FIELD & KINGSTON
[2019] FamCA 863
•21 November 2019
FAMILY COURT OF AUSTRALIA
| FIELD & KINGSTON | [2019] FamCA 863 |
| FAMILY LAW – PROPERTY – Property Adjustment – Where both parties seek adjustive orders – Where appropriate to make adjustive orders – Where discussion of applicable principles – Where consideration of relevant contributions and s 75(2) factors – Where orders made for property adjustment. FAMILY LAW – SPOUSE MAINTENANCE – Where consideration of applicable principles – Where application dismissed. |
| Family Law Act 1975 (Cth) ss 72, 75, 79 |
| Bevan & Bevan [2014] FamCAFC 19 Chapman & Chapman [2014] FamCAFC 91 Chorn& Chorn [2004] FamCA 633 Jarrott & Jarrott [2012] FamCAFC 29 Rosati & Rosati [1998] FamCA 38 Russell & Russell (1999) FLC 92-877 Scott & Danton [2014] FamCAFC 203 Stanford v Stanford [2012] HCA 52 Teal & Teal [2010] FamCAFC 120 Trevi & Trevi [2018] FamCAFC 173 |
| APPLICANT: | Ms Field |
| RESPONDENT: | Mr Kingston |
| FILE NUMBER: | PAC | 2095 | of | 2014 |
| DATE DELIVERED: | 21 November 2019 |
| PLACE DELIVERED: | Parramatta |
| PLACE HEARD: | Parramatta |
| JUDGMENT OF: | Foster J |
| HEARING DATE: | 14, 15, 16 and 17 October 2019 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr Campton SC |
| SOLICITOR FOR THE APPLICANT: | Matthews Folbigg Pty Ltd |
| COUNSEL FOR THE RESPONDENT: | Mr Lloyd SC |
| SOLICITOR FOR THE RESPONDENT: | Hamish Cumming Family Lawyers |
Orders
That within three months from this date the husband pay to the wife, or as she may otherwise direct in writing, the sum of $1,232,616 with interest to accrue on that sum from the due date.
That the husband indemnify the wife from all or any liability arising from the Company C loan facility.
That in default of the husband paying the said sum to the wife by the due date, the husband and wife shall do all things necessary to sell the property at S Street, Suburb B for the best price reasonably obtainable and after payment of selling costs and discharge of the mortgages and/or loan advances secured thereon (including CBA home loan, Viridian Line of Credit and Company C facility) pay the net proceeds of sale in the following manner and priority:
(a) As to the wife 47.5 per cent of the balance remaining;
(b) As to the wife a further payment of $289,790; and
(c) As to the balance then remaining to the husband.
That pending sale of the Suburb B property, the husband pay all outgoings in relation to the property as they fall due and payable and pay as they fall due and payable principle (if any) and interest payments on the borrowings set out hereunder and maintain the balances of the said borrowings at or below the balances set out hereunder:
Company C facility $151,777
CBA mortgage Suburb B $299,133
Viridian Line of Credit $264,192
That in the event that the Suburb B property is sold to facilitate the payment to the wife, and not otherwise, the wife shall reimburse the husband a sum equivalent to 47.5 per cent of any additional personal income tax assessed as against the husband by reason of an additional capital gain income being included in his, otherwise, assessable taxable income for the relevant year with such payment to be made to the husband within 28 days of the wife being provided with a copy of the husband’s personal income tax return for the relevant year and a copy of the income tax assessment notice for the relevant year with interest to accrue as and from the due date of such payment.
Liberty to apply as to implementation or enforcement of these order.
That the wife’s application for spouse maintenance be dismissed.
All outstanding applications be dismissed.
The matter be removed from the active pending cases list.
All subpoenaed documents produced and all exhibits tendered in these proceedings be returned at the expiration of one calendar month unless an appeal is lodged.
Note: The form of the order is subject to the entry of the order in the Court’s records.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Field & Kingston has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
Note: This copy of the Court’s Reasons for Judgment may be subject to review to remedy minor typographical or grammatical errors (r 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to r 17.02 Family Law Rules 2004 (Cth).
| FAMILY COURT OF AUSTRALIA AT PARRAMATTA |
FILE NUMBER: PAC 2095 of 2014
| Ms Field |
Applicant
And
| Mr Kingston |
Respondent
REASONS FOR JUDGMENT
The matters for determination are the questions of property adjustment and spouse maintenance as between the applicant wife (“the wife”) and the respondent husband (“the husband”).
Proceedings were commenced by the wife in 2015. By reason of an Amended Initiating Application filed by the wife in April 2019 the wife also sought final orders as to parenting although her amended application was limited to issues of overseas travel and the obtaining of passports for the children of the parties’ relationship. The discrete parenting issues were to be determined at a later date but have now been resolved by agreement.
Various interlocutory orders have been made during the conduct of the proceedings that included one appeal to the Full Court of this Court. It is readily apparent that the parties are enthusiastic litigators and as such have incurred inordinately high legal costs.
For some time during the interlocutory stage there were significant issues between the parties in relation to the business and the income derived therefrom by the wife that was conducted by the wife on the matrimonial property at Suburb B. That business was closed in March 2018 following the parties’ separation some years earlier in 2011 when the wife left the then matrimonial home at Suburb B.
Context
The parties commenced cohabitation in about late 2001 or early 2002 and married in 2002.
The parties separated in circumstances discussed below in January 2011. They divorced in 2014.
There are three children of the parties’ relationship: X now aged 16, Y now aged 14 and Z now aged 11. The children have since separation mostly resided in a shared care arrangement between the parents and continue to do so.
Proceedings were listed for trial commencing 15 October 2019 allocating four days for trial.
The parties’ documents
The applicant wife relied upon the following documents at trial:
a)her Amended Initiating Application filed 3 April 2019;
b)her Financial Statement filed 11 October 2019;
c)her primary trial affidavit filed 3 April 2019;
d)the affidavit of her father Mr J Field (deceased) filed 22 February 2018;
e)the affidavit of Ms Q, accountant, filed 3 April 2019;
f)the affidavit of Mr T filed 22 February 2018;
g)the affidavit of her brother Mr U Field filed 22 February 2018;
h)the affidavit of Mr V filed 22 February 2018;
i)the affidavit of her brother Mr W Field filed 22 February 2018;
j)the affidavit of Mr AA filed 22 February 2018; and
k)the affidavit of Mr BB filed 22 February 2018.
The respondent husband relied on the following documents at trial:
a)his further Amended Response filed 20 February 2019;
b)his Financial Statement filed 8 October 2019;
c)his primary trial affidavit filed 21 March 2019;
d)the affidavit of Mr EE filed 14 October 2019; and
e)the affidavit of Mr DD Kingston filed 11 October 2019.
The evidence
The parties commenced a relationship some years prior to formal cohabitation. It is readily apparent that they spent significant time together either at the husband’s previous home at Suburb R or at the wife’s rental property at P Street, Suburb B.
In early 2001 the wife was conducting a business on acreage at her rented property at P Street, Suburb B. In about mid-2001 the parties inspected a property at S Street, Suburb B (“the matrimonial property”). The wife’s father also inspected the property.
At about this time in 2001 the parties, in summary, had the following assets and liabilities:
a)The wife:
i)her business Company C that had been purchased by her some five years before for the sum of $30,000. At this time, the business ran 30 livestock assets together with equipment to conduct the business. Of the assets used in the business, about 20 were owned by the wife;
ii)some cash estimated by the wife to be about $10,000;
iii)a 4WD purchased at about this time for $50,000 and later sold in 2004 for $25,000 with the sale funds applied towards the cost of filling in a dam and pasture improvement on the matrimonial property;
iv)a trailer purchased for the sum of about $20,000 later sold in about 2002/2003 with funds applied to the purchase of another trailer;
v)the Business asset 1 previously purchased for $12,500 and later sold for $18,000 of which $15,000 was applied towards the construction of the stable complex on the matrimonial property;
vi)the Business asset 2 previously purchased for about $9,000 and sold in 2002/2003 for $27,000 with the proceeds of sale applied towards the cost of the stable complex including foundations and concrete of nearly $20,000;
vii)various other assets sold during the course of the parties’ relationship with funds asserted by the wife to be paid towards improvements to the matrimonial property and for day-to-day living expenses and the conduct of the business; and
viii)otherwise, the wife had available to her an available overdraft facility of $10,000.
b)The husband:
i)The real estate property at O Street, Suburb R (“the Suburb R property”) sold by him in July 2001 for $362,000 with net proceeds of sale after discharge of mortgage being in the sum of $278,952. In May 2001 the husband exchanged contracts to purchase in his name the property at S Street, Suburb B with settlement effected in mid-October 2001. The purchase price was $905,000 but with purchase costs including stamp duty and legal fees such costs totalled overall about $940,000. The purchase was partially funded by a Commonwealth Bank mortgage of $540,000 with the balance comprising proceeds of the Suburb R property and the husband’s savings at that time. The wife asserts that it was the husband’s suggestion that the property be acquired in his name as the wife would be conducting a business on the property that carried inherent risk of accident. The wife asserts that she agreed with the suggestion. However, nothing turns on who was the registered proprietor as the question is one of contribution;
ii)Some savings;
iii)Furniture, furnishings and personalty;
iv)Some Company LL shares;
v)Some Company MM shares; and
vi)His business conducted as H Pty Ltd that owned a luxury car.
The actual date of cohabitation for some reason was a live issue between the parties at trial. The husband asserting that cohabitation did not commence until marriage in February 2002 and the wife asserting that cohabitation occurred once the husband had purchased the matrimonial property at Suburb B as she had relinquished her rented accommodation at this time.
Nothing turns on the actual date of cohabitation as the Court’s attention is more focused on the parties’ respective contributions.
However, subsequent to purchase of the matrimonial property by the husband in mid-October 2001 in a pseudo-commercial arrangement between the parties, the wife commenced payments to the husband of $1,800 per month relating to her being able to operate her business from the matrimonial property. Such sum she asserts was represented by the husband as equal to half the mortgage payments.
These payments were paid by the wife directly to the home loan mortgage account. These payments by the wife reduced to $1,600 per month from June 2006 until December 2007 and then from January 2008 until December 2015 she paid $1,400 per month. From December 2015 the wife’s payments ceased.
In all, the wife paid from her income a total of about $180,800 to the mortgage account.
The parties seem to have regarded these payments in various different ways. Whilst the husband asserts that the payments were not a contribution by the wife to the matrimonial property mortgage payments, but were received by him as rent. He has never disclosed such rental income in his income tax returns in the period from 2002 to the time of trial. Yet he later in late 2013 represented to bank that wife continued to make such contributions “to the mortgage payments”: Exh “Y”.
The wife, on the other hand, asserts that payments were made by way of contribution to the property mortgage, yet she has claimed in her tax returns the payments as rent thus affording to her a tax deduction.
It is neither here nor there how the parties themselves classified the payments as they represent part of the income contributed to the household by the wife from her business.
During cohabitation
During the parties’ cohabitation the husband operated a retail business and the wife continued to operate her business the Company C from the matrimonial property. During cohabitation the wife traded in assets that were purchased for use in her business and otherwise. Surplus funds were applied to the business, overall household expenses and outgoings and to fund some of the works on the property.
The parties attended to their parenting obligations as their work commitments allowed them, although the wife was mostly on the property and being assisted to a great extent by her mother.
During their cohabitation it is common ground that the parties operated separate accounts (save for a short period) although funds available to each of them were applied overall to household expenses and outgoings, children’s education and school fees including uniforms and school needs and activities, property expenses including mortgage payments, council rates, water rates, health insurance and property insurance expenses and holidays. The direct running costs of the wife’s business were paid from income generated from that business.
During cohabitation there were significant improvements effected to the matrimonial property mostly focused upon the operation by the wife of her business. These works commenced about three months prior to actual settlement of the purchase in October 2001.
In summary, the improvements included repair and remediation of a shed, construction of a hay shed, installation of fencing mostly undertaken by the wife’s father (including initially temporary portable electric perimeter fencing), filling and retaining of dams to create level areas, construction of a shelter, construction of a small round yard, construction of a fenced area being 55 metres x 25 metres installation of floodlighting to the area, electrical supply and works to the shed and installation of underground watering system.
Other work was undertaken to the main residence on the property and also a cottage that would, otherwise, be suitable for rental. The parties attended to painting the cottage internally and externally, and the wife paid for carpet to recarpet the cottage with the carpet laid by her father. The wife’s father attended to replacing damaged wall sheets, tiles in the bathroom and roof sheeting. The cottage was rented out during various periods during cohabitation and was at the date of trial with the rent of $400 per week paid to the husband. Such rent does not appear in his income tax returns.
Work was undertaken on the main residence prior to completion of the purchase and thereafter by the parties and family members. The residence was painted internally and externally, carpet was removed and floorboards polished. The wife’s father installed a privacy screen with material purchased by the wife. Other works were undertaken in 2006 including bathroom renovation, conversion of part of the garage to an office and bedroom. This work was undertaken by the wife’s father at his cost. At this time the parties purchased furniture and furnishings for the home from her business income.
The wife’s father, a builder, undertook significant works on the matrimonial property meeting most of the costs from his funds and engaging subcontract trades; some at his expense and some paid by the wife. He estimates that the commercial cost of such works to be about $461,000. The husband made no contribution to the costs of the works undertaken but did assist physically with his labour.
The parties refinanced the matrimonial property in about May 2003 by borrowing in addition to the initial home loan an Overdraft Facility of $150,000 with the Commonwealth Bank (“the Company C Facility”). The available funds were applied to purchase a ride on mower ($15,000) and, otherwise, to meet some of the costs of the works undertaken on the matrimonial property. Repayments of about $1,000 per month to the facility were paid by the wife from her business income and such repayments continued from 2003 until about March 2018 some seven years after separation. This overdraft liability remained at about $150,000 at trial with the husband maintaining interest only payments from March 2018.
In 2007 the husband was diagnosed with cancer and his capacity for full-time work was reduced for a period of months in the early part of that year. At about this time, the wife sold her Business asset 3 for $55,000. The sale proceeds were received in cash and were applied by the husband and wife for payment of household expenses including medical fees and obstetrician fees relating to the birth of the child Z.
The husband borrowed funds from the Commonwealth Bank after the establishment of his retail business. This Viridian Facility was in the sum of $300,000. His oral evidence is that the facility was used for the purposes of his business and to pay his legal fees for these proceedings. In oral evidence the husband disclosed that the balance owing on the Viridian Facility late 2015 was down to $72,000 following funds in the total sum of $200,000 received by him by way of gift from a Mr EE in 2014. By January 2016 the Facility was in credit of $5,000. As at trial the facility was in debit $264,192. His Costs Statement (Exh “E”) is clearly indicative of those funds being drawn for his legal expenses in that it asserts that his costs paid were drawn from the Viridian Line of Credit and, otherwise, funded by his father’s advances that totalled $161,133.
The husband’s oral evidence discloses:
22 April 2014 He deposits $100,000 from Mr EE to his CBA Account
29 April 2014 He withdrew $85,691 from his CBA home loan
29 April 2014 He deposits $85,691 to his CBA Account
5 May 2014He withdraws $185,691 from his CBA Account
5 May 2014He deposits $185,691 to his Credit Union Account creating a credit balance of $312,555,
12 January 2016 He transfers $294,000 to his business account
12 January 2016 He transfers to his Viridian account $150,000 from his business account,
18 January 2016 He transfers to his Viridian account $144,000 from his business account.
These funds totalling $294,000 he expended on his legal fees save for a portion of the $85,691 drawn from the home loan. His oral evidence also is that the remaining $100,000 from Mr EE paid into his CBA account in October 2014 was most probably expended on legal fees.
In September 2008 the husband opened his own retail business, H Pty Ltd. The husband’s gross taxable income varied from about $70,100 to about $107,721 during the parties’ marriage. His available after tax income was clearly less. In 2010 to 2012 his taxable income more than halved averaging only about $42,000. From 2012 his income has comprised a salary from his company and a franked dividend from its profits. His income tax returns to 2018 include no rental payments received by him.
The wife’s gross income before further disclosure as referred to below in the period from 2005 to 2015 varied between about $150,000 per annum to $247,000 per annum.
There is no evidence as to the wife’s real income from the Company C during this period. However, in servicing “rental payments” to the husband, Line of Credit payments and business and other property outgoings including payments to staff and business overheads including the maintenance and upkeep of livestock the inference must be that the Company C turnover was significant. The husband himself describes it as a “well established full time business operating seven days and nights a week” and the wife as “seriously involved in and worked in the business on a day-to-day basis”.
Separation
In January 2011 the parties separated. The wife left the property and obtained rented accommodation for herself and the children. The parties kept their finances separate after separation. Both parties expended monies on the children and their various expenses without contribution from the other after separation.
The wife engaged in livestock and equipment sales and share rent to accrue income to live on and invest post separation.
The husband continued to occupy the matrimonial property to the exclusion of the wife, save that her business continued to be conducted on the property.
Indeed, much of the interlocutory litigation was focused on the husband’s assertion of undisclosed turnover of the Company C being those that eventually surfaced to an extent in the wife’s mother’s ANZ account.
The husband has spent considerable time and expense seeking to demonstrate the wife’s income post separation where the circumstances were that the wife and children when with the wife were housed in rental accommodation and the wife was solely responsible for her own and the children’s upkeep in her care, whilst he remained in occupation of the matrimonial property and in early 2018 precipitated the closure of her business and her primary source of income.
At the time of trial, the wife was residing with her mother and with the children there when spending time with the wife.
The business vacating the property
Following separation the parties’ relationship deteriorated notwithstanding that the wife continued to run the Company C from the property. The wife eventually operated the business using third parties as she felt unsafe in attending the property.
In May 2015 the wife complained through her solicitors about the husband’s conduct. The husband in November 2015 demanded that the wife’s business vacate the property if her “monthly remittance” was not paid. In February 2016 the husband threatened to cause the wife’s business to vacate the property by 16 February 2016 if the wife did not withdraw her complaints as to his behaviour.
There appeared to be a lull in conflict until February 2018. The husband then demanded unpaid “rent” of $39,200, reimbursement for water rates paid by him of $6,700 and Land Tax he says he was assessed in the sum of $43,303 (although he asserts that there would be no liability if the wife’s business vacated the property). On payment by the wife of $89,203 the husband said he would permit the business to remain operating on the property.
The husband exhibits to his trial Affidavit Land Tax Assessments dated:
a)February 2016 for the years 2012 to 2016 in the sum of $25,361;
b)January 2017 for $7,616;
c)January 2018 for $10,326.
Yet his trial affidavit at [243] asserts he has now paid the assessments.
The wife had no funds to meet the husband’s demand.
On or about 16 March 2018 the husband locked out the wife’s business. The wife was required to urgently relocate livestock on the property. The business closed. The wife was able to sell some of her business assets to meet her ongoing living expenses for herself and the children when in her care.
The wife’s tax returns
During the course of operating her business, the wife from 2013 onwards directed a portion of the income of the business to an ANZ account conducted in her mother’s name. This circumstance came to light during these proceedings and occasioned significant interlocutory litigation.
In her oral evidence, the wife conceded that her earlier financial statements filed in the proceedings were untruthful as to her true income (including cash income) and in other relevant respects including disposition and sale of livestock and other assets. She conceded that she knew that the Court would rely on same in the context of her then interim applications. She conceded that her deception had caused the husband to incur significant legal costs but her intention was to hide her true position from the husband.
The wife has now prepared amended income tax returns but same have not as yet been lodged. There is an inference that they may never be lodged but were prepared for these proceedings only. It is readily apparent from the evidence of her accountant that the wife has still not properly disclosed her income over the years. Income earned by her after separation in 2011 is her after separation income to which the husband has no claim nor can he assert any real contribution by reason of the history discussed above. The wife’s oral evidence was seen as evidence of convenience with the wife inventing what she perceived to be answers required to rebut the husband’s attack in cross examination. Her own accountants revealed that aspects of her oral evidence were blatantly false.
The husband’s tax returns
Whilst the wife’s taxation affairs give rise to concern, so do those of the husband.
It is his sworn evidence that the wife was to pay and did pay to him “rent” for the whole of the cohabitation and thereafter. He, otherwise, has received rent for the separate cottage on the property at various times including $400 per week in the period up to trial.
Notwithstanding his sworn evidence as to receiving such funds by way of rent he has not disclosed same in his taxation returns for the relevant periods. His procrastination as to the wife’s conduct referred to above reflects poorly on him and his own conduct.
FF Pty Ltd and the Suburb HH Property
Following the parties’ separation and in August 2013 the husband and his brother Mr DD Kingston incorporated FF Pty Ltd. The husband and his brother were directors and equal shareholders in the company that acted as trustee for the then created Kingston Family Trust (“the trust”).
The husband and his brother were the specified beneficiaries of the trust with the trustee/guardian having the power to include additional beneficiaries.
The trust acquired the real estate property situated GG Street, Suburb HH. The property comprises a heritage listed cottage with adjoining shop front. The purchase price was $517,000. The property was purchased in the name of the husband and his brother at auction in June 2013 with the husband present. The property was purchased at that time as a joint investment for both.
The property now some six years after purchase has a value of $1.275 million: Exh “D”.
It appears that the contract for purchase was later assigned to the corporate trustee. The husband’s signature as director of the trustee company appears on the memorandum of transfer for the purchase. The husband’s father advanced the deposit with the repayment of that advance later taken over by the husband’s brother. The husband’s brother and his wife provided the balance of purchase price after deposit of about $466,000. The intention asserted by the husband’s brother was for the husband to reimburse half the purchase price to him and his wife.
The property has at all times been tenanted. The husband’s business H manages the property and its rental income.
The husband asserts that it was his intention to participate in the investment represented by the trust acquiring this property. He asserts in his trial affidavit that as a consequence of his “inability to service the loan” that was acquired for the purchase of the property, he was removed as a director and shareholder of the corporate trustee on 2 May 2014.
The husband’s evidence was better illuminated during the course of the oral evidence of himself and his brother.
The husband’s brother asserts that following purchase the CBA Bank was approached to finance the property to fund the husband’s half share and to reimburse funds advanced by the husband’s brother’s wife to the purchase.
The initial application for funds from the Commonwealth Bank in late 2013 was for a loan of about $568,000: Exh “Y”. The bank was told that the property had been purchased for cash and funds were sought to repay the cash advanced for the purchase. The husband and his brother both provided financial details of their respective circumstances to the bank and supporting documents to the bank so as to demonstrate their ability to service the loan. The brother also offered his adjoining property as security so that the trust could borrow the whole purchase price so as to refund those monies to him and his wife.
Bank documents reveal that the bank was concerned about serviceability of the loan. The loan advance was finally approved in the sum of $280,000 only with the husband’s brother withdrawing his own property at GG Street, Suburb HH as additional security.
The husband was unclear as to how the initial purchase was funded but agreed that the borrowing was to repay acquisition costs.
The husband acknowledges that he was and remains the sole guarantor of the loan with the Commonwealth Bank presently secured over the trust property. He signed the mortgage for $279,800 on behalf of the company. Such sum equates approximately to a little more than one half of the cost of purchase including purchase costs and stamp duty. The mortgage to the Commonwealth Bank is dated March 2014 about seven months after the purchase of the property was completed. The mortgage provides for interest only payments for five years then principal and interest payments in reduction of the loan.
The ultimate net mortgage funds of about $278,000 were paid to the trust’s bank account in March 2014 and ultimately paid into the husband’s brother’s wife’s account. That repayment represented about half the overall purchase costs.
It was put to the husband in oral evidence that the loan was, in fact, to be his contribution to one half of the purchase. He did not know. Yet the funds were paid to his brother’s wife after they had funded the whole purchase costs, thus refunding them half. He was not aware if the trust paid interest on the remaining one half of the purchase costs represented by his brother’s wife’s loan account. He denied that his brother was holding a half share in the property for him.
The husband’s brother asserted that the loan funds were simply to repay the funds advanced by his wife and as the husband was unable to fund his half share then he was removed from the trustee company and the trust.
The husband was removed as a director of the trustee company on 2 May 2014 and his brother also acquired his one half shareholding in the trust.
The husband says his brother “struck me off as a beneficiary” in 2016 as he “could not obtain finance from the Commonwealth Bank”. On 5 September 2016 a Variation of Trust Deed was signed removing the husband as Appointor and Guardian of the trust and removing him as a beneficiary. The Trust Deed nevertheless allows the husband’s brother to restore the husband as a beneficiary. Having regard to the contribution history to the purchase why he would do that is not clear.
Strangely, this was about two years after the mortgage advance was secured and a year after the current litigation commenced. Even stranger was the husband’s assertion that he was not aware of his position as beneficiary of the trust or understand what the trust involved. Such assertions by the husband are ingenuous.
Yet the reality is that the husband made no financial contribution to the purchase and that the purchase was substantially funded by his brother and his brother’s wife. The bank finance is a primary borrowing of the trust through its trustee. The funds advanced repaid the brother and his wife for about one half of the purchase cost advanced by them to the trust. The remaining funds advanced are represented by a loan account in the trust evidencing the balance still owing to the husband’s brother’s wife which as at 30 June 2018 was in the sum of $239,957.
It is contended by the wife that the trust property represents a financial resource of the husband. By reason of the matters discussed above, that contention is rejected.
Present circumstances
The wife, as said, resides with her mother. She has not re-partnered. She has borrowed funds from her father and others to meet her and the children’s needs post separation, particularly after her business was excluded from the matrimonial property by the actions of the husband.
The wife has worked in various capacities since separation. At trial she was working part-time as a personal assistant and as a child contact and school supervisor. Her taxable income for 2018 was about $34,000. She proffers no evidence as to attempts to obtain full time employment. Nor has she sought a child support assessment as against the husband.
Regrettably, her evidence as to her income must be treated with caution in the absence of objective documents.
She has no significant funds or premises with which to re-establish her business.
The husband remains in the matrimonial property. He has not re-partnered. He receives the rental income derived therefrom. He is self-employed through his company. His taxable income in 2018 was $101,000 and that did not include rent from the cottage on the property.
The Approach to Property Adjustment
The approach to the determination of an application under s 79 of the Family Law Act 1975 (Cth) (“the Act”) is set out in Stanford v Stanford [2012] HCA 52 and further considered by the Full Court in Bevan & Bevan [2014] FamCAFC 19, Chapman & Chapman [2014] FamCAFC 91 and Scott & Danton [2014] FamCAFC 203.
The Court must identify the existing legal and equitable interests of the parties in the property, the liabilities and financial resources of the parties at the time of the hearing and then whether it is just and equitable to make a property settlement order.
Such a consideration should not be guided by an assumption that the parties’ rights to or interests in property are or should be different from those that then exist. The question is whether those rights and interests should be altered.
There is no presumption that one or other party has the right to have the property of the parties divided between them or a right to an interest in marital property that is fixed by reference to the various matters in s 79(4).
The Court in the application of s 79(2) of the Act needs to conclude that it would be unjust or unfair to leave the parties’ property rights intact.
In many cases, this requirement is readily satisfied where the parties are no longer in a marital or de facto relationship and, thus, for example, the common ownership or use of property by husband and wife will no longer be possible or the express or implicit assumptions that underpinned existing property arrangements such as the accumulation of assets or financial resources by one for the benefit of both have been brought to an end with the relationship. Such is the case in this matter.
It would, in some circumstances, be unjust or unfair to leave property rights intact where there is common ownership and discrete assets are sought by each. Such is the case in this matter.
The parties both agree that adjustive orders are to be made so as to reflect their respective contentions as to entitlement.
In particular, both parties seek property adjustment orders but are unable to agree as to same. Here the wife seeks an order for adjustment of property as does the husband.
It is appropriate that property adjustment orders be made.
Otherwise, a consideration of s 79(4) factors as discussed reveals it would be unjust or unfair to leave the parties’ property rights as they are.
Section 79(4) requires a consideration of the contributions made by the parties as defined in s 79(4)(a) to (c). The Court must then consider s 79(4)(d) to (g), in particular, the subjective considerations as to the parties by having regard to the provisions of s 75(2) in so far as they are relevant: (s 79(4)(e)).
The Court can then consider the “justice and equity” of the actual orders to be made: Russell & Russell (1999) FLC 92-877; Teal & Teal [2010] FamCAFC 120, in the context of the Court’s obligation to make “appropriate orders” as provided for in s 79(1) of the Act.
The Property Pool
Following final submissions the property pool for consideration was as follows:
Assets:
Husband Property at Suburb B 2,700,000
Husband H Pty Ltd 233,074
Husband Gateway Credit Union …54 48
Husband Gateway Credit Union …44 29
Husband CBA account …42 1,456
Husband CBA account …54 903
Wife Company C *
Wife CBA account …70 7
Wife ANZ account …88 7,597
Wife ANZ account …57 0
Husband Interest in Kingston Family Trust *
Wife Colonial Superannuation 38,831
Husband CBA Superannuation 219,929
Liabilities:
Wife Company C facility 151,777
Husband CBA mortgage Suburb B 299,133
Husband Viridian Line of Credit 264,192
Wife Virgin Money Card 15,621*
Wife CBA Diamond Credit Card 18,963*
Husband MasterCard (…08) 5,018*
Wife Loan from Ms KK 20,000*
Wife ATO debt 49,049*
Husband CGT on sale of Suburb B property 308,406*
Matters identified thus * are matters on contention and are considered below.
Otherwise, it was contended by the wife that the husband’s paid legal fees in the sum of $426,155 should be added back notionally to the asset pool for division.
Company C: there is no evidence save for the husband’s unsupported supposition that the wife still operates this business. It will be thus omitted.
Kingston Family Trust: for the reasons set out above this will be omitted from the asset pool, it being neither an asset nor a financial resource of the husband.
Virgin Money Card, CBA Diamond Card, loan from Ms KK: there is no evidence that supports the proposition that such liabilities so long after separation should be included in the pool to the effect that the husband would bear some liability thereof. They will be omitted.
ATO debt: the wife’s evidence as to her non-disclosure of income for taxation purposes and the evidence of her accountant was such that in the absence of actual assessments on income tax liability being in evidence this amount as asserted will be disregarded. Otherwise, it is plain that the wife enjoyed the benefit of the income and there is no reason asserted as to why the husband should bear any liability for her outstanding tax, if any.
Capital gains tax: the single expert opines as to prospective CGT liability should the Suburb B property be sold. Yet his opinion is based on various assumptions by him. Otherwise, the husband is steadfast in his desire to retain the Suburb B property and not to sell it.
The Full Court in Rosati & Rosati [1998] FamCA 38 said:
(1)Whether the incidence of capital gains tax should be taken into account in valuing a particular asset varies according to the circumstances of the case, including the method of valuation applied to the particular asset, the likelihood or otherwise of that asset being realised in the foreseeable future, the circumstances of its acquisition and the evidence of the parties as to their intentions in relation to that asset.
(2)If the Court orders the sale of an asset, or is satisfied that a sale of it is inevitable, or would probably occur in the near future, or if the asset is one which was acquired solely as an investment and with a view to its ultimate sale for profit, then, generally, allowance should be made for any capital gains tax payable upon such a sale in determining the value of that asset for the purpose of the proceedings.
(3)If none of the circumstances referred to in (2) applies to a particular asset, but the Court is satisfied that there is a significant risk that the asset will have to be sold in the short to midterm, then the court, whilst no making allowance for the capital gains tax payable on such a sale in determining the value of the asset, may take that risk into account as a relevant s.75(2) factor, the weight to be attributed to that factor varying according to the degree of the risk and the length of the period within which the sale may occur.
(4)There may be special circumstances in a particular case which, despite the absence of any certainty or even likelihood of a sale of an asset in the foreseeable future, make it appropriate to take the incidence of capital gains tax into account in valuing that asset. In such a case, it may be appropriate to take the capital gains tax into account at its full rate, or at some discounted rate, having regard to the degree of risk of a sale occurring and/or the length of time which is likely to elapse before that occurs.”
In Jarrott & Jarrott [2012] FamCAFC 29 the Full Court said that an “all or nothing” approach of either including CGT or not including it but trying to take it into account under s 75(2), had the potential to visit an injustice upon one of the parties. There the Full Court found that in the circumstances of that case, the appropriate course would have been for the trial judge to make a contingent order which would operate if and when a CGT liability actually arose. The Full Court observed:
[62]Her Honour was correct in finding...that in complying with the orders she would make there “could” give rise to a CGT liability of the husband. As such, an “all or nothing” approach of either including CGT or not including it but trying to take it into account under s 75(2) had the potential to visit an injustice upon one of the parties. If allowance were made for CGT, either in the balance sheet, or pursuant to s 75(2), and no CGT liability materialised, the wife would be disadvantaged. Although the risk was less, the husband could be disadvantaged if CGT of $80,000 - $90,000 materialised, and the trial Judge had discounted that figure significantly in her conclusion with respect to s 75(2) because its incidence was only a possibility.
[63]The appropriate course would have been, although no one seems to have urged this upon her Honour, and we have not been referred to any submission in which it was, to have made a contingent order, which would operate if and when, a CGT liability arose, because it was not inevitable (see Rosati & Rosati [1998] FamCA 38 ; (1998) FLC 92-804 and Brett-Hall & Brett-Hall [2006] FamCA 712; (2006) FLC 93-276) that it would…
The application of these principles lead to the conclusion that the incidence of any future CGT liability is probably remote and thus the contended liability should be the subject of a contingent order that requires the wife to indemnify the husband for a percentage reflecting her overall percentage entitlement of any additional personal income tax liability arising from the inclusion of a CGT component in his assessable income should he be required to sell to meet the wife’s entitlement.
The husband’s legal fees: Doing the best on the evidence as it is, the husband’s costs statement reveals paid legal fees totalling just over $500,000. In addition, his evidence reveals that he has drawn down funds secured against the equity of the matrimonial property to pay other legal fees totalling about $37,000 and Single Expert fees of $10,000. His paid legal fees are thus about $550,000. Leaving aside funds received by way of gift from Mr EE ($200,000) as discussed above and funds received from his father of about $161,000 the balance of about $200,000 was funded mostly by way of capital drawing against his home loan and the Line of Credit thus further encumbering the Suburb B property. Should such sum not be added back to the pool for division the result is that the wife will pay a portion of the husband’s legal fees.
The Full Court said in Chorn & Chorn [2004] FamCA 633:
56.In summary, we consider that the above mentioned decisions of the Full Court establish that, while the treatment of funds used to pay legal costs remains ultimately a matter for the discretion of the trial Judge, in determining how to exercise that discretion, regard should be had to the source of the funds.
57.If the funds used existed at separation, and are such that both parties can be seen as having an interest in them (on account, for example, of contributions), then such funds should be added back as a notional asset of the party, who has had the benefit of them.
58.If funds used to pay legal fees have been generated by a party post separation from his or her own endeavours or received in his or her own right (for example, by way of gift or inheritance), they would generally not be added back as a notional asset; nor would any borrowing undertaken by a party post-separation to pay legal fees be taken into account as a liability in the calculation of the net property of the parties. Funds generated from assets or businesses to which the other party had made a significant contribution or has an actual legal entitlement may need to be looked at differently from other post separation income or acquisitions.
In Trevi & Trevi [2018] FamCAFC 173 the Full Court in referring to Chorn said:
32.Those passages can be seen as an attempt to establish “guidelines”, undertaken after a detailed examination of earlier authorities, for the treatment of paid legal fees within s 79 proceedings. There can be little doubt that the statements made in that case have been applied by trial judges ever since.
33.The word “guidelines” is used advisedly so as to distinguish the same from “binding principles of law”. The distinction is important. Failure to follow a binding principle of law is an error of law. By contrast, the failure of a trial judge to follow a guideline:
…does not of itself amount to error, for it may appear that the case is one in which it is inappropriate to invoke the guideline or that, notwithstanding the failure to apply it, the decision is the product of sound discretionary judgment. [However] [t]he failure to apply a legitimate guideline to a situation to which it is applicable may … throw a question mark over the trial judge’s decision and ease the appellant’s burden of showing that it is wrong…
34.The guidelines emerging from Chorn should be read together and read conformably with the Full Court authorities upon which they are based. That being so, the delineations there referred to — “the funds used existed at separation … such that both parties can be seen as having an interest in them”; or “funds used to pay legal fees have been generated by a party post-separation from his or her own endeavours” or received by a party “in his or her own right (for example, by way of gift or inheritance)” — cannot be seen as determinative of the exercise of discretion but, rather, as informing it.
35.Again, the matters just referred to have important ramifications in an appellate context. They may ease the appellant’s burden of showing that “although the nature of the error may not be discoverable … a substantial wrong has in fact occurred”, or that the decision is “plainly wrong, [the] decision being no proper exercise of [the] judicial discretion”. Equally, they may ease the burden of establishing that irrelevant considerations have been taken into account or that relevant considerations have not been taken into account.
36.Paid legal fees occupy a particular position in the consideration of addbacks by reason of s 117(1) of the Act; a matter not relevant to any other form of expenditure or dissipation of property the subject of an addback claim.
37.An order failing to addback legal costs is a pre-emptive decision about one party paying the other’s legal costs. The statutorily prescribed default position is that neither party pays all or some of the other party’s costs.
In such circumstances, and doing the best on the evidence as it is, the sum of $200,000 will be added to the pool for division.
Otherwise, there is no sound basis for including in the pool for division the parties’ various minimal bank balances so long after separation. Neither party contends any contribution thereto. They will be excluded.
Otherwise both parties have significant unpaid legal fees.
Accordingly the pool, with both parties properly contending that there be one pool for consideration, for division is as follows:
Assets:
Husband Property at Suburb B 2,700,000
Husband H Pty Ltd 233,074
Wife Super Fund 1 38,831
Husband Super Fund 2 219,929
Husband Paid legal fees 200,000
Total: 3,391,834
Liabilities:
Wife Company C facility 151,777
Husband CBA mortgage Suburb B 299,133
Husband Viridian Line of Credit 264,192
Total: 715,102
Net Pool:2,676,732
Contributions
Counsel for the wife contended that overall contributions should be found to be equal to date of hearing notwithstanding the husband’s initial capital contribution through the purchase of the Suburb B property. Such initial inequality of contribution being offset, it is inferred, by the wife’s contributions to the improvements (as described in the Single Expert valuation Exh “C”) of the property, some funded by the overdraft and, otherwise, funded by her or her father and her contribution to the mortgage over a long period including post separation. Otherwise, the husband has remained in occupation of the property for some years post separation.
Counsel for the husband, by reason of the husband’s initial contribution, contended that overall contributions should favour the husband as to 70 per cent and the wife as to 30 per cent. This would see a disparity of $1.68 million between the parties.
It is accepted by the Court that the parties’ contributions, otherwise, in terms of income, non-financial contributions and their respective contributions to the household and parenting obligations are such as to not give rise to any disparity deserving of recognition other than equality. It is not, otherwise, contended by the parties.
There is no evidence as to the parties’ respective superannuation entitlements as at various relevant times. It was simply agreed that those entitlements are in the pool for division.
Having regard to the evidence above, contributions will be assessed as favouring the husband as to 55 per cent and as to the wife 45 per cent. Such will create a disparity of about $267,000 between them. Such adjustment acknowledges his initial equity in the home at the commencement of the relationship; an equity that has increased over the years but is offset in part by the wife’s business assets brought in and later disposed of as discussed above and improvements to the property.
Section 75(2) considerations
It was contended on behalf of the wife that there should be an adjustment of 10 per cent in her favour in recognition of these considerations. Such would create a disparity of about $534,000 between the parties. The husband asserts that the relevant matters are disparity in income capacity, ongoing childcare, the husband’s financial resource represented by the Kingston Family Trust and that no child support is being paid from the husband to the wife. Yet these parties share the care of the children of their relationship. Should the wife elect to seek child support she can apply for an assessment.
Counsel for the husband contended that there should be no further adjustment to contribution finding by reason of the s 75(2) considerations.
Relevantly, the wife is aged 44 and the husband 51. Neither contends any significant health issues. The parties substantially share the care of their children who are now aged 16, 14 and 11. The present income, property and financial resources of the parties are considered above.
The wife’s income position has significantly diminished after exclusion of her business from the matrimonial property by the husband. She has no significant assets and personal debt.
Both parties have superannuation entitlements as set out that are in the asset pool by agreement.
The proposed contribution based entitlements will see the wife with a significant cash capital sum.
Overall, it is proper to make a modest adjustment in favour of the wife. There will be an adjustment to the contribution based entitlements in favour of the wife of 2.5 per cent thus creating a disparity of about $133,000 between the parties.
Overall
From the above discussion overall, the asset pool is to be divided as 52.5 per cent in favour of the husband and 47.5 per cent in favour of the wife. This creates a disparity of about $133,000 between them. Such is a just and equitable outcome.
Should the husband seek to payout the wife without a sale of Suburb B he will be required to pay the wife the following sum:
Net Pool $2,676,732
47.5 per cent thereof $1,271,447
Less:
Wife Superannuation $ 38,831
Net payment $1,232,616
The husband will retain:
Property at Suburb B 2,700,000
H Pty Ltd 233,074
CBA Superannuation 219,929
Paid legal fees 200,000
Total: 3,353,003
Less:
Company C facility 151,777
CBA mortgage Suburb B 299,133
Viridian Line of Credit 264,192
Payment to wife 1,232,616
1,947,718
Net: 1,405,285
It is appropriate that orders be made facilitating the husband paying the wife a cash sum with default provisions in the event that he elects to sell the property at Suburb B or defaults in payment to the wife.
It is proper if the property is to be sold that the wife’s entitlement be converted to her a percentage interest entitlement in the home with a consequential adjustment as between the parties for the other assets remaining in their respective possession.
Other assets total $691,834 and allowing for the wife’s superannuation she is to thus receive an adjustment of $289,790 from the husband’s portion of the proceeds of sale.
There will be contingent order as to any accrued CGT liability if the property is to be sold.
Orders will be made accordingly.
SPOUSE MAINTENANCE
The wife seeks an order for periodic spouse maintenance in the sum of $500 per week: Exh “JJ”. It appears that such order is sought on an open ended basis.
Section 72 of the Act sets out the relevant provisions in relation to the right to spouse maintenance.
Section 72 provides that a party to a marriage is liable to maintain the other party, to the extent that the first mentioned party is reasonably able to do so, if, and only if, that other party is unable to support herself or himself adequately whether:
a)By reason of having the care and control of a child of the marriage who has not attained the age of 18 years;
b)By reason of age or a physical or mental incapacity for appropriate gainful employment; or
c)For any other adequate reason;
having regard to any relevant matter referred to in s 75(2) of the Act.
The wife gives evidence of her income in the period before trial that comprises part-time income from various positions averaging about $1,039 per week. She also receives Family Allowance payments relating to the children. It must be said that any evidence the wife gives as to her financial circumstances must be treated with some circumspection as a consequence of the matters discussed above.
The children are now aged 16, 14 and 11. Their care is substantially shared by the parties.
The wife does not contend that her care of the children precludes appropriate and gainful employment, indeed, she is and was engaged in various part-time positions including other employment whilst still conducting her business.
The wife does not contend that she suffers incapacity for appropriate gainful employment by reason of age, physical or mental incapacity. Indeed, at present, she is aged only 44 with many years of employable age ahead of her.
The wife advances no other adequate reason for any asserted inability to obtain appropriate gainful employment. She proffers no evidence as to any application for full-time employment but rather it appears that her part-time obligations simply suit her. She proffers no evidence as to any proposal for retraining or further education such as may qualify her more appropriately.
Her application for spouse maintenance is to be dismissed in that she has failed to establish an adequate reason for her asserted inability to support herself.
I certify that the preceding one hundred and thirty-nine (139) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Foster delivered on 21 November 2019.
Associate:
Date: 21 November 2019
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