Gambrell and Gambrell
[2020] FCCA 537
•12 March 2020
FEDERAL CIRCUIT COURT OF AUSTRALIA
| GAMBRELL & GAMBRELL | [2020] FCCA 537 |
| Catchwords: FAMILY LAW – Property settlement – marital relationship – pool uncertain as business yet to be sold – contributions – future earning capacity. |
| Legislation: Family Law Act 1975, ss.75(2), 79(2), 79(4), 90XT(1)(a), 90XT(4), 117(2A)(c) |
| Cases cited: Stanford v Stanford (2012) 247 CLR 108; (2012) 293 ALR 70; (2012) 87 ALJR 74; (2012) 47 Fam LR 481; (2012) FLC 93-518; [2012] HCA 52 |
| Applicant: | MR GAMBRELL |
| Respondent: | MS GAMBRELL |
| File Number: | MLC 12862 of 2017 |
| Judgment of: | Judge Riley |
| Hearing dates: | 6 and 7 May, 30 September and 4 October 2019 |
| Date of last submission: | 2 December 2019 |
| Delivered at: | Melbourne |
| Delivered on: | 12 March 2020 |
REPRESENTATION
| Counsel for the applicant: | Mr E Hall |
| Solicitors for the applicant: | Beaumont Lawyers |
| Counsel for the respondent: | Mr G Combes |
| Solicitors for the respondent: | Berry Family Law |
ORDERS
Within seven days, from the proceeds of the sale of the former matrimonial home, $16,000 be paid to A Bank (“A Bank”) as follows:
a.to account number …32, on account of X (“X”), the sum of $9,000.00;
b.to account number …45, on account of Y (“Y’), the sum of $6,000.00; and
c.to account number …65, on account of Z (“Z”), the sum of $1,000.00.
The funds in the A Bank accounts numbered:
a.…32;
b.…45; and
c.…65, (“the A Bank accounts”),
be held by the husband on trust for X, Y and Z respectively and used for their benefit, including for their education, until they each reach 25 years old, at which time any remaining funds held on behalf of the relevant child be paid to her.
The husband advise the wife in writing seven days before he makes any transaction on the A Bank accounts, and provide to her, within seven days after he receives it, a copy of any statement in respect of the A Bank accounts, and a copy of any invoice and any receipt in respect of any transaction he makes on the A Bank accounts.
CONSENT ORDERS
The husband and wife do all such acts and things and sign all such documents as may be required to effect a sale altogether out of court (“the business sale”) of the business known as the Gambrell Unit Trust and the plant and equipment owned by B Pty Ltd (“the business”) on terms to be agreed between the parties and in default of agreement and by way of consequential arrangement for the purposes of effecting a sale:
a.the business be listed for sale with an agent to be agreed within 21 days and in default of agreement as nominated in writing by Mr C, accountant, and in default of Mr C agreeing to make the nomination then the selling agent be nominated by the president of the Real Estate Institute of Victoria (“the selling agent”);
b.the listing price for the business sale and the terms of the business sale be as agreed between the parties and in default of agreement as reasonably determined by the selling agent;
c.the solicitor to act for the parties with respect to the business sale be as agreed between the parties and in default of agreement as appointed by the selling agent;
d.the parties do all such acts and things and sign all such documents as may be required to wind up, vest or otherwise deal with the related entities of the business consequent upon the business sale and the costs of doing so be part of the costs of the business sale, such entities being the following:
i.the Gambrell Unit Trust being the trading entity of the business;
ii.D Pty Ltd being the trustee company for the Gambrell Unit Trust;
iii.B Pty Ltd being the holding company for the business; and
iv.the Gambrell Unit Trust being the family trust in the business structure; and
e.there be liberty to apply as to the terms, conditions and execution of the business sale.
Pending the completion of the business sale, the business pay the costs of the business in the ordinary course.
Upon completion of the business sale, the proceeds be applied firstly, to pay all costs, commissions and expenses of the business sale.
ORDERS:
Upon completion of the business sale, the proceeds be applied, secondly, to pay outstanding liabilities incurred in the ordinary course of business including:
a.employee entitlements including salary, wages, superannuation and Australian Taxation Office contributions thereon;
b.insurance and Workcover;
c.stock suppliers;
d.franchise fees;
e.rent and any arrears of rent for the factory premises pursuant to the lease and utilities services;
f.fees for services provided to the business including accounting, marketing, advertising, book-keeping, IT consulting, cleaning, labour hire, contractors’ bills, security monitoring and commercial legal fees;
g.any other liability incurred in the ordinary course of operation of the business; and
h.amounts payable to the Australian Taxation Office in respect of assessed or anticipated capital gains or other taxation arising from the sale.
CONSENT ORDERS:
Upon completion of the business sale, thirdly, the balance be held by the solicitors for the husband in an interest bearing controlled monies account in the joint names of the parties pending further order of the court or the written agreement of the parties.
Within seven days of the completion of the business sale, the husband provide to the wife:
a.a full accounting of any liabilities discharged from the proceeds of the business sale or paid by the business since 1 May 2019; and
b.a copy of all invoices received by the business since 1 May 2019.
For the purposes of order (7)(h), pending the assessment of any capital gains tax liability arising from the business sale, a proportion of the net proceeds of the business sale be held in trust by the solicitor acting on behalf of the husband for the parties on account of the estimated amount of such tax liability to pay the same upon assessment and the surplus of any such monies upon payment be held on trust pending further order of the court or written agreement of the parties.
ORDERS:
From the proceeds of the sale of the former matrimonial home, within seven days, the husband be paid the sum of $95,951.91 and the wife be paid the sum of $143,927.86.
The proceeds of sale of the business be divided between the parties so that the husband receives 40% and the wife receives 60% of the parties’ non-superannuation assets.
The wife receive 50% of the benefits of the Gambrell Superannuation Fund.
The parties make submissions on whether the superannuation benefit payable to the wife can legally be taken as cash.
Unless otherwise specified in these orders and save for the purposes of enforcing any monies due under these or any subsequent orders:
a.each party be solely entitled to retain the chattels, items and property (including choses-in-action) in the possession of such party to the exclusion of the other party as at the date of these orders;
b.each party be liable for the credit card debt/s and loans in their respective names;
c.insurance policies remain the sole property of the owner named thereon;
d.each party be solely liable for any liability encumbering any item of property to which that party is entitled to pursuant to these orders; and
e.any joint tenancy in any real or personal estate is hereby expressly severed.
The husband indemnify and keep indemnified the wife against any taxation liability past, present or future which has arisen or may arise from the husband’s conduct of the business or related entities.
Each party have liberty to apply.
DIRECTIONS:
The principal registrar refer this matter to the Australian Taxation Office for investigation into whether the husband has committed any crimes or whether the husband personally or through his company has underpaid any tax in circumstances where he has admitted income splitting, utilising a phoenix company and using for family holidays a caravan owned by the company.
The principal registrar provide a copy of these orders and the reasons for this judgment to the Australian Taxation Office, and such other documents from the court file as the Australian Taxation Office may request.
NOTATIONS:
(A)Pursuant to s.81 of the Family Law Act 1975 (“the Act”) the parties intend these orders to finally determine the financial relationship between them and avoid further proceedings between them.
(B)Section 121 of the Act provides that it is an offence punishable by imprisonment for up to one year to publish or disseminate to the public any account of family law proceedings which identifies the parties, witnesses or other people concerned with the proceedings, unless specifically authorised by the court.
IT IS NOTED that publication of this judgment under the pseudonym Gambrell & Gambrell is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT MELBOURNE |
MLC 12862 of 2017
| MR GAMBRELL |
Applicant
And
| MS GAMBRELL |
Respondent
REASONS FOR JUDGMENT
Introduction
This is an application for property adjustment under s.79 of the Family Law Act 1975 (“the Act”).
The parties commenced cohabitation in 2001. They were married in 2004 and separated in February 2017 under one roof. The husband left the former matrimonial home in April 2017. The parties were divorced on 4 December 2018. There are three children of the marriage, namely, X, who is now 17 years old, Y, who is now 15 years old and Z, who is now seven years old.
A significant issue in this case was the value of the husband’s business. That issue occupied a lot of court time and no doubt added considerably to the parties’ legal costs. However, to the parties’ credit, on 30 September 2019, they agreed that the business would be sold, and the proceeds divided in proportions to be determined by the court. That means that the precise value of the parties’ combined assets is not known, and the division of the proceeds of the sale of the business will be based on percentages rather than dollar figures.
Chronology
The parties provided a joint chronology to the court (exhibit 1). The joint chronology is substantially as follows:
1971The husband was born. He is now 48 years old.
1972The wife was born in the United Kingdom. She is now 48 years old.
2001The wife migrated from the United Kingdom. The wife said she migrated to be with the husband. Co-habitation commenced in Australia.
The husband owned a business and a house which was subject to a mortgage. The husband said he also had an investment property.
The wife had no assets of significance.
Both parties worked, the husband as a tradesman and the wife as an administration assistant.
2002X was born.
2003The husband began contributing $100 per month to a A Bank account for X, and after they were born, for Y and Z.
2004The parties married.
2004Y was born.
2008The husband’s grandmother lived with the family for a year. The wife said that she largely cared for the husband’s grandmother.
2008The husband claimed that he sold his investment property, used the proceeds to build on land in Suburb F owned by his grandmother, sold that property and put the proceeds into the former matrimonial home.
2009The husband’s business went into liquidation leaving unpaid debts of $250,000.
The husband began a new business.
2010The parties bought the former matrimonial home.
2012Z was born.
2014The husband’s mother gave him approximately $160,000 after his grandmother mother died.
The funds were used to renovate the former matrimonial home.
Additional funds were borrowed from the ANZ, via a line of credit, to assist with the renovations.
The ANZ line of credit was repaid with a loan from the Bank of Melbourne.
The ANZ line of credit remained available. The wife said that she drew on it for joint expenses.
2015, 2016 financial years The husband said his business bought and fitted out a factory, and replaced some equipment.
The wife did not admit the timing.
13 February 2017 The parties separated under one roof, at the wife’s instigation.
March 2017The husband traded in his boat and a trailer for newer models.
April 2017The husband moved out of the former matrimonial home and into a rental property.
The wife asserted that the husband made withdrawals from April to September 2017 from their self-managed superannuation fund without her prior knowledge.
2017The parties agreed that the children will live with their mother and spend six nights a fortnight with their father.
8 December 2017 The husband filed his initiating application.
18 May 2018 The factory, which is owned by the parties self-managed superannuation fund, was valued at $470,000.
2018The husband had a holiday in Town G.
November 2018 The husband received a taxation refund of $47,437.
The husband paid $18,000 to his mother, which he said was the repayment of a loan, and also paid school fees, life insurance, and other expenses. The wife said the payments were made without her prior knowledge and the husband’s payment to his mother was not the repayment of a loan.
4 December 2018 The parties were divorced.
2019The wife went to the United Kingdom to scatter her uncle’s ashes. Her flights were a gift.
2019The husband had a holiday in Country H with the children.
Material relied upon
The husband indicated in his case outline filed on 3 May 2019 that he relied upon:
a.his trial affidavit sworn on 12 April 2019;
b.his financial statement sworn on 12 April 2019;
c.the affidavits sworn on 25 September 2018 and 2 May 2019 by a single expert business valuer, Mr C (these became redundant in view of the agreement to sell the business);
d.the affidavit sworn on 17 April 2019 by Ms J, the husband’s mother;
e.the affidavit sworn on 3 May 2019 by Mr K, the husband’s accountant, in relation to the value of the Gambrell Superannuation Fund, which is the parties’ self-managed superannuation fund (this became redundant in view of the agreed value of the fund);
f.the husband’s answers dated 24 September 2018 to specific questions (which are contained in exhibit -3 to the affidavit affirmed on 15 April 2019 by Mr L); and
g.only if necessary:
i)the husband’s earlier affidavits sworn on 29 November 2017, 8 February 2018 and 13 December 2018; and
ii)the affidavits sworn on 13 August 2018 and 17 September 2018 by the husband’s solicitor Mr M.
The wife said in her case outline filed on 6 May 2019 that she relied upon:
a.her response filed on 1 February 2018 to the initiating application;
b.her financial statement filed on 1 February 2018;
c.her response filed on 10 September 2018 to an application in a case;
d.if leave is granted, the affidavit affirmed on 15 April 2019 by Mr L, a business valuer (this became redundant in view of the agreement to sell the business);
e.the trial affidavit sworn by the wife on 29 April 2019; and
f.the transcripts of the interim proceedings on 18 September 2018 and 14 December 2018.
The husband’s proposal
The husband proposed final orders in his closing submissions filed on 2 December 2019 as follows:
1.That the residue of the sale proceeds of the former matrimonial home in the sum of $255,879.77 be forthwith divided between the parties by payment to them care of their respective solicitors as follows:
(a)First to reimburse the A Bank Funds of:
a. Y account number …45 in the sum of $6,000.00.
b. X account number …32 in the sum of $9,000.00.
c. Z account number …65 in the sum of $1,000.00.
(b)The balance thereafter remaining to be divided between the parties as follows:
a. $155,933.87 thereof to the Husband; and
b. $83,945.90 thereof to the Wife.
2.That upon completion of the sale of the business, the net proceeds of sale as defined by paragraph 9 of the Orders of 30 September 2019 be divided as to 55% to the Husband and 45% to the Wife.
3.That pursuant to section 90XT(4) of the Family Law Act 1975 (“the Act”), the member entitlements of the Husband and of the Wife in the Gambrell Superannuation Fund be adjusted so that the value of the Wife’s member entitlement in the Fund is $148,641.76 (“the base amount”).
4.That within 60 days of the completion of sale of the business as ordered by the Court on 30 September 2019, the Trustees of the Fund shall effect a rollover to the Wife’s nominated superannuation fund pursuant to section 90XT(1)(a) of the Act of the Wife’s entitlement calculated in accordance with the Family Law (Superannuation) Regulations 2001 using the base amount specified in Order 3 above and there shall be a corresponding reduction in the interest that the Husband would have in the Fund but for these Orders.
5.IT IS DECLARED THAT the Husband holds the following A Bank Investment Funds on trust for the children of the marriage for their future education pending their majority:
(a)Y account number …45 in the sum of $23,509.55.
(b)X account number …32 in the sum of $32,229.94.
(c)Z account number …65 in the sum of $11,440.72.
6.That unless otherwise specified in these orders and save for the purposes of enforcing any monies due under these or any subsequent orders:-
(a)each party be solely entitled to retain the chattels, items and property (including choses-in-action) in the possession of such party to the exclusion of the other party as at the date of these orders;
(b)each party be liable for the credit card debt/s and loans in their respective names;
(c)insurance policies remain the sole property of the owner named thereon;
(d)each party be solely liable for any liability encumbering any item of property to which that party is entitled to pursuant to these orders;
(e)any joint tenancy any real or personal estate is hereby expressly severed.
7.That all extant applications be otherwise dismissed.
AND THE COURT NOTES:
A.That pursuant to s.81 of the Act the parties intend these Orders to finally determine the financial relationship between them and avoid further proceedings between them.
In his closing submissions, the husband provided a table in the following form:
FINANCIAL EFFECT OF ORDERS SOUGHT BY HUSBAND
ITEM
IN SPECIE
Wife
Husband
1
Part property settlement (“PPS”) to Wife: Order 3D on 12.2.2018
$20,000.00
2
PPS to Wife: Order 4(d) on 30.9.2019
$220,000.00
3
PPS to Husband: Order 4(c) on 30.9.2019
$20,000.00
4
PPS to Husband: Order 4(d) on 30.9.2019
$220,000.00
5
Distribution of house sale proceeds (to be ordered)
$83,945.90
$155,933.87
6
Boat
$14,000.00
7
House contents (wife has retained)
100%
NIL
SUBTOTAL
$323,945.90 + contents
$395,933.87 + boat
8
Net sale proceeds of business
45%
55%
SUPERANNUATION
9
Super Fund 1
$20,741.00
10
Wife’s rollout from Gambrell Superannuation Fund
$148,641.78
10
Gambrell Superannuation Fund
$169,382.76
TOTAL SUPERANNUATION
$169,382.76
$169,382.76
The wife’s proposal
The wife proposed final orders in her closing written submissions filed on 8 November 2019 as follows:
1.That the Wife receive sixty-five per centum (65%) from the net proceeds of sale of the former matrimonial home and the business, including all related entities of the business.
2.That liberty be reserved to both parties in relation to the sale of the business and related entities.
3.That the Wife receive fifty per centum (50%) of the parties (sic) Self-Managed Superannuation Fund as a cash payment in lieu of a splitting Order.
4.That paragraphs 5 to 8 inclusive of the Order of 30th. September, 2019 remain in full force and affect (sic) including any amendment to paragraph 8.e.
5.That the Wife have control of the A Bank fund for the benefit of the children and she keep the Husband informed of any expenditure made from the fund.
6.That the Husband pay the Wife’s costs of and incidental to these proceedings or in the alternative receive a greater percentage of the matrimonial assets in lieu thereof. (It being noted that the Wife’s Application for Litigation Funding is still extant.)
7.That unless otherwise specified in these Orders and save for the purposes of enforcing any monies due under these or any subsequent Orders:
(a)each party be solely entitled to the exclusion of the other to all property including choses-in-action in the possession of such party as at the date of these Orders.
(b)monies standing to the credit of the parties in any joint bank account be transferred to the Wife.
(c)insurance policies remain the sole property of the owner thereon.
(d)each party be solely liable for and indemnify the other against any liability encumbering any item of property to which that party is entitled pursuant to these Orders.
(e)any joint tenancy of the parties in any real or personal estate is hereby expressly severed.
(f)the husband indemnifies (sic) and keeps (sic) indemnified the Wife against any taxation liability past present or future which has arisen or may arise from the Husband’s conduct of the business or related entities.
(g)such further or other Orders as this Honourable may deem fit.
Costs
As can be seen, in her proposed orders, the wife sought an order for costs, or, in the alternative, a greater proportion of the pool. The husband opposed that order, arguing that costs should be dealt with, if at all, in the conventional way following the delivery of judgment. It seems to me that the husband is correct in relation to the proper time to deal with the question of costs. It is inappropriate to conflate costs issues with property division issues, not least because the Act specifies different matters to consider in relation to each issue.
Nevertheless, the parties agreed, during the course of the trial, possibly to save court time in a busy list, for the question of Mr K’s witness fees to be dealt with in the final judgment: Tr. p.262. The wife made some submissions on that point in her closing written submissions, (which, unhelpfully, did not have paragraph numbers) but the husband did not squarely address the point. In the circumstances, it seems to me that it is preferable for that issue to be left until after the delivery of judgment, to enable each party to make such submissions as they wish.
The legislation
Section 79 of the Act gives the court power to alter the interests of the parties to a marriage in the property of the parties to that marriage. Sub-section 79(2) of the Act provides that:
The court shall not make an order under this section unless it is satisfied that, in all the circumstances, it is just and equitable to make the order.
Section 79(4) of the Act sets out the matters the court must take into account when considering what orders, if any, should be made for the alteration of the interests of the parties in property. Those matters are:
(a)the financial contribution made directly or indirectly by or on behalf of a party to the marriage or a child of the marriage to the acquisition, conservation or improvement of any of the property of the parties to the marriage or either of them, or otherwise in relation to any of that last‑mentioned property, whether or not that last‑mentioned property has, since the making of the contribution, ceased to be the property of the parties to the marriage or either of them; and
(b)the contribution (other than a financial contribution) made directly or indirectly by or on behalf of a party to the marriage or a child of the marriage to the acquisition, conservation or improvement of any of the property of the parties to the marriage or either of them, or otherwise in relation to any of that last-mentioned property, whether or not that last-mentioned property has, since the making of the contribution, ceased to be the property of the parties to the marriage or either of them; and
(c)the contribution made by a party to the marriage to the welfare of the family constituted by the parties to the marriage and any children of the marriage, including any contribution made in the capacity of homemaker or parent; and
(d)the effect of any proposed order upon the earning capacity of either party to the marriage; and
(e)the matters referred to in subsection 75(2) so far as they are relevant; and
(f)any other order made under this Act affecting a party to the marriage or a child of the marriage; and
(g)any child support under the Child Support (Assessment) Act 1989 that a party to the marriage has provided, is to provide, or might be liable to provide in the future, for a child of the marriage.
The matters to be taken into account under s.75(2) of the Act are as follows:
(a)the age and state of health of each of the parties; and
(b)the income, property and financial resources of each of the parties and the physical and mental capacity of each of them for appropriate gainful employment; and
(c)whether either party has the care or control of a child of the marriage who has not attained the age of 18 years; and
(d)commitments of each of the parties that are necessary to enable the party to support:
(i) himself or herself; and
(ii) a child or another person that the party has a duty to maintain; and
(e)the responsibilities of either party to support any other person; and
(f)subject to subsection (3), the eligibility of either party for a pension, allowance or benefit under:
(i)any law of the Commonwealth, of a State or Territory or of another country; or
(ii) any superannuation fund or scheme, whether the fund or scheme was established, or operates, within or outside Australia;
and the rate of any such pension, allowance or benefit being paid to either party; and
(g) where the parties have separated or divorced, a standard of living that in all the circumstances is reasonable; and
(h)the extent to which the payment of maintenance to the party whose maintenance is under consideration would increase the earning capacity of that party by enabling that party to undertake a course of education or training or to establish himself or herself in a business or otherwise to obtain an adequate income; and
(ha)the effect of any proposed order on the ability of a creditor of a party to recover the creditor’s debt, so far as that effect is relevant; and
(j)the extent to which the party whose maintenance is under consideration has contributed to the income, earning capacity, property and financial resources of the other party; and
(k)the duration of the marriage and the extent to which it has affected the earning capacity of the party whose maintenance is under consideration; and
(l)the need to protect a party who wishes to continue that party’s role as a parent; and
(m)if either party is cohabiting with another person — the financial circumstances relating to the cohabitation; and
(n)the terms of any order made or proposed to be made under section 79 in relation to:
(i) the property of the parties; or
(ii)vested bankruptcy property in relation to a bankrupt party; and
(naa)the terms of any order or declaration made, or proposed to be made, under Part VIIIAB in relation to:
(i)a party to the marriage; or
(ii)a person who is a party to a de facto relationship with a party to the marriage; or
(iii)the property of a person covered by subparagraph (i) and of a person covered by subparagraph (ii), or of either of them; or
(iv)vested bankruptcy property in relation to a person covered by subparagraph (i) or (ii); and
(na) any child support under the Child Support (Assessment) Act 1989 that a party to the marriage has provided, is to provide, or might be liable to provide in the future, for a child of the marriage; and
(o)any fact or circumstance which, in the opinion of the court, the justice of the case requires to be taken into account; and
(p)the terms of any financial agreement that is binding on the parties to the marriage; and
(q)the terms of any Part VIIIAB financial agreement that is binding on a party to the marriage.
The approach to applications under s.79
In Stanford v Stanford (2012) 247 CLR 108; (2012) 293 ALR 70; (2012) 87 ALJR 74; (2012) 47 Fam LR 481; (2012) FLC 93-518; [2012] HCA 52, the High Court explained the proper approach to an application under s.79 of the Act as follows:
37.First, it is necessary to begin consideration of whether it is just and equitable to make a property settlement order by identifying, according to ordinary common law and equitable principles, the existing legal and equitable interests of the parties in the property. … The question posed by s 79(2) is thus whether, having regard to those existing interests, the court is satisfied that it is just and equitable to make a property settlement order.
38.Second, although s 79 confers a broad power on a court exercising jurisdiction under the Act to make a property settlement order, it is not a power that is to be exercised according to an unguided judicial discretion. In Wirth v Wirth, Dixon CJ observed that a power to make such order with respect to property and costs “as [the judge] thinks fit”, in any question between husband and wife as to the title to or possession of property, is a power which “rests upon the law and not upon judicial discretion”. … (footnotes omitted)
39.Because the power to make a property settlement order is not to be exercised in an unprincipled fashion, whether it is “just and equitable” to make the order is not to be answered by assuming that the parties’ rights to or interests in marital property are or should be different from those that then exist. All the more is that so when it is recognised that s 79 of the Act must be applied keeping in mind that “[c]ommunity of ownership arising from marriage has no place in the common law”. Questions between husband and wife about the ownership of property that may be then, or may have been in the past, enjoyed in common are to be “decided according to the same scheme of legal titles and equitable principles as govern the rights of any two persons who are not spouses”. The question presented by s 79 is whether those rights and interests should be altered. (footnotes omitted)
40.Third, whether making a property settlement order is “just and equitable” is not to be answered by beginning from the assumption that one or other party has the right to have the property of the parties divided between them or has the right to an interest in marital property which is fixed by reference to the various matters (including financial and other contributions) set out in s 79(4). The power to make a property settlement order must be exercised “in accordance with legal principles, including the principles which the Act itself lays down”. To conclude that making an order is “just and equitable" only because of and by reference to various matters in s 79(4), without a separate consideration of s 79(2), would be to conflate the statutory requirements and ignore the principles laid down by the Act. (emphasis in original) (footnote omitted)
…
42.In many cases where an application is made for a property settlement order, the just and equitable requirement is readily satisfied by observing that, as the result of a choice made by one or both of the parties, the husband and wife are no longer living in a marital relationship. It will be just and equitable to make a property settlement order in such a case because there is not and will not thereafter be the common use of property by the husband and wife. No less importantly, the express and implicit assumptions that underpinned the existing property arrangements have been brought to an end by the voluntary severance of the mutuality of the marital relationship. That is, any express or implicit assumption that the parties may have made to the effect that existing arrangements of marital property interests were sufficient or appropriate during the continuance of their marital relationship is brought to an end with the ending of the marital relationship. And the assumption that any adjustment to those interests could be effected consensually as needed or desired is also brought to an end. Hence it will be just and equitable that the court make a property settlement order. What order, if any, should then be made is determined by applying s 79(4). (emphasis in original)
Stanford requires the following matters to be determined in applications brought under s.79 of the Act:
a.whether the parties have separated;
b.the assets and liabilities of each party;
c.the contributions of each party;
d.the future needs of each party;
e.bearing in mind all of the foregoing matters, whether it is just and equitable to make any orders altering the interests of the parties in their property; and
f.what orders, if any, are just and equitable in all the circumstances of the case.
Stanford does not require these matters to be addressed in any particular order. In most cases, it would seem rational to consider them in the order set out above.
Whether the parties have separated
The parties agreed that they had separated.
The assets and liabilities
The parties provided to the court a number of joint statements regarding their assets and liabilities, which were subsequently partially overtaken by events.
It was common ground that each party, during the course of the litigation, had received a part property settlement of $240,000.
It was also common ground that the proceeds of sale of the former matrimonial home amounted to $255,879.77. That sum is presently held on trust for the parties jointly and it is to be divided by the court.
It was not suggested that the parties have any other joint assets.
It was not suggested that the parties have any joint liabilities.
The parties agreed in the fourth version of their table of assets, liabilities, contributions and future needs, which was provided to the court on 30 September 2019, (“the Table”), that the husband individually owns a boat and trailer with a value of $14,000.
The husband also owns a business, consisting of the Gambrell Unit Trust and the plant and equipment held by B Pty Ltd. After much argument about the value of the business, the parties agreed that the business would be sold, and the proceeds would be divided by the court in percentage terms.
The parties also agreed that the husband has some funds in an account with A Bank Investments Limited. The funds were ostensibly held on trust for X, Y and Z. It was common ground that the husband had withdrawn some of the funds for purposes unrelated to the children. The husband proposed that, from the proceeds of sale of the former matrimonial home, $9,000 be repaid to X’s account, $6,000 to Y’s account and $1,000 to Z’s account. The husband proposed that the court declare that he holds in the A Bank accounts a total of $67,180.21 for X, Y and Z. That figure was based on the assumption that the funds taken by the husband from the children’s accounts had been repaid.
The wife said in the Table that the sum of $67,180 should be included in the pool. The wife argued in her closing written submissions that the fact that the husband had used the A Bank funds for purposes unrelated to the children was evidence that the A Bank funds had never been held on trust for them. However, somewhat inconsistently, the wife proposed an order that the funds be transferred to her to hold them for the benefit of the children. Previously, in paragraph 119 of her affidavit sworn on 29 April 2019, the wife had proposed that the A Bank funds be used to pay her legal fees.
Exhibit 9 is a statement for the A Bank account number …32. It had a closing balance on 2 May 2019 of $32,229.94. It indicates a withdrawal of $9,000 was made on 8 April 2019. It says the account name is:
Mr Gambrell
X A/C
Exhibit 10 is a statement for the A Bank account number …45. It had a closing balance on 2 May 2019 of $23,509.55. It indicates a withdrawal of $6,000 was made on 8 April 2019. It says the account name is:
Mr Gambrell
Y A/C
Exhibit 11 is a statement for the A Bank account number …65. It had a closing balance on 2 May 2019 of $11,440.72. It indicates a withdrawal of $1,000 was made on 8 April 2019. It says the account name is:
Mr Gambrell
Z A/C
The husband took a total of $16,000 from the A Bank accounts. He said that he did so because the wife drew down $49,450 from the ANZ line of credit, without his knowledge, and, when he discovered what had happened, he was obliged to withdraw money from the A Bank funds, to preserve his credit rating. It appears that the wife made some repayments of the money she had drawn down on the ANZ line of credit, but stopped doing so after a time, with the result that debt collectors were called in. The husband said that, ultimately, the total amount outstanding on the ANZ line of credit was $23,506, but he was able to negotiate a deal whereby the ANZ accepted $16,000 in satisfaction of the debt.
In paragraph 25 of his affidavit sworn on 12 April 2019, the husband described the A Bank funds as the children’s trust accounts.
The husband said that:
a.the wife first made disclosure of her drawdowns from the ANZ line of credit in her solicitor’s letter dated 7 February 2018;
b.previously, she had filed a financial statement which made no mention of any liability in respect of the ANZ line of credit, and no mention of another ANZ bank account in her sole name, into which the funds she drew down from the ANZ line of credit appear to have been transferred; and
c.the husband discovered the wife’s undisclosed account as the result of issuing a subpoena to the ANZ Bank.
The bank statements for the wife’s personal ANZ account are contained in exhibit -16 to the affidavit sworn by the husband’s solicitor, Mr M, on 13 August 2018. The bank statements indicate that the wife drew down $49,450 from the ANZ line of credit as follows:
a.$25,000 on 1 February 2016;
b.$10,000 on 4 April 2016;
c.$3,000 on 11 October 2016;
d.$5,000 on 9 November 2016;
e.$2,000 on 28 November 2016;
f.$2,000 on 4 April 2017;
g.$1,000 on 24 April 2017; and
h.$1,450 on 12 June 2017.
The wife said at paragraph 114 of her affidavit sworn on 29 April 2019 that she simply used jointly available funds to pay joint debts, such as for holidays. She said that the husband was well aware at the time what she was doing and the precise destination of the funds. The wife said that the husband was just making a false allegation about her financial dishonesty to deflect attention from his own. The wife’s explanation was not supported by bank statements, receipts, or other source documents.
The wife said at paragraph 115 of her affidavit sworn on 29 April 2019 that:
I have repeatedly answered questions about this ANZ account during the course of these proceedings and in particular, I again (in answer to the allegations contained in 19(a) in Mr M’s affidavit) say that:
a.On 1 February 2016 I made a transfer of $25,000 from the joint ANZ loan account to my personal account. $10,000 of this was paid into our joint account on the 1st February and the remaining $10,000 on the 2nd February. As indicated in the joint account statement, one of these payments was immediately applied to the credit card. $5,000 remained in the account;
b.On 4 April 2016 I transferred $10,000 into the joint account to be used for joint expenses.
c.On 11 October 2016 I transferred $3,000 into the joint account.
d.On 9 November 2016 I transferred $4,000 and not $5,000 into the joint account noting that $2,000 of this was applied towards the credit card.
e.On 28 November 2016 I transferred $2,000 back into the ANZ loan account by way of repayment.
f.On 4 April 2017 I transferred $2,000 into the joint account and $1,800 was immediately applied towards the credit card.
b.On 24 April 2017 I transferred $1,000 to the joint account.
c.On 12 June 2017 I transferred $1,450 by way of repayment towards the ANZ loan account.
As at 13 February 2017, the date of separation, the wife’s personal ANZ account had a credit of $2,350. As at 19 March 2018, which is the last date referred to in exhibit -16, the wife’s undisclosed ANZ account had a credit of $6.89.
In any event, the husband did not argue in the Table or in his closing submissions that any amount should be included in the pool or in relation to the parties’ contributions in relation the wife’s draw down from the ANZ line of credit or from her personal ANZ account. Presumably, the husband accepted that the wife used the funds she drew down from the ANZ line of credit for joint purposes, as she claimed. I accept her claims in this regard, not least because of my findings about the husband’s gross financial dishonesty, set out below.
After that tangent, the end result is that the husband used part of the A Bank funds to repay withdrawals made by the wife from the ANZ line of credit, and those withdrawals had been used for joint purposes.
Ultimately, the husband and wife both agreed that the A Bank funds should be held for the benefit of the children. That is tantamount to agreeing that the funds should be held on trust. In view of that agreement, and in view of the fact that the funds were held in separate accounts for each child, I consider that the A Bank funds have always been held on trust for the children. It follows that, when the husband withdrew $16,000 from the A Bank funds, he acted in breach of trust. It also follows that the A Bank funds are not part of the pool.
Although the wife did not ask for orders that the $16,000 be repaid to the A Bank accounts, that sum must be repaid, to remedy the husband’s breach of trust. It makes sense for the repayment to come from the proceeds of the sale of the former matrimonial home, as they are joint funds, and the amount being repaid was used for joint purposes.
The husband submitted that he should hold the A Bank funds on trust for the children’s future education pending their majority. The wife said that she should hold the A Bank funds for the benefit of the children, without specifying an end date.
It is not known how much of the funds will be left when the children reach 18 years old, whether they will go to university, or whether they will have some other sensible use for the funds, such as assisting with the purchase of a car, or a house. It seems to me that the trustee should be able to decide what to spend the money on, whether education or otherwise, as long as it is for the benefit of the children. It also seems to me that 18 years old is a little too young to be given control of a large sum of money. I consider that it would be preferable that, whatever is left in each child’s account when she reaches 25 years old should be paid to her at that point.
The husband submitted that the A Bank funds should remain in his sole control and the wife submitted that the A Bank funds should be transferred to her on behalf of the children. She said that the parties were not capable of acting co-operatively, thus precluding the option of them being joint signatories.
I accept that the parties in this case are not capable of acting co-operatively. That is to their discredit. However, it is not a reason for transferring the A Bank funds to the wife.
In my view, the A Bank funds should stay where they are and where they always have been, in the husband’s name. However, the husband should be required to advise the wife in writing seven days before making any transactions on the A Bank accounts, and provide her with bank statements, invoices and receipts evidencing any such transactions within seven days of receiving them.
The husband alleged in the Table that the wife had a pension from the United Kingdom in an unknown amount. However, the husband did not maintain that position in his closing written submissions. Consequently, I am unable to include the wife’s supposed pension in the pool.
The wife submitted in the Table that her legal costs should be included in the pool. That is contrary to authority. The point was not pressed in closing submissions, although the wife did note in her proposed orders that her application for litigation funding was still on foot. Applications for litigation funding are meant to secure funds to enable the proceedings to be conducted. In the present case, the proceedings have been conducted, without litigation funding as such. Therefore, the point is moot.
The wife also submitted in the Table that her current credit card debt of $16,000 should be included in the pool. The husband opposed the wife’s credit card debt being included in the pool on the basis that she had provided no evidence of any credit card debt as at the date of separation.
I consider, in the absence of evidence to the contrary, that the wife’s credit card debt accrued post-separation. However, in view of Stanford, the wife’s current credit card debt must be included in the pool. Having said that, the wife’s current credit card debt needs to be taken into account as a post-separation contribution.
The parties agreed in the Table that the wife had superannuation with Super Fund 1 worth $18,567. However, in cross-examination, it was put to the wife that she had $20,000 in superannuation in round terms, and she accepted that figure.[1] Consequently, I will use $20,000 as the figure for the wife’s superannuation.
[1] Tr. p.292.
The parties also agreed that they have a self-managed superannuation fund, called the Gambrell Superannuation Fund, which was for their joint benefit. In cross-examination, the wife agreed that the Gambrell Superannuation Fund was worth $308,000. However, in his closing written submissions, the husband submitted that the Gambrell Superannuation Fund was worth $318,024.52. As the higher value was to the wife’s benefit, and as that was the figure given in the fund’s statement of financial position as at 30 June 2019, I would treat that as a concession and use it as the figure for the Gambrell Superannuation Fund.
However, there is one additional point relating to the value of the Gambrell Superannuation Fund. The wife said in her closing submissions, in relation to the pool, that the husband’s company was $30,000 behind in its payment of rent to the Gambrell Superannuation Fund[2], in that it had not paid rent for the previous financial year. I take that to be a reference to the financial year ended 30 June 2019. The wife said that submission was based on the evidence of the husband’s accountant, Mr K. The husband said at paragraph 18 of his closing submissions that Mr K’s evidence was to the effect that the husband’s company had paid all rental monies due to the Gambrell Superannuation Fund up to 30 June 2019.
[2] The husband’s company leases its premises from the Gambrell Superannuation Fund.
Mr K swore an affidavit on 3 May 2019 in which he said that the net value of the Gambrell Superannuation Fund was $306,468.35. Mr K did not say in his affidavit that the husband’s company owed $30,000 to the Gambrell Superannuation Fund for rent. Mr K exhibited various financial documents to his affidavit for the 2017 and 2018 financial years. They do not indicate that there was any outstanding rent owed by the husband’s company to the Gambrell Superannuation Fund. However, the financial documents only show rental paid for 2017 and 2018. The wife’s point was that the rent for 2019 was unpaid.
Mr K attended court to be cross-examined on his affidavit on 30 September 2019. In relation to the first substantive question put to him, Mr K said that he could not explain an aspect of a document exhibited to his affidavit, because he did not have his documents with him. In relation to the second substantive question put to him, Mr K said:
Without me looking at the paperwork I can’t comment.
The following exchanges then occurred:
You’ve got no idea whatsoever?---I’ve got no documents. I wasn’t asked - - -
HER HONOUR: Well, why didn’t you bring them with you?---I was told to appear, your Honour. I asked if there was any documents. “Just come yourself”, and that’s what I did, your Honour. …
Basically, Mr K attended court as an expert witness for the husband in relation to the valuation of the Gambrell Superannuation Fund, but was unable to answer any questions because he did not bring the relevant documents to court. He did not bring the relevant documents because someone, presumably the husband’s solicitor, told him not to.
The cross-examination of Mr K on 30 September 2019 continued but was abbreviated, because Mr K was unable to answer many relevant questions, because he did not have the relevant documents with him. The court asked the parties how they wished to proceed at Tr. p.219, saying:
… Would you want him to come back with his documents or would you rather just make submissions to the effect that he’s completely unreliable because he has chosen not to bring his documents to court.
The wife’s counsel said that he would prefer to rely on his submissions. The husband’s counsel said that Mr K would appear on the next date for further cross-examination with his documents. The matter was adjourned to 4 October 2019.
Mr K attended court on 4 October 2019 with documents. Shortly before court began on 4 October 2019, Mr K produced to the wife’s counsel about 60 pages of documents, being the annual tax return for the Gambrell Superannuation Fund for 2019 (exhibit 18) and a bundle of documents relating to the Gambrell Superannuation Fund consisting of a payment slip for a BAS payment (duplicated), BAS statements (duplicated), financial statements for the Gambrell Superannuation Fund for the year ended 30 June 2019, the Gambrell Superannuation Fund tax return for 2019 (duplicated), the Gambrell Superannuation Fund’s general ledger for 2017, 2018 and 2019, and various bank statements.
The versions of exhibits 18 and 19 that were provided to the court were different to the versions that were provided to the wife’s counsel. This issue took some time to sort out. I am unable to say whether the discrepancies were due to ineptitude or were a deliberate attempt to confuse and confound the wife’s counsel. In any event, although the late delivery of exhibits 18 and 19 meant that the wife’s legal team were unable to be assisted in their analysis by an accountant, they chose to press ahead rather than seek an adjournment.
Mr K said in cross-examination that there was no payment of rental in 2019 because the rent for 2019 had been prepaid in 2018: Tr. p.243. Later, Mr K said that the valuation of the Gambrell Superannuation Fund did not take into account unpaid rental: Tr. p.254.
Exhibit 19, which was made available to the wife for the first time on 4 October 2019, the last day of the trial, included an operating statement for the Gambrell Superannuation Fund for 2019. It showed that the Fund had no revenue for rental in the 2019 year. It also showed that the revenue for rental for the 2018 year was $33,545.45. The operating statement for the Gambrell Superannuation Fund for the 2018 year (which was exhibited to Mr K’s affidavit) showed the same rental income for the 2018 year and rental income of $40,496.80 for the 2017 year.
On these figures, $33,545.45 paid in 2018 and $40,496.80 paid in 2017, there is no basis for Mr K’s claim that the rent for 2019 was prepaid in 2018. I conclude that the husband’s business did not pay the Gambrell Superannuation Fund rent for 2019, and, in accordance with Mr K’s evidence at Tr. p.254, the valuation of the Gambrell Superannuation Fund of $318,024.52 did not take into account that unpaid rent.
In the circumstances, I consider that the sum of $30,000 should be added to the valuation of the Gambrell Superannuation Fund. I accept that the wife agreed to a lower figure in cross-examination, but I consider that she should not be bound by that concession in circumstances where the evidence produced by the husband’s expert witness on the last day of trial, when the wife did not have the opportunity to fully absorb it, meant that the true value of the fund was higher.
In the event that the court accepted that the value of the Gambrell Superannuation Fund included the $30,000 for the 2019 rent, the wife asked the court to amend an order made on 30 September 2019 that the proceeds of sale of the business be applied to, among other things:
rent for the factory premises pursuant to the lease and utilities services [.]
The wife asked that the order be amended to read:
rent and any arrears thereof for the factory premises pursuant to the lease and utilities services [.] (proposed amended words in bold)
I would have thought that the order as originally framed would have encapsulated arrears of rent. The husband’s closing submissions did not directly address this issue, but the mere fact that he sought to argue that there is no the unpaid rental suggests that he would not ensure that the proceeds of the sale of the business are used to pay the rent the business owes to the Gambrell Superannuation Fund for the 2019 financial year.
In the circumstances, it seems to me that it will be necessary to make the amendment sought by the wife to ensure that the 2019 rent is paid by the husband’s business to the Gambrell Superannuation Fund before any further distribution of the proceeds of sale.
As interim orders are subsumed in final orders, it will also be necessary in the final orders to restate all of the interim orders dealing with the sale of the business, as some time has passed since the trial and the court has not been advised whether the sale of the business has occurred as yet.
Therefore, in summary, the pool consists of:
a.the balance of the proceeds of sale of the former matrimonial home, being $255,879.77, less $16,000, which is to be paid to the A Bank accounts, leaving $239,879.77 as joint funds;
b.the husband’s boat, valued at $14,000;
c.the husband’s business, which has an unknown value;
d.the wife’s superannuation, with a value of $20,000;
e.the Gambrell Superannuation Fund, with a value of $348,024.52; and
f.the wife’s credit card debt of -$16,000.
That makes a total pool of $605,904.29 plus the business. In addition, each party has already received a part property settlement of $240,000. The remaining non-superannuation pool is $257,880 plus the business. The precise value of the business was hotly contested. It was ultimately agreed that the business would be sold. If it has been sold, its sale price has not been made known to the court. Nevertheless, Mr C, a joint valuer, valued it at $533,000 on 2 May 2019. The wife disputes that value. As discussed above, from the proceeds of sale of the business, $30,000 will have to be paid to the superannuation fund, reducing the value of the business, on Mr C’s figures, to $503,000.
Contributions
a. Initial contributions
The parties commenced cohabitation in 2001. The parties agreed that, at that time, the husband owned:
a.E Street, Suburb N (“the E Street, Suburb N property”);
b.O Street, Suburb P[3] (“the O Street, Suburb P property”); and
c.a business.
[3] This property was described in the Table as O Street, Suburb P. However, in exhibit 3, it was described as O Street, Suburb P. Exhibit 3 seems to me to be more reliable.
The wife denied that the husband had any significant equity in those assets at the time of cohabitation, while the husband submitted that he did. There was no evidence as to their values in 2001 or the husband’s equity in them. The court is not permitted to guess about such matters. It is possible for there to be negative equity in assets.
As discussed below, the E Street, Suburb N property was sold in 2007, with sale proceeds of $164,200 and the O Street, Suburb P property was sold in 2009, with sale proceeds of zero (exhibit 3).
The husband’s business folded in 2009. The husband admitted that his company went into liquidation with an unpaid debt to the Commissioner of Taxation of $250,000.
Based on the available evidence, it is not possible for the court to conclude that the E Street, Suburb N property, the O Street, Suburb P property or the business had any appreciable equity in 2001. It is possible that virtually all of the equity in the E Street, Suburb N property arose after 2001, that the O Street, Suburb P property was in negative equity at that time, and that the husband’s business was worthless or in debt at the commencement of the relationship.
The husband alleged and the wife disputed that, at the commencement of their cohabitation, she had a United Kingdom pension entitlement which she had accrued over 12 years. There was no evidence of that pension entitlement, and the husband did not pursue it in closing submissions. I can take it no further.
Otherwise, the parties agreed that the wife had no assets of any appreciable value at the commencement of cohabitation.
b. Contributions during the relationship
The parties agreed that the husband’s contributions during the relationship included:
a.full time work throughout;
b.a gift of $160,000 from his mother in 2014; and
c.his contributions as a father.
The parties agreed that the wife’s contributions during the marriage included:
a.paid work in part time and full time capacities at various times; and
b.her contributions as a mother and homemaker.
The husband alleged and the wife disputed that the sale proceeds of the E Street, Suburb N property amounted to $165,000. Exhibit 2 is the settlement statement and a solicitor’s letter in relation to the sale of the E Street, Suburb N property. It shows that the husband received $164,280.23 as the proceeds of sale of the E Street, Suburb N property on about 31 August 2007. I accept that the husband received that sum on about that date.
The husband alleged and the wife disputed that the sale proceeds of their house in Suburb F in 2009 amounted to $122,000. It was common ground that the proceeds of the sale of the E Street, Suburb N property were used to knock down a house owned by the husband’s grandmother in Suburb F, and to build another house on the same site, in which it was intended that the husband, the wife, their children and the husband’s grandmother would all live. However, before the house in Suburb F was completed, the husband’s business failed, and the Suburb F property had to be sold.
Exhibit 4 is a settlement report for the Suburb F property. It shows that $128,450.66 should have been paid to the husband and wife at settlement on or about 10 February 2010. (The statement of adjustments indicates that the husband and wife were overpaid at settlement, but that the overpayment was refunded to the husband’s grandmother.) In view of this report, I accept that the husband and wife received proceeds of sale of $128,450.66 from the Suburb F property.
Exhibit 3 is the settlement documents for the O Street, Suburb P property. It shows that the property was sold for $350,000, the amount paid to the mortgagee was $335,439.27, and, with the costs of sale, there was no surplus available for the husband as vendor.
The wife alleged and the husband disputed that the proceeds of sale of the Suburb F property, except for $50,000, were applied to the creditors of the husband’s business. The husband explained in cross-examination (Tr. p.114 ˗ 116) that his company, Q Pty Ltd trading as D Pty Ltd, went into liquidation but all of its employees and customers were seamlessly transferred to a new company under a trust structure. He said the business never stopped trading. The husband said:
all creditors were paid. The only bad debt we had was 250,000 to the Tax Office.
To say that all creditors were paid, but that there was a $250,000 bad debt to the tax office, is laughable. The husband seems to be under the misapprehension that the Australian Taxation Office, and through it, the people of Australia, are not real creditors. The process the husband described is a phoenix arrangement, where a company director puts the company into liquidation leaving behind bad debts, and starts up a new company and no one ever has to pay those debts.
Phoenix arrangements are fundamentally and grossly dishonest. The fact that the husband engaged in such behaviour, and blithely described it to the court as if he had done absolutely nothing wrong, demonstrates serious financial dishonesty on the husband’s part. I infer from that conduct that the husband would blithely cheat the wife in this proceeding, and blithely lie to the court.
In any event, the husband said that all of the creditors, other than the tax office, were paid, some with payment arrangements. Even in a phoenix arrangement, the non-tax office creditors have to be paid, so that they will continue to supply goods and services to the new company.
The husband denied that any of the proceeds of the Suburb F property were used to pay out the creditors of the old company. However, in view of the fact that at least some of the creditors of the old company were paid pursuant to a payment arrangement, and in view of the fact that the husband is grossly dishonest, I do not accept his evidence on this point. I accept the wife’s claim that all but $50,000 of the proceeds of sale of the Suburb F property were used to pay out the non-tax office creditors of the husband’s old company.
Also in relation to the tax issue, and in relation to the wife’s contributions, the husband said that the wife did not work in the business, but the business did pay her a salary of $2,000 per month.
The husband said in examination in chief that the wife had never worked at his company: Tr. p.49. The husband said in cross-examination at Tr. p.94:
… Because when we were together we income split.
…
HER HONOUR: Sorry, you said yesterday that she didn’t do any work for the company?---No, but she was part of the family trust. So the profits were split through the trust.
MR COMBES: So she didn’t work at the business and she wasn’t paid a salary?---No.
No. Are you sure about that?---As far as I’m aware. She may have early on, but she didn’t work.
The exchange continued at Tr. p.95:
MR COMBES: … Given that she didn’t work at the business, she couldn’t be paid a salary, could she?---How far back are you talking?
Well, let’s say about February of 2017?---I think at that point in time we were both paid wages out of the business and once we separated, that stopped.
Yes, but your evidence says that she did work in the business, so that - - -?---She didn’t.
- - - would be – that would be dishonest, wouldn’t it? To pay her a salary out of the business when she wasn’t working there?---That was just the way we had it set up.
Income splitting is used so that the amount of tax paid by a family unit is reduced. It allows the husband and wife to each get the benefit of the tax-free threshold and lower marginal tax rates than one spouse would if all of his or her earnings were assessed for tax at his or her marginal tax rate. Income splitting is tax evasion, and fundamentally dishonest.
Given that the husband blithely told the court that he engaged in income splitting, the husband has again demonstrated that he is fundamentally financially dishonest.
While on paper the wife may have contributed $2,000 per month to the family finances, it was common ground that, except perhaps briefly and in a very minimal capacity, she did not work for the husband’s company. On the other hand, she did work part-time and full-time at various times for third parties. Nevertheless, it was not disputed that the husband was the principal breadwinner.
On the topic of tax, it also appears that the husband’s company[4] bought a caravan, which was used for family holidays. However, the husband also claimed that it was used by the business for promotional purposes: Tr. p.208 ˗ 212. That is extremely hard to believe. The husband’s company appears to have claimed a tax deduction for depreciation for the caravan, which was used for personal family purposes. If that is what happened, there may have been an underpayment of tax.
[4] It was not clear from the evidence whether the entity that bought the caravan was the Gambrell Unit Trust, D Pty Ltd, B Pty Ltd being the holding company for the business or the Gambrell Unit Trust.
The phoenix company issue, the income splitting issue and the caravan issue will be referred to the Australian Taxation Office for investigation into whether any crimes have been committed, and whether any further money is owed to the Australian Taxation Office.
The E Street, Suburb N property was sold during the course of the marriage and produced proceeds of sale of about $164,000 which were largely put into the Suburb F property. The Suburb F property was sold during the course of the marriage and produced proceeds of sale of about $128,000. However, I accept the wife’s evidence that all but $50,000 of that money was lost when the husband’s business failed in 2009.
Having said that, the parties did have the benefit of living between 2001 and 2007 in a house that the husband brought to the relationship and did have the benefit of the gift of $160,000 from the husband’s mother.
c. Contributions post separation
The parties agreed in the Table that the husband’s post-separation contributions included:
a.the husband paying all mortgage payments on the former matrimonial home and periodic child support; and
b.the children spending half of school holidays with him.
The wife agreed in cross-examination that the husband had paid $118,922 in post-separation mortgage and house insurance payments for the former matrimonial home in which the wife and children lived for 2.5 years post-separation, and $9,300 into the children’s A Bank accounts.
The parties agreed in the Table that the wife’s post-separation contributions included:
a.caring for the children the majority of the time; and
b.the children spending half of school holidays with her.
As discussed above, the wife’s $16,000 post-separation credit card debt also needs to be taken into account.
The husband alleged in the Table that he cares for all of the children for six nights a fortnight during term time. The wife said in the Table that Z spends six nights a fortnight with the husband, X spends a maximum of four nights with him and Y spends between four and six nights with him. The wife said nothing about this in her closing submissions. I take that to mean that the wife accepted the husband’s claims in this regard. In addition, the wife agreed in cross-examination that a child support care summary (exhibit 7) was accurate. It showed that the husband had the care of the three children 44% of the time, or six nights a fortnight. The wife also agreed in cross-examination on 4 October 2019 that X had been living with the husband for a number of weeks following X having an altercation the wife.
The husband alleged in the Table that he had paid all of the children’s school fees post separation. The wife said that she had paid the school fees for one term in 2017. Neither party made any closing submissions about this issue. I take it that neither thought it was significant. (The wife conceded in cross-examination that the husband paid the school fees in 2017 that are shown in exhibit 25. However, exhibit 25 shows one payment of school fees on 13 August 2017 and another on 17 September 2017. Presumably, there were two other terms that needed to be paid for in 2017, so exhibit 25, if anything, supports the wife’s claims.)
The husband claimed in the Table that he made $50,356 of contributions to the Gambrell Superannuation Fund, consisting of decreasing the mortgage by $16,344 and increasing the current account by $34,328. The wife said in the Table that she disputed that claim. However, she made no closing submissions about these matters. I take it from the absence of submissions that the wife accepted the husband’s claims in this regard.
The wife also submitted in her closing submissions, but not in the Table, that the husband had spent lavishly post-separation, while she had struggled and been frugal. She said that the husband’s claim that the business was failing was not credible, in circumstances where:
a.at about the time of separation in 2017, the husband spent about $15,000 to $20,000 on a trip to Country R, including a ticket to a sports event at a cost of $3,000;
b.in 2017, the husband bought a boat for $22,000;
c.in 2017, the husband had a holiday in City S and stayed at an expensive hotel;
d.later, he had holidays in Country H, on the Region T, and in Country U; and
e.he took the children on a holiday to Country H at Easter time in 2019.
The wife said that, in the same time period, she had had a holiday in Country U, which was paid for by her partner, and a trip to the United Kingdom, to scatter her uncle’s ashes. She said the airfares to the United Kingdom were paid for by her brother and she was accommodated with family.
It is well established that, following separation, parties are entitled to get on with their lives, and spend money that would otherwise be part of the pool on their ordinary living expenses. Overseas holidays have become so prevalent that they may also be regarded as part of ordinary living expenses, up to a point, and depending on the family’s circumstances.
In the present case, I consider that the husband’s travel, in the space of three years, was excessive, in the context of this family and the size of the pool. In particular, spending $3,000 on a ticket to a sporting event was an unreasonable depletion of the pool, in the circumstances of this case.
I accept the wife’s contention that the husband’s lavish spending belies his claim that his business is struggling.
The s.79(4)(d), (e), (f) and (g) and the s.75(2) factors
The parties agreed in the Table that they each had future needs including their continued responsibility to care for their children part of the time.
In addition, the husband alleged and the wife disputed in the Table that the wife is capable of earning $65,000 per annum. The wife submitted in the Table that her earning capacity was $20,000 per year and the husband’s was $300,000 per year.
The wife currently works as a health care worker, formerly known as a health care worker. She works part time in this role. According to her financial statement sworn on 10 September 2019, she currently earns per year about $28,700 in wages, about $12,517 in government benefits and $11,472 in child support, making an annual total of $52,689.
The husband submitted in his closing submissions that the wife has an earning capacity of $69,000 per year. That was partly based on the wife’s admission in paragraph 57 of her affidavit sworn on 1 February 2018 that, if she worked full time, she could earn up to $62,000 per annum. The wife also said in paragraph 58(b) of that affidavit that, from 2019 onwards, she hoped to work full-time.
The wife conceded in cross-examination that she could work 38 hours per week (Tr. p.297) and that her average rate of pay was $35 per hour (Tr. p.238). That works out to be $69,160 per year. I accept that the wife has an earning capacity of about $69,000 per year. Although Z is still in primary school, there are many parents who work full-time even though they have primary school aged children. The wife submitted in her closing submissions that she did not have family support in Australia, which would impact on her ability to work full-time. I accept the lack of family support would add to the difficulty of working full-time, but the wife nevertheless has that capacity, as she conceded in cross-examination.
The wife noted in her closing submissions under the heading, The Future Needs of the Parties, that the husband said at paragraph 9 of his affidavit sworn or affirmed on 20 September 2019 that, upon the sale of his business, he might be employed by the new owner as a manager and could expect to earn $80,000 to $100,000 per year. That appeared to be a concession that the husband’s earning capacity was at that level.
However, in her closing submissions under the heading, Conclusion, the wife said that the husband was in a far stronger financial position than the wife, and he would in all likelihood start a new business and attain his current earnings.
In his closing submissions, the husband said that, upon the sale of the business, he would be unemployed, but hoped to find a position in which he would earn about $90,000 per year. According to the husband’s financial statement sworn on 12 April 2019, his present earnings are about $150,000 per year.
I do not consider that the husband’s vague assertions, unsupported by any expert evidence, about his future earning capacity should be given any credence. I consider that it is likely that the husband will start a new business and earn about $150,000 per year or otherwise find a position in which he will earn a salary of about $150,000. One way or another, I conclude that the husband has an earning capacity commensurate with his current admitted earnings of $150,000 per year.
The wife’s earning capacity of $69,000 per year is under half of the husband’s earning capacity of about $150,000 per year. The husband argued that the wife would continue to receive child support of $220 per week and government benefits of $240 per week. There may be some doubt about the precise amounts, given that the wife’s salary is expected to increase from its recent annual level of about $41,000. In any event, there will still be a substantial discrepancy between the parties’ earnings.
In the Table, the husband argued that the income of the business cannot be counted twice as capital and income. The husband did not press that point in closing submissions, presumably because the business is going to be sold.
Dealing with the matters specified in s.75(2) of the Act, the husband is 48 years old, and the wife is also 48 years old. There was no admissible evidence of either party having any health issues, and none was pressed.
There was no suggestion that either of the parties has any financial resources other than their incomes mentioned above. Their prospective incomes are detailed above. Their property is to be determined in this proceeding.
Both parties have the care and control of their children, who are under the age of 18 years. The wife has 56% of their care and the husband has 44% of their care.
There was no suggestion that either party has anything other than the usual commitments to support themselves and their children. Neither of the parties is responsible for the support of any other people.
The wife obtains government benefits, as discussed above.
A moderate standard of living would be appropriate for each of the parties in this case.
The orders proposed by both parties would enable the wife to pay out her credit card debt.
The husband supported the wife while she gained her qualifications as a health care worker.
It was not suggested that either party’s earning capacity was affected by the duration of the cohabitation, which was about 16 years.
Both parties wish to continue their roles as parents.
Neither party has commenced cohabitation with another person, although both have repartnered and may cohabit in the future.
The husband has paid child support as assessed.
In her closing submissions, the wife addressed various matters under the headings, The Pool of Assets to be Adjusted, Contributions and The Future Needs of the Parties, but then launched into a number of other matters without explaining how they related to the matters the court was required to determine. For example, the wife made lengthy submissions under the heading, Husband’s Conduct During the Proceedings, and then more submissions under different headings, but which still related to the husband’s conduct of the proceedings. These submissions may have been intended to address the costs issue described in s.117(2A)(c) of the Act, but I am uncertain. As discussed above, costs will be dealt with separately after the delivery of judgment.
For present purposes, there are no other relevant matters.
Whether it is just and equitable to alter the parties’ property interests
The parties agreed that it would be just and equitable to alter their property interests in this case. In view of paragraph 42 of Stanford, the fact that the parties are no longer living in a marital relationship and the various findings made above in relation to contributions and future needs, I also consider that it would be just and equitable to alter the parties’ property interests in this case.
What order is just and equitable?
The husband said that contributions favoured him 60:40, but he conceded that an adjustment to the wife of 5% was appropriate for future factors, resulting in the husband proposing a 55:45 split in his favour of the non-superannuation assets, and a 50:50 split of the superannuation.
The wife proposed a split of 65:35 in her favour of the non-superannuation assets, and a 50:50 split of superannuation.
The wife proposed in relation to superannuation that she receive a cash payment from the husband in lieu of a splitting order. When that was first proposed, the husband argued orally that the cash amount should be discounted, on the basis that cash now is worth more than cash in the future. However, in his closing written submissions, the husband retreated from his foreshadowed argument about a discount, and argued that the superannuation should be split 50:50 and the wife’s share rolled into a superannuation fund in the normal way.
The wife did not explain how she could take her superannuation entitlements in the Gambrell Superannuation Fund as cash when she is many years away from retirement age. I suspect that it would not be lawful for her to obtain a cash payout of her superannuation at present. I will invite the parties to make submissions on that issue.
In relation to the non-superannuation assets, each party has already received $240,000 as a part property settlement. The remaining non-superannuation pool is $257,880, plus the business, which has a disputed value of $503,000.
The husband has conceded at paragraph 59 of his written submissions that the wife should receive an adjustment of 5% on account of the substantially shared care of the children, the parties relative incomes, and the child support record. However, the husband argued that the parties’ incomes were roughly equal. I do not accept that. I consider that, in addition to the 5% adjustment for the matters conceded by the husband, there should be a further 10% adjustment for the wife, because of the earning capacity differential. On future factors, that leads to a 65:35 split in the wife’s favour of the non-superannuation assets.
The husband submitted that there should be a 10% adjustment for him, because of his greater financial contributions. To the extent that the husband was the primary breadwinner and the wife was the primary homemaker, their contributions were equal. As discussed above, the husband’s initial contributions may have had minimal value, given that his business subsequently went into liquidation with $250,000 of unpaid debt, and one of his properties was subsequently sold with no proceeds of sale after the mortgage and costs of sale were paid. Nevertheless, the husband did provide the house in which the parties lived for the first several years of their relationship and did receive the gift of $160,000 about three years before the relationship ended. In these circumstances, I consider that there should be a 5% adjustment of the non-superannuation assets to the husband.
The net effect is that the wife will receive 60% of the non-superannuation assets, and the husband will receive 40%. As the dollar value of the non-superannuation assets is not known, I will leave it to the parties to calculate the precise amount to be paid to the wife after the sale of the business, and give liberty to apply in the case of any dispute. In the meantime, the proceeds of the sale of the former matrimonial home will be split 60:40 in favour of the wife and the appropriate amount will be paid to each party.
The wife also sought an order that:
the husband indemnifies (sic) and keeps (sic) indemnified the Wife against any taxation liability past present or future which has arisen or may arise from the Husband’s conduct of the business or related entities.
The husband did not actively oppose that order and it is entirely appropriate. The husband clearly had full control of the business and the wife had little awareness of how he conducted it.
I certify that the preceding one hundred and forty-nine (149) paragraphs are a true copy of the reasons for judgment of Judge Riley
Date: 12 March 2020
Key Legal Topics
Areas of Law
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Family Law
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Commercial Law
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Tax Law
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Consent
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