs order against the wife in favour of the husband.
In addition, as already noted, it was the husband’s case that the realisation costs of selling assets and winding up the corporate entities, together with the costs and taxation consequences of doing so, should be included in the pool.
There was a minor issue as to the appropriate amount to add back by way of the husband’s legal fees.
Value of the B Street property and funds received by the wife post separation from the sale of the BB Street property
In his valuation dated 22 February 2024 Mr MM of NN Valuers valued the B Street property at $2,500,000 ‘as is’. That included valuing the partially constructed new home. Mr MM included in that valuation a figure of $431,579 described by him as the value attributable to “new works”. That was then further explained by Mr MM as a figure that “represents 30% of the Building Contract”.
Senior counsel for the husband asserted in closing that:
(a)if the B Street property was included at $2,500,000 then the wife’s use of the $400,000 redraw on D Street (being funds from the proceeds of sale of the BB Street property, paid into the offset account attached to the B Street property and accessed by the wife in 2021/2022) could be disregarded; or
(b)if the B Street property was included at $2,000,000 then the $400,000 should be notionally added back in.
It was conceded it would be a double counting to include both the higher valuation of the B Street property and the funds the wife had contributed to the B Street property from the sale of the BB Street property. However, it was asserted that wife’s share of the proceeds of the sale of the BB Street property must be added in – either by including the higher value for the B Street property, or notionally adding back the sum of $400,000 – as well as notionally adding back the wife’s part property settlement monies.
This was opposed by the wife.
Regarding the $400,000, the wife’s evidence was:
(a)she drew down the funds available in the redraw between 2021 and 2022 to meet the costs for herself and the children in circumstances where the husband had substantially reduced her access to income, and she said he would not provide her with proper support. She said the husband at that time paid her $1,050 per week from which she had to meet all outgoings and provide for the children – although I understand the husband met the mortgage repayments and utilities, rates, and insurances for the B Street property for a period. She said the husband refused to provide her with additional funds to cover costs including babysitters, out of pocket medical and dental costs for the children, the wife’s car registration and the children’s school expenses aside from some school fees;
(b)she also used the funds in part to construct fences at the B Street property, and to have house plans drawn up. In her oral evidence the wife referred to having to repair fences on the property, as well as attending to earthworks and drainage works on the property. It is her case that the monies used to effect these improvements and maintenance of the B Street property are already reflected in the value of the property separately from the “new works” as described in the valuation, and accordingly it would be double counting to notionally add those monies back;
(c)the funds in the offset account were almost depleted by mid-2022 – at which time the wife sought (and obtained) court orders for spousal maintenance and child support; and
(d)she contributed the sum of $501,000 from the part property settlement monies paid to her pursuant to court orders towards the design, planning, and construction of the dwelling on the property. She said that figure is already adequately and appropriately reflected in the “new works” component of the valuation.
Accordingly, she said it would be an error to notionally addback the $400,000 as well as the wife’s part property payments, and the higher valuation for the B Street property.
Additionally, the wife said the husband had the benefit of $70,000 of the $400,000 that was available from the offset account. That was denied by the husband in his affidavit. This evidence was not the subject of any testing at trial and no documents were produced to me.
The wife’s evidence as to having undertaken improvements to the property – separately from the construction of the new dwelling – was consistent with the husband’s own evidence that the wife advised him she had installed new gates, undertaken excavation works, extended the driveway, extended the arena, constructed sand yards, undertaken extensive plumbing works, installed a water tank, and made “many more alterations to the property”.
I am satisfied it is reasonable to assume that these repairs, works, and improvements are already reflected in the value given to the B Street property – separately from the value attributed to the new works which is tied to the building of the new home.
That the wife essentially expended $400,000 (or she says $330,000) within 12 months does appear to be significant spending – particularly when it appears to be common ground that the husband paid the mortgage repayments for B Street for a period. However, there was no real challenge in the husband’s material, or by way of cross-examination as to how the wife applied those funds. She was not challenged as to what monies she spent on the property or the appropriateness – or quantum – of the funds being used to maintain herself and the children.
In the circumstances, I am satisfied that:
(a)the sum of $400,000 should not be notionally added back into the pool. Part of the funds were used by the wife to meet her living expenses and those of the children. I am satisfied the balance of those monies is already reflected in the value of the B Street property having been spent on repairs, improvements and maintenance the wife attended to on the property separately to the new build;
(b)the wife was not meaningfully challenged on her evidence that the funds were used by her to meet living expenses for her and the children, or that she used the funds for works and improvements to the property separately from the new build;
(c)the appropriate valuation for the B Street property is $2,500,000 less the “new works” pursuant to the building contract (reflecting the partial construction of the new dwelling) of $431,579. I will include it in the pool at $2,068,421; and
(d)the part property settlements the wife has received (of which $501,000 has been paid towards B Street) should be notionally added back into the pool.
Funds in the husband’s ANZ bank account
The wife contended the sum of $10,460 should be included in the pool, reflecting the funds in the husband’s account as at 17 April 2024. However she asserted her bank accounts of a similar figure should not be included. She said the funds in her account were the balance of monies she borrowed from family. She said both the funds and the liability to her family ought be excluded.
The husband asserted similarly in relation to his bank account balance. The pool he initially contended for included monies owed by him to his sister and brother-in-law – and like the wife, he no longer sought to include that as a liability. I do not know precisely the source of the husband’s current bank funds.
In all the circumstances I am satisfied it would not be just to include only one party’s modest savings. The more appropriate manner to deal with the parties’ respective modest savings is to exclude them from the pool.
Overpayment of tax to wife by husband
The wife received a distribution from the H Group in 2021 of $122,426. Pursuant to orders made in August 2022 the husband was to pay the tax liability arising from that distribution. At that time, there was some dispute as to what tax liability the wife incurred, with the wife asserting the amount of $38,691 was owed – and that was the amount paid by the H Group to the Australian Tax Office on behalf of the wife.
The husband said the wife subsequently received a tax refund of $8,327 which he said indicated he overpaid her taxation liability for that year.
The wife did not engage with that issue in her trial material beyond saying she denied the husband’s assertions. The matter was not raised in any meaningful way at trial. There was no cross-examination on the issue by either party. No documents were adduced or tendered.
In the circumstances where the wife denied the allegation, no documents were produced, the wife’s taxation return was not tendered, and there was no cross-examination on the point, I am not prepared to notionally addback the monies.
Trailer
The husband asserted this should be included in the pool. The vehicle has not been valued but was listed by the wife in her Financial Statement filed 8 February 2024 at $3,000.
There was no argument advanced on behalf of the wife as to why the vehicle should be excluded from the pool. Accordingly, I will include it.
Husband’s ANZ bank credit card liability
The husband said he owed $1,238 on his credit card liability. I do not know when, or for what, that liability was incurred. No evidence was adduced to support this claim. Accordingly I will not include it in the pool.
Costs order owing to the husband
Pursuant to orders made 16 August 2023, the wife was ordered to pay $12,000 to the husband. It would be mathematically incorrect to include that payment as an asset to be paid to the husband in the pool of assets without also including a corresponding liability owed by the wife. However, in my view the appropriate way to deal with that costs order is to deduct the sum of $12,000 from the sum the husband is to pay the wife by way of overall property settlement.
Tax liabilities and liquidation costs
It is not in dispute that there will be significant sale costs and tax implications for the parties if assets are realised. As already determined, I am not satisfied that the entire group needs to be wound up in order to effect a payment to the wife, and accordingly, the costs of realising the H Group entirely, and the taxation consequences of doing so, need not be taken into account.
It was not in dispute that if a corporate asset or assets (such as J Street) are sold pursuant to the orders made, the costs of any sale and the capital gain tax arising would need to be taken into account.
According to the single expert’s supplementary report the anticipated Capital Gains Tax on the sale of J Street will be approximately $528,554 if it sells for $10,025,000. After allowing for anticipated costs of sale, repayment to the ANZ bank, and payment of the Capital Gains Tax, the single expert estimated the net proceeds would be approximately $4,816,446.
It was also the single expert’s evidence in the supplementary report that the sale of L Street would yield a capital loss which would offset the capital gain on J Street if both properties were sold. The anticipated net proceeds from the sale of L Street after allowing for sale costs were estimated by the single expert to be $1,011,187.
Assets
Post separation the husband purchased an asset for $35,000 for U. It has not been valued. At the conclusion of the hearing the husband agreed to make the asset available for collection by the wife, so that it could be retained at the wife’s home and utilised by U. It was regrettable that the husband had retained the asset in his care, depriving U of the use of the asset.
In circumstances where the asset had not been valued, and where it was common ground the asset was purchased for U, I am not including it in the pool. I note the husband said he had two other assets in his care. They have also not been included in the pool. Nor have the assets utilised by the other children been included.
Funds owed to F Pty Ltd
Throughout the hearing there was a disagreement as to how the funds owed to F Pty Ltd should be treated. Ultimately, at the further mention of the matter on 4 July 2024, it was agreed that only the following monies owed to F Pty Ltd should be included on the balance sheet:
(a)the sum of $375,000 was borrowed by the husband from the company post valuation and paid to the wife as part property on 20 July 2023. Accordingly, it was agreed that amount should be recorded in the asset pool as both a liability of the husband, and a part property payment to the wife as a notional addback; and
(b)the sum of $200,000 paid to the wife pursuant to interim orders made by consent at the conclusion of the substantive hearing had also been borrowed from the company. Again, it was agreed that amount should be recorded as both a liability of the husband and a part property payment to the wife as a notional addback.
I made orders on 21 November 2024 for a further partial property distribution to the wife. I do not know the source from which the husband proposes to make the payment. On the assumption the order has been complied with, I have included the part property distribution as an asset of the wife to be notionally added back, and a corresponding liability of the husband.
Husband’s legal fees
It was accepted that the husband had paid $545,985 by way of legal fees. Part of those monies were funds borrowed from the husband’s family of $87,323 and not drawn from the H Group. Accordingly, the correct amount to notionally add back into the pool is $458,662.
Determination as to the pool
Accordingly, I am satisfied the tangible pool is comprised:
B Street – wife
$2,068,421
D Street – husband
$3,200,000
Motor Vehicle 1 – wife
$15,000
Motor Vehicle 2 (sale proceeds) – wife
$35,000
Motor Vehicle 3 – wife
$50,000
Motor Vehicle 6 – husband
$8,000
Motor Vehicle 5 – husband
$1,000
Vessel 1 – husband
$148,000
Vessel 2 – husband
$15,000
Recreational vehicles (x2) – husband
$6,000
Vessel 3 – husband
$20,000
Vessel 4 (partial) – husband
$8,000
Part property settlement (Orders 31 August 2022) – wife
$110,000
Part property settlement (Orders 27 January 2023) – wife
$500,000
Part property settlement (Orders 20 July 2023) – wife
$375,000
Part property settlement (Orders 15 January 2024) – wife
$70,000
Part property settlement (Orders 24 April 2024) – wife
$200,000
Part property settlement (Orders 21 November 2024) to be paid on or before 20 January 2025 – wife
$113,260
Trailer – wife
$3,000
Husband’s legal fees notionally added back
$458,662
F Pty Ltd – husband
$3,567,901
O Unit Trust – husband
$41,929
G Pty Ltd – husband
$5,274,945
N Pty Ltd - husband
$2,294,891
TOTAL ASSETS
$18,584,009
LIABILITIES
Mortgage over B Street – wife
($2,127,483)
Mortgage over D Street – husband
($366,866)
Funds owed to F Pty Ltd by the husband
Funds borrowed by the husband from F Pty Ltd and paid to the wife as part property
($375,000)
Funds borrowed by the husband from F Pty Ltd and paid to the wife by the husband as part-property pursuant to orders made 24 April 2024
($200,000)
Funds used by husband to fund further part property settlement pursuant to orders made 21 November 2024
($113,260)
Funds owed to N Pty Ltd – husband ($1,341,735) less the funds N Pty Ltd owes to the wife $136,586
($1,205,149)
Funds owed to husband’s mother – husband
($70,000)
TOTAL LIABILITIES
($4,457,758
NET POOL excluding superannuation
$14,126,251
The parties advised that there was no dispute as to the valuation of the H Group or any part of it. Neither party asserted there was any issue with the valuation of N Pty Ltd in light of the updated valuations of J Street and L Street.
Whilst the husband’s primary position remained that the entities would need to be wound up, it was agreed that for the purposes of calculating the asset pool and the parties’ respective ‘keeps’ that the husband would retain responsibility for the debt to N Pty Ltd, to be offset against the monies owed to the wife by N Pty Ltd – leaving the husband with a net amount owing to N Pty Ltd of $1,205,149.
The husband’s net ‘keep’ of the tangible pool is therefore $12,714,053, including the H Group (totalling $11,179,666).
The wife’s net ‘keep’ totals $1,412,198.
Superannuation
The parties operate the SMSF. The parties’ entitlements in that fund are:
Husband’s entitlement
$939,817
Wife’s entitlement
$396,526
The wife has an additional entitlement with Superannuation Fund 1 of $4,227.
The total superannuation entitlements are therefore $1,340,570.
The parties agree that their superannuation entitlements in the SMSF should be divided equally between them. That will require the sale of the Q Street property, so that the wife can then roll out her share into a separate fund nominated by her.
The parties provided a minute of proposed orders in relation to superannuation. Those orders only dealt with the parties’ entitlements in the SMSF – to be divided equally – and did not make any adjustment for the wife’s very modest industry fund entitlements.
In all the circumstances, and particularly in light of the modesty of the wife’s Superannuation Fund 1 entitlement this appears to be appropriate.
IS IT JUST AND EQUITABLE THAT AN ORDER BE MADE?
Before I make any order altering the interests of the parties to a marriage, I must first be satisfied that it is just and equitable that I do so. If I am so satisfied, I am then empowered to make such order as I consider appropriate taking into account a number of factors as set out in ss 79(4) and 75(2) of the Act, insofar as they are relevant. I cannot conflate my determination pursuant to ss 79(2) and 79(4) – these are separate enquiries. There is also no presumption that the parties’ entitlements in the existing asset pool should be altered, or that one party has the right to have the property of the parties divided between them only on the basis of the considerations in s 79(4) per Stanford v Stanford (2012) FLC 93-518.
In these proceedings, both parties assert it is just and equitable that orders be made to alter their interests in their property. However, it is not sufficient that the parties agree that there should be an order made pursuant to s 79(2) of the Act. I must be satisfied myself that any order is appropriate.
In my view, this is one of the “vast majority of cases” referred to by the plurality of the High Court in Bevan v Bevan (2013) 279 FLR 1 at [164] in which the requirements of s 79(2) of the Act are fairly readily satisfied. If no adjustment was made, the husband would retain the vast majority of the parties’ assets after a relationship that spanned approximately 15 years and produced six children. Five of those children are in the wife’s primary care.
It is plainly just and equitable to make an order pursuant to s 79 of the Act in these proceedings for a division of property between the parties.
SECTION 79(4) OF THE ACT
In determining the appropriate orders to be made, I must weigh and assess the contributions of all kinds made by the parties over the period of their relationship. This is an holistic assessment, and not a mathematical or accounting exercise; Dickons v Dickons (2012) 50 Fam LR 244. There is no presumption of equality of division of property.
Initial contributions
At the start of the parties’ relationship, the husband owned the following assets:
(a)the F Pty Ltd business. His interest in the H Group was retrospectively valued at $1,600,923. The husband had a net liability to the group of $45,956, so that the husband’s net interest in the group at the commencement of the parties’ relationship was about $1,554,965;
(b)the D Street property then valued at $500,000;
(c)the Q Street property then valued at $460,000. That property is now owned by the SMSF; and
(d)Vessel 1 and various other vessels.
The husband and his first wife also owned a property at OO Street, Suburb R (“OO Street”). The wife asserted the husband used that property to borrow funds to pay out his first wife’s property settlement, which the husband denied. Irrespective, it was sold at about the time the parties commenced cohabitation. Under-cross examination the husband accepted the contents of a document shown to him that set out he received $92,000 plus his share of the deposit less the real estate agent’s fees from that sale. I was not informed as to what precise figure the husband received.
The husband deposed he also had Vessel 1, recreational vehicles and other vessels worth approximately $245,000. According to the Application for Consent Orders filed by the husband and his first wife in 2004 – approximately two years before the parties commenced cohabitation – the husband owned Vessel 1 worth $80,000, Vessel 4 worth $90,000 and recreational vehicles worth $8,000. In that document the husband further asserted he had a vessel loan of $110,000. That amounted to vessels and equipment with a net value of $68,000 in 2004. The husband did not depose to having purchased additional items between 2004 and 2006. I do not know how much of the vessel loan was repaid in those years. Doing the best I can, I am satisfied that the vessels owned by the husband at cohabitation had a net value of not less than $68,000.
The husband deposed that he had superannuation totalling $50,000 at cohabitation. In the Application for Consent Orders signed by him two years earlier he said he had nil superannuation. He did not adduce any evidence to assist me to make a finding in regard to the quantum of superannuation at cohabitation.
Whilst both D Street and Q Street had mortgages to the ANZ bank registered against the title, it was the husband’s case that the properties were used only as security for business loans. I accept the husband’s evidence that there were no monies owing on those mortgages that had not already been captured by the retrospective business valuation.
Accordingly, the husband’s initial contributions were not less than $2,674,965 being:
(a)his interest in the business at $1,554,965;
(b)D Street valued at $500,000;
(c)the Q Street property valued at $460,000;
(d)vessels of not less than $68,000; and
(e)the proceeds of sale of OO Street of $92,000 plus the deposit.
As already observed, it is unclear as to the quantum of superannuation the husband had at the commencement of the relationship.
The husband also had a liability to his first wife pursuant to final property orders made by consent on 16 September 2004. Pursuant to those orders the husband was to pay his first wife $600,000, paid by way of instalments. Relevantly, after the first few payments, the orders provided that the sum of $250,000 was to be paid off at $50,000 per annum from 1 July 2005, plus interest.
It was the husband’s evidence that his first wife died in 2007, and he subsequently entered into a deed of release with the estate. The husband did not produce an executed copy of that release but had only an unexecuted copy. He said at the time his first wife died he still owed $150,000 (which suggested the husband had made two payments of $50,000 before the parties cohabited) and that part of the debt was forgiven. According to the unexecuted release the husband paid a further $50,000, and it was agreed the balance to be paid would be reduced to $65,000. Thus at the commencement of the parties’ relationship the husband had a liability to his former wife of $150,000, although according to the husband that had been reduced to $115,000.
The husband continues to own D Street, in which he lives (now with net equity of $2,833,134). He also continues to operate the transport business (valued at 30 June 2023 at $11,179,666) and has also retained the vessels. As set out, the Q Street property is now owned by the SMSF, unencumbered (and is valued at $1,260,000).
At the commencement of the relationship the wife was working full time as a health professional. The wife had some savings (she said around $50,000), a car and some superannuation.
It is common ground that the contributions of the husband quite clearly eclipse those made by the wife at the commencement of the parties’ relationship.
Contributions during the marriage
It is also common ground that during the relationship the husband worked long hours in the business, including driving interstate for periods of time. The wife worked on a part time basis when the children were young. She stopped working as a health professional entirely in 2017 and was then not in paid employment until the parties separated. The wife has been the primary carer for the children often in the absence of the husband who worked long hours and spent time away from home.
I am satisfied parties both worked as hard as they could substantially in their separate spheres during the marriage. I accept that the husband played a role in caring for the children, but in circumstances where he worked long hours, and spent time driving interstate, the vast majority of their care fell to the wife. He of course worked hard outside the home, earning the funds to support the family.
There was no real dispute that the parties’ contributions during the marriage should be regarded as equal.
Contributions post-separation
Post-separation the wife continued in her role as homemaker as parent. At all times W, X, Y and Z have remained in her primary care. U lived with the husband between January 2022 and August 2023. V has lived with his father since January 2022.
The husband has continued to operate the businesses, and provide primary care to V, and at times, U. The other children spend regular time with him. The husband has made contributions to the wife for her maintenance, and towards the costs of the children’s schooling. The wife says this has not been without issue, and that the husband has been highly resistant to providing her with appropriate funds.
RELEVANT CONSIDERATIONS PURSUANT TO SECTION 75(2) OF THE ACT
The parties have six children. Five live with the wife and the second eldest child lives with the husband. The four younger children in the wife’s care spend regular time with their father. The two eldest children do not currently spend time with their non–resident parent.
The husband is 58 years old. He is the director of F Pty Ltd. He generally undertakes office work, and said he sometimes undertakes other duties. However, he said that it is his plan to reduce his hours at work, so he can spend more time with the children “and with a view to working towards retirement”.
It was his evidence that the business did very well during COVID-19, but since that time, the demand for local and interstate transport has declined, and the loss of several lucrative contracts – including for distribution – has meant the business income has dramatically decreased from its peak during the pandemic.
The husband deposed that he earned $163,294 in 2020, $146,530 in 2021 and $442,372 in 2022. He said that year’s income was inflated as a result of property sales.
According to his Financial Statement filed 2 February 2024 the husband deposed to having a taxable income of just $53,352. That was the figure taken from his 2023 tax return. The husband said the substantial drop in his income was the result of the reduction in demand post COVID-19 and the loss of key contracts.
However, that income does not reflect the husband’s access to funds. It was common ground the husband had for a period been meeting the costs of U and V at private secondary school. He had, by consent, agreed to interim orders requiring him to meet the costs of the children’s attendance at private school and to meet their private health insurance costs.
The husband acknowledged during cross-examination that he has had access to funds from the business, either as profit from the business, or by way of access to loan accounts, although those monies will have to be paid back. Additionally, the husband has the ongoing use of an electric motor vehicle through F Pty Ltd.
I note further the unchallenged valuation of the single expert that a commercial salary for the husband from F Pty Ltd would be $154,500 for the year 2023.
The husband deposed he has medical issues. He said he may need surgery. He said because of his medical issues he is “presently unable to drive […]”. However, he did not adduce any further evidence about this issue, including no evidence from a medical professional. Nor did he adduce any evidence that would enable a finding to be made that this issue impacted on his income earning capacity.
If the entities are wound up, and the husband’s business ceases operation, his access to funds and income will be reduced. Of course, in that event his ability to pay child support would also decrease.
As observed, the husband has the primary care of one child. He has regular time with the younger children.
The wife is 45 years old. She is a health professional but has not worked as a health professional since 2017. The wife said she does not have a current registration. She said she would have to undertake expensive and time-consuming study and training to be able to return to the profession, and she would have to engage in shift work. She said that is not possible as the youngest of the five children living in the wife’s primary care is just five years old.
The wife works part time at a retail outlet. She started there in early 2022. Generally, she works between nine and a half and 12 hours each week. She can pick up extra shifts, and work on weekends and public holidays when that is practicable given her childcare obligations. She outlined the significant number of extra curricula activities in which the five children are actively engaged, which impinges on her ability to work outside school hours. The youngest child is only five – and accordingly the wife’s ability to work during school holidays is likely to be compromised.
According to her Financial Statement the wife earns $30.91 per hour. If she works around 12 hours each week, she will earn a gross income of $371. In addition, she receives a further $175 per week for animal care. Her total weekly income is therefore approximately $546.
The wife was not meaningfully challenged in relation to her commitments to care for the children, her limited income earning ability, or that it is not practicable for her to return to a health sector career at this time. She was not challenged in relation to the significant expenses she incurs on behalf of the children, which she deposed to being $3,117 per week (although that figure was for all six children). There is clearly a very significant shortfall between the wife’s income, together with the child support paid by the husband, and the costs the wife must meet on the children’s behalf. There will continue to be a shortfall even upon the making of a departure order as proposed by each of the parties.
ASSESSMENT OF CONTRIBUTIONS AND PROSPECTIVE NEEDS
The husband contended that the parties’ contributions should be assessed at 55 per cent by him and 45 per cent by the wife. The wife contended the contributions should be assessed at around 48-49 per cent by her and 51-52 per cent by the husband.
It was common ground there should be an adjustment in favour of the wife on account of future needs. The husband contended a five per cent adjustment was appropriate – resulting in an equal division of the parties’ assets. The wife asserted there should be an adjustment of around six to seven per cent in her favour – bringing her overall entitlement to 55 per cent.
As noted, the husband’s initial contributions overwhelmed those by the wife. Those assets continue to be retained by the husband.
Both of the parties worked hard throughout the marriage.
I must consider the totality of what the parties have contributed financially, and non-financially, to the welfare of their family, and to the acquisition, conservation, and improvement of the parties’ property. I am required to give a reasonable value to all the contributions made by the parties, across the entirely of their relationship and post separation.
Doing the best I can, and weighing the myriad of contributions, I am of the view that it is appropriate to regard the husband’s contributions at 55 per cent of the asset pool, and the wife’s contributions at 45 per cent.
In terms of the relevant s 79(4) factors of the Act, I note the ages of the parties. I am satisfied the husband’s income earning capacity is greater than that of the wife’s, which is impacted by virtue of her having been the primary carer for the parties’ children over the course of the marriage, and her continuing in that role for the five children remaining in her care. The youngest child is five years old. The wife will be required to provide primary care for the younger children for a number of years.
The husband is older than the wife but cares full time for only one child. According to the single expert, at least as at the date of valuation of the H Group, it would be reasonable for the director to draw a salary of about $150,000 from F Pty Ltd. The husband also has access to additional funds – although any director’s loans will ultimately need to be repaid. In the event the H Group was wound up, the husband said he expected to find other employment, but he did not expect to have access to the same benefits as he currently enjoys. If his income reduced, that would of course reduce the amount of child support he would provide to the wife once the departure order that I have been asked to make comes to an end.
As indicated, both parties agreed it was appropriate there be an adjustment in the wife’s favour as a result of these considerations.
The Full Court in Van der Linden & Kordell [2010] FamCAFC 157 observed, at [90];
As this Court has often recognised (eg see Steinbrenner & Steinbrenner [2008] FamCAFC 193, at paragraph 234), given that the assessment of the relevant factors arising under s 75(2) of the Act inevitably moves from a “qualitative evaluation” of those factors to a “quantitative reflection of such evaluation, there will inevitably be a ‘leap’ from words to figures”. That is the nature of the exercise of discretion.
Weighing all the factors, I am satisfied that it is appropriate there be an adjustment in the wife’s favour, so that the parties’ overall entitlement in the pool is equal.
ORDERS TO BE MADE
Given the non-superannuation pool as I have found (at $14,126,251) and given my determination as to the relevant considerations in ss 79(4) and 75(2) of the Act, the wife is entitled to net assets of the current pool – if no assets are sold – totalling $7,063,126. Taking into account the assets the wife has already, (which total $1,412,198) this would require the husband to pay to the wife a cash amount of $5,650,928 less the $12,000 costs order made against her.
However, if it is necessary that assets be sold to make that payment to the wife, then in line with the authorities, the costs that flow will need to be shared by the parties. I note it is most likely on the scenarios discussed during the proceedings J Street will be sold.
In his supplementary report the single expert calculated that if J Street was sold for $10,025,000 the net proceeds after payment of all costs and commissions, and repayment of the mortgage and the Capital Gains Tax would be approximately $4,816,446.
On the assumptions that:
(a)the property sells for $10,025,000;
(b)the costs and commissions of the sale are $127,313 as estimated by the single in his supplementary report; and
(c)the Capital Gains Tax is $528,554
the net pool would then be $13,597,697.
On those figures, the wife would be entitled to a further cash adjustment of $5,310,994 (being her 50 per cent entitlement, less her ‘keep’ and less the $12,000 costs order against her). If she received the whole of the proceeds of the sale of J Street (anticipated on this scenario to be $4,816,000), the husband would need to find a further $494,994 to pay the wife her full entitlement.
It would be a matter for the husband how he would fund that further payment, and whether it was funded from personal or corporate assets. He may elect to fund that through the sale of L Street. I note that according to the single expert’s supplementary report the sale of L Street is likely to trigger a capital loss.
The orders I am making will enable the husband to elect whether he will sell J Street and/or L Street in order to finalise the payment to the wife. As a sale of J Street is likely, and will incur a significant Capital Gains Tax liability, that needs to be taken into account. As the sale of L Street is less certain – and indeed likely to trigger a capital loss – that can be retained by the husband.
The actual Capital Gains Tax and the actual costs and commissions of the sale will need to be included in the net pool before that is then divided equally between the parties. In addition, for every dollar for which the J Street property sells in excess of $10,025,000 that dollar should be added to the pool. Similarly, the pool should be reduced by one dollar for every dollar for which it sells for less than $10,025,000. This will ensure the parties share equally in costs of the sale, and in the event the property value has risen or fallen.
I have included orders for the sale of J Street and/or the husband’s D Street property in default. I am satisfied that is just and equitable and otherwise appropriate in the circumstances of this case.
Superannuation
The parties were able to agree as to superannuation splitting orders, as already observed.
CHILD SUPPORT DEPARTURE ORDER
Initially the wife’s application sought non-periodic payments by way of private school fees to be paid by the husband. The parties now acknowledge the financial reality that they are not able to meet the costs of private school fees for their six children. The wife accordingly no longer pursued this aspect of her application.
The wife did press however for a departure order with respect to periodic payments to be made by the husband towards the support of the five children in her primary care. It was understood that the wife would not make any contribution towards V and the husband would meet all of the expenses for that child.
The child support assessment from which the wife says there should be a departure is dated 4 April 2024 and covers the period 1 April 2024 to 30 June 2025. This was tendered as an exhibit in these proceedings. The assessment provides for the husband to pay to the wife $23 per month. That assessment was based on the following information:
(a)the wife’s adjusted taxable income at $25,014;
(b)the husband’s adjusted taxable income at $53,349; and
(c)both U and V being primarily cared for by their father, which is no longer accurate.
Counsel for the wife said the child support registrar was served on 30 August 2022. They have not sought to participate in these proceedings.
The wife proposed a departure order be made requiring the husband to pay her $300 per week per child. That would be $1,500 per week for the five children in her care, or $6,500 per month. She said that should be fixed for 18 months to two years.
The husband proposed he pay the periodic amount of $200 per week per child. That would be $1,000 per week or $4,333 per month. He said the payment should be fixed for 12 months.
It is implicit in that submission that the husband must concede it is appropriate there be a departure order – the issue is apparently the quantum and the length of time the departure order should be in place.
Should the application proceed in this Court?
The wife has not sought a review of the child support assessment by making an application to the Registrar pursuant to s 98B of the Child Support (Assessment) Act 1989 (Cth) (“the Child Support Act”). Instead, she seeks that I make an order for departure.
Pursuant to s 116 of the Child Support Act, the wife is entitled to make that application before this Court provided she or the paying parent are parties to proceedings pending in this Court and if the Court is satisfied that it would be in the interests of the parties for the Court to consider this application. The first limb is obviously satisfied. I am also satisfied that it would be in the interests of the parties for me to hear and determine this issue rather than requiring the parties to continue their dispute elsewhere. I have heard evidence from the parties as to their financial circumstances, and the care arrangements for the children – leaving me reasonably well placed to also determine this aspect of the parties’ dispute. The matter is somewhat complex, involving a corporate structure controlled by the husband. I have the benefit of detailed valuations of the various entities, which includes profit and loss statements, balance sheets, and expert evidence as to the details of the operating performances of the entities, and their financial position. I note further both parents seek that I determine the issue.
The Law
I am empowered to make a departure order by Part 7, Division 4 of the Child Support Act. The objects of that division are set out at s 114 of the Child Support Act. They are to ensure:
(a)that children have their proper needs met from reasonable and adequate shares in the income, earning capacity, property and financial resources of both of their parents; and
(b) that parents share equitably in the support of their children.
Relevantly, pursuant to s 117 of the Child Support Act, I can make a departure order “in the special circumstances of the case” if I am satisfied:
(a)that a ground of departure exists within the meaning of s 117(2); and
(b)that it would be “just and equitable as regards the child, the carer entitled to child support and the liable parent” within the meaning of s 117(4) to make an order; and
(c)that it is “otherwise proper” within the meaning of s 117(5) to make an order.
It is the wife’s case that as the husband is self-employed his taxable income does not accurately reflect his access to and use of funds in the H Group. Rather, she said, the special circumstances of this case are that the husband is able to direct how he is paid and ensure his income – and therefore child support obligations – are kept to a minimum.
Accordingly, the relevant ground/s for departure must be ss 117(2)(c)(ia) or (ib) of the Child Support Act, namely:
(c)that, in the special circumstances of the case, application in relation to the child of the provisions of this Act relating to administrative assessment of child support would result in an unjust and inequitable determination of the level of financial support to be provided by the liable parent for the child:
…
(ia)because of the income, property and financial resources of either parent; or
(ib) because of the earning capacity of either parent;
…
Discussion and determination
The wife deposed that the children’s weekly expenses are $3,117. That amount included all six of the parties’ children. She has primary care of five of the children. Assuming the expenses for the children were equally divided between them, the weekly costs for five children would be about $2,600. The wife was not meaningfully challenged in relation to those expenses, although the husband was critical that the children engage in an expensive hobby. I note the husband also engages in the same hobby.
I am satisfied the wife currently earns approximately $371 per week from her employment (if she works 12 hours) and an additional $175 per week from animal care. That is about $28,400 per annum. I am also satisfied the wife’s ability to generate a greater income than she currently does is adversely impacted by her being the primary carer for five of the parties’ six children, the youngest of whom is just five years old. Whilst she has previously worked as a health professional, the wife would need to undertake further training to become registered. I accept she could not work shift work as a health professional given her caring responsibilities.
I accept the wife cannot afford to feed, clothe, house, educate and entertain and otherwise support the children on her income together with the very modest child support as assessed.
According to the husband’s Financial Statement he earns $1,026 per week, or $53,352 per year. I find that the husband’s taxable income does not reflect his income, financial resources, or his earning capacity;
(a)according to the report prepared by the single expert, as at 2022, the husband could be drawing a salary of $154,500 from F Pty Ltd. The single expert’s report was not the subject of challenge;
(b)in addition to that salary, the husband has access to considerable funds in the business, which he continues to operate. As already set out in these reasons, the single expert’s report identified the profit of F Pty Ltd was $715,908 in the year ended 2022, and $728,174 the following year. As noted, the single expert’s report was not the subject of challenge. It was not suggested by the husband that the business had deteriorated significantly since the valuations were completed (although he does say if J Street is sold this will impact his business);
(c)the husband previously agreed to orders (in July 2022) that he pay the wife the sum of $1,439 per week by way of child support, together with meeting all the costs of the children’s school fees, kinder fees, and educational expenses, as well as maintaining the children’s private health insurance. The wife had the care of only the four youngest children when that order was made. That amounted to almost $360 per week, per child by way of periodic payments. The order for that periodic payment was discharged, by consent, the following month, and a lump sum payment was ordered, and paid; and
(d)the husband’s own proposal is that he be assessed to pay $200 per week for each child in the wife’s primary care. In my view, it is implicit in the husband’s position that he recognises the administrative assessment of just $23 in total per month is an unjust and inequitable determination.
I am satisfied the wife has established a ground of departure by way of s 117(2)(c)(ia) and/or (b) the Child Support Act in that the husband’s taxable income does not reflect his income, earning capacity or financial resources. He is able to minimise his taxable income through control of a corporate structure, and simultaneously access funds through that entity. The administrative assessment pursuant to which the husband is required to pay to the wife just $23 per month has not taken these special circumstances into account.
The assessment does not amount to the children sharing reasonably and adequately in the income, earning capacity and financial resources of both of their parents. Nor does it reflect an equitable sharing by the parents in the support of their children.
I am satisfied the husband has the capacity to contribute $250 per week for each of the children in the wife’s care (being an increase in the annual rate of child support from $280 to $65,000). I am further satisfied that it is just and equitable regarding the children and their parents and otherwise proper to make a departure order accordingly.
I understand the husband said if the business is wound up his access to funds will diminish. As already set out, I am satisfied a wholesale wind up is not inevitable as a result of the property orders I am making.
In the circumstances, I am satisfied the departure order should remain in place for 12 months. I do not regard it as appropriate to make orders for the two-year period as sought by the wife. The potential for the financial circumstances of the parties to change, and orders then being unjust or inequitable, clearly increases with time. I am satisfied the period of 12 months as proposed by the husband, is appropriate – providing some stability and security to payments and taking into account that the parties’ respective financial circumstances may change within that period.
COSTS OF APPLICATION IN A PROCEEDING FILED 7 JUNE 2024
Although the parties entered into consent orders in relation to the parenting dispute on 22 April 2024, they were unable to resolve the question of schools for U and W. The wife filed an Application in a Proceeding on 7 June 2024 regarding this and other ongoing parenting issues. On 24 June 2024 the husband agreed to the wife’s proposals for U to commence at QQ School at the wife’s expense, and consent orders were made to that effect on 24 June 2024. The husband did not agree at that time to the wife’s proposal that W be similarly enrolled, to commence in 2025. His response to the wife’s application was that it be dismissed.
The matter was listed before me in relation to the question of W’s schooling on 4 July 2024. On that day the parties were also required to address me further in relation to an aspect of the balance sheet regarding funds owed to F Pty Ltd by the husband.
The parties were able to resolve the balance sheet issues. However, counsel was briefed and attended on 4 July 2024, instructed by solicitors as the issue of W’s schooling required determination.
Very shortly after the matter commenced, the husband’s counsel indicated her client consented to W being enrolled at QQ School at the wife’s expense.
In the circumstances counsel for the wife made a costs application. The wife sought $7,000 for the solicitor’s fees for the preparation of the Application in a Proceeding and attendance at the hearing, and $5,950 for counsel’s fees for his attendance on 4 July 2024. That was opposed by the husband.
Under the Act, the general rule is that each party will bear his or her own costs. However, that rule is subject to the provisions of s 117(2) of the Act which provides that a court may make such order for costs as it considers just if “…the court is of opinion that there are circumstances that justify it in doing so…”
Subsections 117(2A)(a)-(g) of the Act set out the matters the Court must consider in determining whether to exercise its discretion and make an order as to costs. No one factor must be present, and no particular factor is to be given more or less weight than any other. The factors to which the Court must have regard are as follows:
(a)the financial circumstances of each of the parties to the proceedings;
(b)whether any party to the proceedings is in receipt of assistance by way of legal aid and, if so, the terms of the grant of that assistance to that party;
(c)the conduct of the parties to the proceedings in relation to the proceedings including, without limiting the generality of the foregoing, the conduct of the parties in relation to pleadings, particulars, discovery, inspection, directions to answer questions, admissions of facts, production of documents and similar matters;
(d)whether the proceedings were necessitated by the failure of a party to the proceedings to comply with previous orders of the Court;
(e)whether any party to the proceedings has been wholly unsuccessful in the proceedings;
(f)whether either party to the proceedings has made an offer in writing to the other party to the proceedings to settle the proceedings and the terms of any such offer; and
(g)such other matters as the court considers relevant.
The relevant matters appear to be the financial circumstances of the parties, and their conduct. I have already referred to the parties’ financial circumstances. The husband’s income earning capacity is greater than the wife’s. In terms of conduct, it is the wife’s case that the husband caused her to incur legal fees to draft the Application in a Proceeding, and to instruct counsel to appear on 4 July 2024. She said that appearance by counsel would have been unnecessary had the husband provided his consent to the schooling issue prior to the commencement of the matter on the day it was listed. If that matter was resolved, it was asserted the attendance on 4 July 2024 could have been by the wife’s solicitor rather than counsel instructed by her solicitor. It was conceded by counsel for the wife that his client’s Application in a Proceeding sought orders additional to that single issue, and that the affidavit also covered matters beyond the question of W’s schooling – such that the costs sought were likely excessive.
I am not satisfied that there are circumstances that justify the Court departing from the usual rule as to costs as a result of the husband’s late consent to W’s attendance at QQ School. It is regrettable that the husband provided his consent to W’s attendance at the school only on the morning of the hearing. He had previously agreed to U attending at that school – and orders to that effect were made by consent, in chambers on 24 June 2024. However, the matter was listed for other reasons on 4 July 2024, including the issue as to the letter to be provided to the single expert, and the Court was very much assisted by counsel who had the conduct of the trial also appearing on that day.
For all of the foregoing reasons, I make the orders as are set out.
I certify that the preceding two hundred and fourteen (214) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Carter. Associate:
Dated: 20 January 2025
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