Gangemi and Shahani & Anor
[2019] FamCA 686
•9 August 2019
FAMILY COURT OF AUSTRALIA
| GANGEMI & SHAHANI AND ANOR | [2019] FamCA 686 |
| FAMILY LAW – PROPERTY SETTLEMENT – Just and equitable – Where the most significant source of dispute between the parties in these property settlement proceedings is the husband’s interest in a partnership through which a business is run– Where the husband is in a partnership with the Second Respondent – Where the husband seeks to be able to dispose of his interest in the partnership and for the Second Respondent to be able to acquire this interest and this is supported by the Second Respondent – Where the wife’s primary position to this proposal is one of opposition and for the husband to maintain his interest in the business – Where her alternative position is that the interest is sold and the proceeds transferred to her – Where drawings taken by the husband to be notionally added-back for the purpose of determining the value of the property of the parties – Where the husband’s interest in the business is to be sold with the sale proceeds to be used to discharge the business loan secured over the former matrimonial home, which is then to be transferred to the wife, and costs associated with the sale and with the balance to be paid to the husband and the wife such that the wife receive property valued at 60 per cent of the property of the parties, inclusive of superannuation interests, and the husband receive 40 per cent of the same. FAMILY LAW – CHILD SUPPORT – Application for departure – Where the wife sought an order departing from the administrative assessment of child support – Where the application is dismissed given the uncertainty about what each of the parents’ financial circumstances will be following the sale of the husband’s partnership interests. |
| Child Support (Assessment) Act 1989 (Cth) Family Law Act 1975 (Cth) |
| Best & Best (1993) FLC 92-418 In the Marriage of Mallet (1984) 156 CLR 605 In the Marriage of Pastrikos (1980) FLC 90-897 |
| APPLICANT: | Ms Gangemi |
| FIRST RESPONDENT: | Mr Shahani |
| SECOND RESPONDENT: | Ms Cason |
| FILE NUMBER: | MLC | 3938 | of | 2016 |
| DATE DELIVERED: | 9 August 2019 |
| PLACE DELIVERED: | Brisbane |
| PLACE HEARD: | Melbourne |
| JUDGMENT OF: | Hogan J |
| HEARING DATE: | 31 July 2018, 1 & 2 August 2018 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Ms Tulloch |
| SOLICITOR FOR THE APPLICANT: | J A Middlemis |
| COUNSEL FOR THE FIRST RESPONDENT: | Mr Robinson |
| SOLICITOR FOR THE FIRST RESPONDENT: | Mills Oakley Lawyers |
| COUNSEL FOR THE SECOND RESPONDENT: | Mr Laidlaw |
| SOLICITOR FOR THE SECOND RESPONDENT: | Rotstein Commercial Lawyers |
Orders
Amended on 9 October 2019 pursuant to rule 17.02 of the Family Law Rules 2004
IT IS ORDERED BY WAY OF FINAL ORDER THAT
The First Respondent’s 21 per cent interest in the GG Limited Partnership (the First Respondent’s interest) be sold on such terms as will be the subject of further order.
The First Respondent be restrained from selling or dealing with his 21 per cent interest in the GG Limited Partnership and from resigning from this partnership pending the parties being heard further about those orders needed to facilitate the sale of the First Respondent’s interest in the GG Limited Partnership.
Upon the settlement of the sale of the First Respondent’s interest, the sale proceeds be applied as follows:
(a)by payment of the NAB business loan secured by mortgage number … registered over the title to real property situated at X Street, Suburb AA, more particularly described in Certificate of Title Volume … Folio …; and then
(b)in payment of the costs associated with the sale of the First Respondent’s interest; and then
(c)by payment of the balance into the trust account of the Applicant’s solicitors (the nett sale proceeds).
Following the payment out of the NAB business loan referred to in Order (3)(a) above, the First Respondent shall forthwith do all acts and things and sign all documents necessary to transfer to the Applicant all of his right, title and interest in the property situated at X Street, Suburb AA.
The Applicant’s solicitors are hereby directed to pay the nett sale proceeds out as follows:
(a)to the Applicant: such amount as is necessary to see her receive 60 per cent of the total value of the property of the parties where:
(i)the total value of the property of the parties is the amount obtained by adding the sale price obtained for the First Respondent’s interest to the sum of $343,749.00 and deducting the costs of sale (referred to in Clause (3)(b) of this Order) from the same; and
(ii)the Applicant shall be taken to already have property and superannuation interests valued at $351,959.50 of the sum payable to her in accordance with Order (5)(a)(i).
(b)to the First Respondent: the balance, if any.
The payments to the Applicant and the First Respondent pursuant to Order (5) above shall be made by the Applicant’s solicitors within seven (7) days of the receipt by them into their trust account of the nett sale proceeds.
The First Respondent shall retain as his sole property and shall be entitled to possession of the Motor vehicle 1 currently in his possession and the Motor vehicle 2 currently in the Applicant’s possession and shall indemnify the Applicant in respect of any liability owing in relation to each of these motor vehicles.
Before the sale of the First Respondent’s interest, the First Respondent shall repay any amount in respect of which his capital drawings from the GG Limited Partnership exceed his capital entitlement to drawings.
Save as is specifically provided for in these Orders, the First Respondent shall indemnify the Applicant against all liabilities arising by reason of his interest in the GG Limited Partnership and the DD business operated by the same.
Pursuant to s 90XT(1)(a) of the Family Law Act 1975 (Cth):
(a)the operative time is the date four (4) days after service of these Orders on the trustee;
(b)the member spouse is the husband MR SHAHANI, born … 1982; and
(c)the non-member spouse is the wife MS GANGEMI, born … 1982; and
(d)the member number is ….
In accordance with section 90XT(4) of the Family Law Act 1975 (Cth), the base amount allocated to the non-member spouse is $25,806.50 of the interest held by the member spouse in the Super Fund 1.
Whenever the trustee makes a splittable payment for the interest held in the Australian Super Fund by the member spouse, MR SHAHANI, born … 1982, the trustee shall pay to the non-member spouse her entitlement calculated in accordance with Part 6 of the Family Law (Superannuation) Regulations 2001 (Cth) and there shall be a corresponding reduction in the entitlement that the member spouse would have had but for these Orders.
The First Respondent be restrained by himself, his servants or agents from making any binding death benefit nomination to the trustee of the Super Fund 1 in favour of any child who is an eligible beneficiary within the meaning of reg 13 of the Family Law (Superannuation) Regulations 2001 (Cth) which would have the effect of diminishing the value to the wife of the splitting order made in Clause (11) of these Orders.
Clauses (10) to (12) inclusive of these Orders are binding on the trustee of the Super Fund 1.
Each party and the trustee of the Super Fund 1 have liberty to apply in relation to the implementation of the orders affecting the superannuation interest.
Unless otherwise specified in these orders and save for the purposes of enforcing any monies due under these or any subsequent orders:
(a)the Applicant and the First Respondent shall be solely entitled to the exclusion of the other to all other property (including choses-in-action) in the possession of such party as at the date of these orders (the furniture, personal possessions and the like chattels in the real property being deemed to be in the possession of the Applicant); and
(b)monies standing to the credit of the Applicant and the First Respondent in any joint bank account are to be divided equally between them; and
(c)the Applicant and the First Respondent forego any claims they may have to any superannuation benefits belonging to or earned by the other; and
(d)insurance policies remain the sole property of the life insured named therein; and
(e)the Applicant and the First Respondent each 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.
If any of the Applicant, the First Respondent or the Second Respondent refuse or neglect to sign any document or do anything as may be reasonably required to give effect to this Order within seven (7) days of the service of a demand upon him or her to sign the document or to do the thing:
(a)a Registrar of the Family Court of Australia is empowered under s 106A of the Family Law Act 1975 (Cth) to sign the document and to direct anything be done in the name of the party in default to give effect to this order; and
(b)evidence of refusal or neglect may be by an affidavit of one of the parties’ lawyers, or by the party; and
(c)the party in default will be responsible for payment of any legal costs incurred by the other party as a result of the failure or neglect.
Save as is specifically provided for in this Order, all otherwise pending applications are dismissed.
AND IT IS FURTHER ORDERED THAT
In the event that any party seeks an order that another party pay his or her costs:
(a)if thought necessary by a party, that party has leave to file a further affidavit by that party containing any evidence relevant to the issue of costs and one other affidavit in support of the same, provided that such affidavits are filed within twenty-eight (28) days of the date of this order; and
(b)any such party shall file and serve any written submissions in support of such application for costs within twenty-eight (28) days of today; and
(c)the party against whom an order for costs is sought shall, within a further fourteen (14) days thereafter, file and serve any brief written submissions in answer to the submissions filed and served by the party seeking costs; and
(d)the party seeking an order for costs shall file and serve any brief further written submissions within seven (7) days of its service, strictly in reply to the submissions served by the party against whom an order for costs is sought,
and any such application for costs shall be considered in Chambers.
AND IT IS FURTHER ORDERED THAT
The matter be listed for mention at 10.00 am on 4 September 2019 for the purpose of affording the parties the opportunity to be heard in respect of those machinery orders required to implement the terms of Order (1) of these Orders.
NOTATION:
This Order has been amended pursuant to Rule 17.02 of the Family Law Rules 2004 by amending Clause (9) to record the correct Respondent and Clause (11) to record the correct section number of the Family Law Act 1975 (Cth).
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 Gangemi & Shahani 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 MELBOURNE |
FILE NUMBER: MLC 3938 of 2016
| Ms Gangemi |
Applicant
And
| Mr Shahani |
First Respondent
And
| Mr Cason |
Second Respondent
These Reasons have been amended pursuant to Rule 17.02A of the Family Law Rules 2004 to reflect the variation made to the Order pursuant to Rule 17.02 of the Family Law Rules 2004 to amend typographical errors in the Orders.
REASONS FOR JUDGMENT
Ms Gangemi (“the wife”) was born in 1982 and is currently 36 years of age. She is qualified as a medical professional in Egypt, but her qualifications are not recognised in this country. Mr Shahani (“the husband”) was born in 1982 and is 36 years of age. He, too, is qualified as a medical professional in Egypt; his qualifications are recognised in this country. Mr Cason, who is also a medical professional, is in partnership with the husband. Their partnership has the franchise for, and operates, the DD business at F Town (“the DD business”).
The wife and the husband married in Egypt in 2006, migrated to Australia on 19 May 2007 and separated on 13 September 2015. They have two children: 12 year old B[1] and nearly nine year old B.[2]
[1] Born 2007.
[2] Born 2010.
Orders made to finalise earlier contested parenting proceedings permitted the wife to relocate the children to live with her in Egypt at any time after 1 July 2018.
Principles
The manner in which proceedings for property settlement are to be approached is well known[3] and requires no further elucidation.
[3] See, for example: In the Marriage of Pastrikos (1980) FLC 90-897; In the Marriage of Lee Steere (1985) FLC 91-626; In the Marriage of Ferraro (1993) FLC 92-335; In the Marriage of Waters & Jurek (1995) FLC 92-635; In the Marriage of Clauson (1995) FLC 92-595, In the Marriage of Hickey (2003) FLC 93-143 and Stanford v Stanford (2012) 247 CLR 108.
I consider that the voluntary separation of the wife and the husband in September 2015 has meant that they no longer enjoy the common use of property and superannuation in which their existing legal and equitable interests were acquired during their approximately nine year relationship. Such separation has also brought to an end the “assumption that any adjustment to those interests could be effected consensually as needed or desired”.[4] I accept that, in the circumstances, it is just and equitable within the meaning of s 79(2) of the Family Law Act 1975 (Cth) (“the Act”) that, pursuant to s 79(1) of the Act, orders altering the interests in property are made. There was no submission to the contrary.
[4]Stanford v Stanford (2012) 247 CLR 108, 122 [42].
The proposals
The wife[5]
[5] Case Outline filed on 24 July 2018.
By way of broad summary, the wife seeks orders that the husband and the Second Respondent be restrained by injunction from entering into a contract of sale in respect of the husband’s 21 per cent interest in their limited partnership to Mr Cason for $331,920.00 (nett of the fee to be paid as a result of the husband’s early resignation from the same). Her proposal is that, instead, the husband retain his interest and continue to work in the DD business and use the income obtained from his exertions (being a combination of salary and entitlement to share in the profits of the business) to pay out the NAB business loan secured over the former matrimonial home. She proposes that all of the husband’s right, title and interest in this property (the Suburb AA property) be transferred to her and that he cause the NAB business loan secured against the real property (obtained to fund his acquisition of his 21 per cent interest in the partnership) to be discharged by making payments in reduction of such loan over time; if he is unable to do so, she proposes that the Suburb AA property is sold, the sale proceeds applied to repay the NAB business loan and that the husband pay her, over time, the amount paid to discharge the same. In addition to this, the wife proposes that the husband pay her an additional amount of $560,000.00 and that, until both of these events occur, he be restrained from selling, transferring or assigning or disposing of his interest in the partnership and from acting to reduce the value of his interest in the same.
That is, her proposal is that the husband should not be permitted to dispose of his 21 per cent interest in the partnership but, rather, be compelled to continue to comply with the conditions of the partnership agreement, which require him to work in the business operated by the partnership, until she is paid those sums which she asserts it is just and equitable that she receive on the basis of her contention about the value to be accorded to the husband’s 21 per cent interest in the partnership.
The wife’s alternative position is that: the husband’s interest in the partnership is sold to Mr Cason for either at least $862,958.00 (her original position) or $821,000.00 (the figure referred to during submissions); the nett proceeds obtained from such sale be paid to discharge the NAB business loan (so that the Suburb AA property can be transferred to her unencumbered) and the balance of the nett sale proceeds then remaining be paid to her.
It seems to me that this proposal fails to appreciate that Mr Cason cannot be compelled to purchase the husband’s partnership interest for a price he is not willing to pay.
In addition to her proposals about the manner in which the Suburb AA property and the husband’s partnership interest should be treated, the wife also proposes that the husband transfer his right, title and interest in the motor vehicle 2 to her and continue to pay all lease payments with respect to the vehicle until this is discharged and that a superannuation splitting order is made such that the base amount allocated to her from the husband’s entitlement to superannuation with Super Fund 1 is $24,266.00.
The husband[6]
[6] Case Outline filed on 24 July 2018.
By way of broad summary of his position, the husband initially proposed that the parties do all acts and things to enable Mr Cason to acquire his minority interest in the partnership in accordance with the terms of the offer made 4 July 2018: that is, for the sum of $331,920.00 (nett). He proposed that, upon settlement of the buyout, the nett proceeds be paid out such that the wife receive 55 per cent of the same and he receive 45 per cent of the same. He also proposed that the remaining nett assets be divided such that the wife receive property valued at 55 per cent of the same and he receive property valued at 45 per cent of the same; he proposed that, in the event neither he nor the wife were able to retain the Suburb AA property, it should be sold. He also proposed that there be an equalisation of the superannuation interests such that he and the wife have the same entitlement to superannuation. Save for these matters, the husband proposed that he and the wife be solely entitled, to the exclusion of the other, to all property in their respective names or possession and that each be solely responsible for, and indemnify the other party in respect of, all liabilities associated with that property.
Mr Cason[7]
[7] Summary of issues filed 25 July 2018 and Minute of Proposed Order handed up by Counsel on his behalf.
Mr Cason proposed that orders be made to enable him to acquire the husband’s minority interest in their partnership, through which the DD business is operated.
It is relevant to note, by way of background, that, on 20 June 2018, the husband advised Mr Cason (via correspondence between their legal representatives) that he proposed to resign from the partnership; he invited Mr Cason to advise whether he was prepared to purchase his interest; the proposed purchase price or value at which Mr Cason would be prepared to purchase the husband’s interest and the basis of the proposed purchase price or value.
By correspondence dated 4 July 2018, Mr Cason offered to purchase the husband’s interest in the business for $331,920.06. This offer was expressed to be subject to obtaining approvals from the DD business franchisor, the Victorian Authority, Commonwealth Authority and the landlord of the premises. The correspondence contained Mr Cason’s response to the valuation of the husband’s interest and advised that Mr Cason did not accept key aspects of the same.
On 6 July 2018, Mr Cason’s legal representatives received a letter from the husband’s solicitors; this conveyed that he instructed them to accept Mr Cason’s offer to purchase the husband’s minority interest in the business on an ‘in-principle’ basis. The correspondence also advised that the husband would not take steps to resign formally from the partnership in order to give effect to the proposed sale until he had the imprimatur of the Court to do so.
Whilst Mr Cason’s initial proposal was that he pay the husband the sum of $331,920.06 (nett of those amounts the husband is required, by the terms of their partnership agreement, to pay to him) for his 21 per cent interest in their partnership, Counsel who appeared for him outlined, during his submissions, that Mr Cason was then prepared to pay the husband the sum of $500,000.00 (nett of all amounts the husband would be required by the terms of their partnership agreement to pay to him, other than any payment necessary by way of capital account adjustment).
In order properly to appreciate Mr Cason’s offers, it is necessary to record that, at the time they were made, it was advanced that:
a)as a consequence of the operation of Clause 30.1 of their partnership agreement, the amount of $125,000.00 would have had to be deducted from the value of the husband’s interest[8]; and, in addition,
b)the amount of $36,000.00 needed to be repaid by the husband to the partnership on account of his drawings.
[8] Although it seems to me that the amount depends on when the husband ceases to be a partner of the partnership as opposed to when notice is given of such intention.
Consequently, the offer of $331,920.06 (nett) was said to equate to a (gross) offer to purchase the husband’s 21 per cent interest in the partnership for $492,920.06 and the offer of $500,000.00 (nett) was said to equate to a (gross) offer to purchase the interest for $589,000.00.[9]
[9] That is: $500,000.00 plus $125,000.00 (to which Mr Cason asserted he was entitled but which he would forego) less $36,000.00 (repayment by the husband of overdrawn capital entitlement).
However, the time taken to finalise this matter means that, on the basis that, if permitted, the husband resigns from the partnership before 1 July 2020, the amount by which the value of his interest now has to be reduced is $75,000.00. Following the same process as that outlined above, it seems to me that Mr Cason’s offer of $500,000.00 now represents a (gross) offer to purchase for $539,000.00.
It is trite to remark that Mr Cason’s offer/s to purchase the husband’s interest in their partnership do not establish the value of the same. This issue was addressed by Mr BB, the single expert witness engaged to value the same for the purpose of these proceedings.
Before turning to a consideration of Mr BB’s evidence, I consider it necessary to determine what I regard to be the primary issue in this case: namely, how to deal with the husband’s 21 per cent interest in the partnership. Such consideration is, I think, assisted by appreciating the means by which the husband acquired his 21 per cent interest in the partnership, the terms of the partnership agreement between the husband and Mr Cason and the terms of the franchise agreement between their partnership and the franchisor.
A broad overview of how the husband came to own a 21 per cent interest in the partnership
I accept that, in or about September 2011, the husband was offered and accepted a 0.01 per cent interest in the DD retail business at F Town (the business) as part of an employee bonus incentive scheme.
I also accept that, on or about 1 July 2012, the husband and Mr Cason commenced in partnership in respect of the business and that, on or around 2 July 2013, the husband acquired a further interest in the partnership, which brought his total interest to 21 per cent. At all times Mr Cason has held a 79 per cent interest in the partnership.
I accept that the husband paid about $363,000.00 to acquire his minority interest: this was the purchase price of $303,000.00 and a joining fee of $60,000.00.[10] I accept that the funds were borrowed and secured by mortgage taken against the former matrimonial home at Suburb AA.
[10] An amount discounted from $150,000.00 for being a rural placement and on the basis that the husband had worked with DD business for more than three years.
The partnership had previously entered into a Service Agreement and a Non-Exclusive License Agreement with third parties: these agreements permitted the partnership to operate/trade under the brand “DD”. I accept that, as a result of being notified that the License and Service Agreements were to be terminated, and that the License Agreement would be replaced with a Franchise Agreement effective from 1 July 2016, the partnership entered into a franchise agreement with the franchisor, DD Pty Ltd, on 20 May 2016.
The partnership agreement
The husband and Mr Cason entered into the partnership agreement on 27 September 2013. According to the Recitals to it, they had carried on the DD business from the premises in partnership with one another since 1 July 2012.
The terms of the same govern their respective rights, obligations and liabilities vis- à-vis each other as parties to the same.
Insofar as the husband is concerned, he is the “general partner”. As such, it is his obligation to manage, supervise and promote the DD business; to use all proper means in his power and at his disposal to maintain, improve and extend the DD business; and to further the reputation, goodwill, public standing and interest in the DD business.[11] The manner in which he is to fulfil these obligations is further particularised in a non-exclusive manner in Clauses 8.2(a) – (m) of the partnership agreement. In short, the husband is responsible for the day-to-day conduct and management of the partnership and the DD business.[12]
[11] Exhibit 3, Clause 8.2.
[12] Exhibit 3, Clause 4.1.
Given this, I consider him to be totally responsible for the fact that, since the expiry of the partnerships’ lease of the premises on 30 June 2017, it has continued to occupy the same on a month by month lease basis. I do not accept his evidence to the effect that he had done nothing to renew the lease because he didn’t have “the upper hand to control this”; I also note that Mr Cason did not appear during his evidence to accept this contention either.
I also note the husband’s explanation to the effect that the renewal of the lease for the premises from which the business operates was not a concern for him and that is why he did not do anything about it; given the contents of the franchise agreement and the owner of the premises (being an entity associated with the franchisor), I suspect he is right in concluding that the absence of a formal lease will not, in a practical sense, negatively affect the operation of the business – after all, the business had continued to operate from the premises from 30 June 2017 without the benefit of a new lease.
The husband’s management of the DD business is, however, not without restriction: for example, he is prevented from doing a number of specified things[13] without the consent of Mr Cason, who is the “limited partner.” In that role, Mr Cason is prohibited from taking part in the management of the DD business and does not have the power to bind the partnership.[14]
[13] Exhibit 3, Clause 8.1.
[14] Exhibit 3, Clause 7.
Unsurprisingly, the manner by which each of the husband and Mr Cason may dispose of their respective interests in the partnership is prescribed by the terms of the partnership agreement. Relevantly, if the husband wishes to retire from the partnership or if it is dissolved for any reason whatsoever, Mr Cason has the right, within 30 days of the date on which the husband serves on him a notice of his intention to retire from the partnership or from the dissolution of the partnership, to acquire the husband’s interest in the capital and assets of the partnership at a value calculated in accordance with Clause 29 of the partnership agreement.
Save for providing that the husband cannot assign his interest in the capital and assets of the partnership to any third party without Mr Cason’s prior written consent (a consent that may be given or withheld at his sole and absolute discretion),[15] the partnership agreement is silent about what practically is to happen in the event that Mr Cason determines that he does not wish to exercise his right to acquire the husband’s interest in the capital and assets of the partnership.
[15] Exhibit 3, Clause 25.
As well as having the right to acquire the husband’s interest, Mr Cason has the right, from the date on which the husband gives notice of his intention to retire from the partnership or the date of the dissolution of the same, to terminate the husband’s services as manager of the partnership – services for which he is entitled to be paid a salary.[16]
[16] Exhibit 3, Clause 20.
Clause 29 of the partnership agreement provides that:
a)the value of the husband’s interest in the capital and assets of the partnership is the price that a willing but not anxious purchaser would pay for his interest in the capital and assets of the partnership on an arm’s length basis; and
b)for the purposes of determining the value of the husband’s interest, the price of the goodwill and other nett assets of the DD business shall be that agreed upon between the husband, Mr Cason and the person acquiring the husband’s interest; and
c)if the price of the goodwill and other nett assets cannot be agreed, then the price will be determined by a valuer with at least five years’ experience in valuing retail businesses, either appointed by the Managing Director of EE Pty Ltd or nominated by the Business Association; and
d)once the price has been determined in accordance with this clause, the purchaser of the husband’s interest in the nett capital and assets of the partnership shall pay that amount, within thirty days, to the husband after deducting any amounts he owes to the partnership; and
e)if the price relates to an acquisition of the husband’s interest in the capital and assets of the partnership, then the goodwill component of the price shall be not less than the greater of the amount specified in the schedule to the partnership agreement (here, specified to be “as determined by the Independent Accountant”) multiplied by the husband’s percentage interest or the actual amount the husband paid for the goodwill acquired by him, less his percentage share of any losses accrued by the DD business; and
f)the valuer is to be instructed that:
i)all furniture, furnishings, plant and equipment, fittings, chattels and instruments of the DD business shall be brought to account at their respective book values; and
ii)stock shall be valued in accordance with the procedure prescribed by Schedule 2 to the partnership agreement; and
iii)all liabilities and any accrued losses of the DD business are to be taken into account in determining the price of the goodwill and nett assets.
The terms of the partnership agreement also impose a further consequence on the husband if he resigns from the same: relevantly, as already noted, it seems to me that, if his resignation occurs at any time before 1 July 2020, the sum of $75,000.00 shall be deducted from the value of his interest in the DD business.[17]
[17] Exhibit 3, Clause 30.1(h).
The franchise agreement
Pursuant to a franchise agreement it has with the franchisor, DD Pty Ltd[18] (“the franchise agreement”),[19] the partnership operates the DD business from premises located at F Town (“the premises”). According to the terms of the franchise agreement, the initial term is five years from 1 July 2016, with a further term of five years.
[18] ACN ….
[19] Exhibit 10.
Relevant terms and recitals of the franchise agreement, dated 20 May 2016, include that:
a)the partnership shall operate the DD business from the premises or such alternative premises approved in writing by the franchisor;[20] and
[20] Exhibit 10, Recital C; Clause 15.1(a).
b)if the doing of any matter or thing under the agreement is dependent on the consent or approval of a party, or is within its discretion, the consent or approval may be given, or the discretion exercised, or the matter or thing done, conditionally or unconditionally or withheld by the party in its absolute discretion, unless express provision to the contrary has been made;[21] and
[21] Exhibit 10, Clause 1.3.
c)the franchise applies only to the premises unless the franchisor accedes to any application to relocate the franchise to another location – which such application it may decline, or accept with the imposition of conditions or terms, in its absolute discretion;[22] and
[22] Exhibit 10, Clause 2.1(b).
d)the partnership must pay an annual franchise fee to the franchisor: the fee assessed was $300,000.00 per annum:[23] all franchise fees (defined to mean the participation fee[24] and the marketing levy[25] and such other fees reasonably determined by the franchisor from time to time and advised to the franchisee in writing) will increase by a minimum of 10 per cent per annum (or, if the costs to the franchisor of providing the services have increased by a greater per cent, then by that percentage) on the first anniversary of the commencement date (here, 1 July 2016) and on 1 July each financial year thereafter, with such increases to be cumulative and compound from year to year;[26] and
[23] Determined in accordance with a formula, applied by the franchisor to all DD businesses, based on the annual rent payable by each business and the current stock on hand.
[24] Also defined.
[25] Also defined.
[26] Exhibit 10, Clause 6.3.
e)the partnership must appoint a nominee who is a registered medical professional and who agrees to devote his time and effort exclusively to the management and conduct of the DD business[27] – here, the husband; and
[27] Exhibit 10, Clause 8.7(b).
f)the partnership shall not provide any guarantee, encumbrance or security against the DD business or its assets to any person without the franchisor’s prior written consent;[28] and
[28] Exhibit 10, Clause 14.1.
g)if the partnership or the husband (who, given its definition as “any person or entity forming part of the franchisee” is a “franchise member”) desires to sell or otherwise transfer all or any part of its or his interest, it or he must provide written notice to the franchisor to that effect (Sale Notice)[29] and, upon the franchisor’s receipt of a Sale Notice, the partnership and the husband appoint the franchisor as their exclusive agent for the purpose of finding a buyer to purchase, and to effect the transfer or sale of all or any part of, the husband’s interest to such buyer nominated by the franchisor;[30] and
h)the partnership and the husband acknowledge and agree that, in exercising the rights summarised in the previous sub-paragraph, the franchisor has exclusive authority to:
i)negotiate the terms of sale of the interest provided that the price shall be as agreed between the franchisor and the franchise member acting reasonably and in good faith; and
ii)enter into an agreement with a buyer for the interest which shall be legally binding on the franchisee or the franchise member.[31]
i)apart from as outlined immediately above, the partnership shall not, without the franchisor’s prior written consent, effect or permit any “change in the underlying ownership or control of” the partnership[32] – a phrase which itself is defined to include any change in the identity of those persons who have legal or beneficial ownership of or a legal or beneficial interest in the partnership;[33] and
j)if there is a change in the partnership’s composition without the franchisor’s consent, the franchisor may terminate the franchise agreement and the franchise by giving written notice of such termination at any time;[34] and
k)the franchisor is entitled to nominate a buyer to purchase the franchise member’s interest in the DD business and in the franchise agreement if the franchise member wishes to sell or dispose of their interest in the franchise business and the price at which the nominated buyer may purchase the interest will be the price agreed between the franchisor and the franchisee acting reasonably;[35] and
l)in the event that a party to the agreement has a dispute with another party to the same, that party may start the dispute resolution process provided for in Clause 31 of the agreement.
[29] Exhibit 10, Clause 26.3(b).
[30] Exhibit 10, Clause 26.3(a).
[31] Exhibit 10, Clause 26.3(c).
[32] Exhibit 10, Clause 26.4(a).
[33] Exhibit 10, Clause 26.4(c).
[34] Exhibit 10, Clauses 28.3(c); 28.4(d).
[35] Exhibit 10, Clause 28.9.
How should the husband’s interest be treated?
In advocating against the making of orders in the terms sought by the wife and urging that the husband be permitted to sell his 21 per cent interest in the partnership, Counsel for both the husband and Mr Cason placed particular emphasis on s 81 of the Act, which provides that:
In proceedings under this Part...the Court shall, as far as practicable, make such orders as will finally determine the financial relationship between the parties of the marriage and avoid further proceedings between them.
Whilst advocating strongly in support of the orders sought by the wife, Counsel for the wife did not refer me to any authority which provided support for the proposition that a party can be required to retain an asset which that party does not wish to retain and can be required to continue to work in a business that that party does not wish to retain.
Whilst the Full Court in Best & Best[36] commented that it should be recognised that the “clean break” concept espoused by s 81 may have been taken to extremes in the past and that the same required careful reconsideration in the light of changing economic and social circumstances and values,[37] such comments were made in the context of musings about the appropriateness, in certain circumstances, of making an order for lump sum spousal maintenance which could be met by annual payments made over a number of years.
[36] (1993) FLC 92-418; see also DJM & JLM (1998) FLC 92-816 where, at 85,275-85,276 [20.8], the Full Court accepted the statement by Evatt CJ and Watson SJ in Dench& Dench (1978) FLC 90-469, 77,402 to the effect that, relevantly, s 81 may have a bearing upon the form of an order following a determination that it is just and equitable to make a property adjustment order under s 79 of the Act and that it must be considered in the light that orders made under s 79 may not be varied (I would add, without consent or pursuant to s 79A of the Act) was correct.
[37]Best & Best (1993) FLC 92-418, 80,296.
I am not persuaded that it is just and equitable or appropriate or proper that the husband be restrained from disposing of his 21 per cent interest in the partnership. The wife cannot receive it as she is not registered to practice as a medical professional in Australia and, in any event, has successfully sought to relocate the children to Egypt. Given these matters and despite the submission made on the husband’s behalf that, if he was required to pay the wife a more modest amount (albeit one that was not particularised in the submissions), he could well choose to continue to operate the business, I have concluded that it is just and equitable to order the sale of the husband’s 21 per cent interest in the partnership.
The next issue then is whether, as contended for by the husband and Mr Cason, the husband should be required (or permitted) to sell his interest to Mr Cason for the amount offered by Mr Cason or at some other price (if Mr Cason was willing to acquire it for a price other than that which he has already offered) or whether the processes envisaged by the terms of the partnership and franchise agreements must be implemented.
In arriving at my conclusion that I am not persuaded, at this time, that it is just and equitable or appropriate to order the sale of the husband’s 21 per cent interest to Mr Cason at the price offered by him, I have also taken into account the terms of these agreements and the evidence as to the value of the husband’s interest provided by Mr BB, who was appointed as the single expert witness to value the husband’s interest, in his 25 May 2018 report and as given during his cross-examination.
Mr BB advanced that the value he contended for was that arrived at on the basis of the amount, in his opinion, that would be negotiated between a willing buyer and a willing seller in an arms’ length transaction after proper marketing, wherein the parties had each acted knowledgably, prudently and without compulsion.
In his report, Mr BB valued the husband’s 21 per cent interest in the business on a branded or badged basis at a range of $780,923.00 (low) and $862,958.00 (high). In order to roughly compare Mr Cason’s latest offer, if the lower figure is used and the contended for early resignation fee of $125,000.00 and the $36,000.00 deducted, the value of the husband’s interest husband’s is $619,923.00.
Whilst Mr BB also accepted – after being taken through a number of factors by Counsel for Mr Cason – that Mr Cason’s initial offer was competitive but on the light side, I am not persuaded that some of the assumptions advanced as providing the basis for such concession are necessarily likely to have the impact contended for.
For example, given the terms of the franchise agreement, the ownership of the premises from which the DD business F Town operates and that it has continued to do so since mid-2017 on a month-to-month tenancy only, I am not persuaded by the suggestion that the absence of a lease would likely significantly adversely affect the sale price likely to be achieved for the business or the husband’s interest in the same in the open market. Further, in so far as it was suggested that the existence of orders requiring the sale of the husband’s interest will impose a component of compulsion, which Mr BB, in essence, failed properly to factor into the opinion he expressed in his report, I consider that such suggestion must be considered in light of the fact that it is the husband who wants to sell his interest: consequently, an order for the sale of the same will be an order that he has positively sought and will not be an order made contrary to his wishes. Further, the actual terms under which the sale will proceed – about which the parties will be afforded the opportunity to be heard – seem to me also to be relevant to a consideration of whether the sale should be regarded as occurring by compulsion or not.
In addition, I am not persuaded that the husband and Mr Cason in fact ever actually agreed the price of goodwill and the other nett assets, despite the husband’s “in principle” acceptance of Mr Cason’s offer to pay $331,920.06 (nett) for the husband’s interest: there is nothing in writing to establish such agreement; the partnership agreement itself provides that the goodwill component will be “as determined by the Independent Accountant” and Mr Cason clearly did not consider that the correspondence which had passed between himself and the husband bound either of them.
Further, I have also had regard to: the difference between Mr BB’s valuation (even taking into account the concessions he made during cross-examination) and the offer/s made by Mr Cason; the fact that there is no evidence to suggest that the terms of the franchise agreement have been complied with; the terms of the franchise agreement itself insofar as they seem to me to relate to the franchisor’s ability to nominate a purchaser for the husband’s interest; the fact that, to make an order for the sale of the husband’s interest to Mr Cason at the last price offered by him would deprive the husband and wife of the opportunity to determine whether, even given the various restrictions imposed on the disposition of the husband’s interest by the terms of the partnership and franchise agreements, there is a purchaser other than Mr Cason (acceptable to Mr Cason and the franchisor) whom might be prepared to pay more for the interest than Mr Cason has advised to date and that the process prescribed in the partnership agreement may be productive of a price higher than that which Mr Cason has offered to date.
Given my conclusions that:
a)the husband’s 21 per cent interest in the partnership is to be sold; and
b)on the evidence before me, I am not persuaded now that it is just and equitable or appropriate to order the sale of the same to Mr Cason at the price offered by him; and
c)the parties shall be afforded the opportunity to be heard about the terms on which the interest should be offered for sale,
I do not consider it appropriate that I now express my conclusion about the value which I would have accorded to the husband’s interest if his case had been that he wished to retain the same. I am concerned that if I was to do so, such expression may in some way colour the market and, potentially, adversely affect the objective of obtaining as much for the interest as the market is willing to pay in the circumstances of the conditions which the terms of the partnership and franchise agreements respectively attach to its disposition.
Of course, any assessment of the terms on which the interest is to be offered for sale will necessarily have to take into account the evidence before me, including that given by Mr BB in both his report and during his cross-examination. The potential risks, including that of discounting for the various factors identified during Mr BB’s cross-examination, will, no doubt, have to be considered in arriving at terms.
Further, the husband’s evidence about his approach to the issue of the absence of a lease (other than on a month to month basis) for the premises since mid-2017, his failure to make any counter-offer of any kind in response to Mr Cason’s initial offer or to seek more for his interest (despite the existence of Mr BB’s report), his view that he cannot do anything about the terms on which his interest is sold and his hopes for the possibility of a future business relationship with Mr Cason combine to persuade me that, whatever the terms of the machinery orders to be made to facilitate the sale of his interest in the partnership, such terms must enable the wife to be involved in and informed about the same; as was raised during the hearing, the husband’s interest in ensuring that he maintains his good working relationship with Mr Cason for his potential future benefit cannot be permitted to adversely impact on the disposition of his current partnership interest.
Having arrived at the conclusion expressed above, I consider that the only course now available to me is to determine the value of the balance of the property of the husband and the wife and to formulate just and equitable orders in a manner that recognises the reality that the amount which will ultimately be received for the husband’s interest is unknown.
The property of the parties other than the husband’s 21 per cent interest in the partnership
There are a number of disputes about the value of the wife and husband’s property. Whilst some are more significant than others, they obviously all require resolution.
Motor vehicle 1
The Redbook valuation[38] tendered at trial provides a price guide of $48,000.00 to $52,200.00 for this vehicle. The husband’s evidence is that his value of $44,000.00 was selected because the vehicle is ex-demo and hail damaged. I accept this evidence in this respect and accord to the vehicle a value of $44,000.00. There is a loan held by Motor Vehicle 1 Finance secured against the vehicle of $75,263.00. The husband pays $279.00 per week in respect of the same. He is able to claim a tax deduction for part of the costs associated with the vehicle.
[38] Exhibit 9A.
I do not accept the submissions made by Counsel for the wife about the manner in which the liability secured over the car should be treated. I agree that this liability cannot simply be ignored and I propose to include it as part of my determination of the nett value of the property of the parties.
Motor vehicle 2
Whilst the wife and husband are not agreed as to the value of the motor vehicle 2, it is accepted that the liability of this vehicle too exceeds its value. The wife provides in her Case Outline[39] that the value of the vehicle is $12,000.00; however a Redbook valuation[40] of the vehicle tendered at trial values the motor vehicle between $28,900.00 and $31,900.00.
[39] Filed 24 July 2018.
[40] Exhibit 8A.
Whilst Counsel for the wife submitted, in essence, that the value is “only” a Redbook value, it is the best evidence that I have: consequently, I accord the vehicle a value of $28,900.00.
A loan account statement[41] provides that, as at 1 July 2017, the closing balance of the Motor Vehicle 2 Finance consumer loan pertaining to the vehicle was $37,051.11. As at 24 July 2018, the figure was $38,364.00.
[41] Exhibit 8B.
It is accepted by the wife that since separation, the husband has met the loan repayments, registration and insurance payments on the motor vehicle 2 which is in the wife’s possession. The negative equity in this vehicle is not able to be deducted in the business. The wife accepts that the liability of about $10,364.00 of the motor vehicle 2 should form part of the exercise of valuing the property of the parties.
The wife’s NAB bank account
The wife holds a nominal amount in her NAB account. I accept her more contemporaneous figure of $401.00[42] over the husband’s figure of a liability of $2,300.00.[43]
[42] Financial Statement filed by the wife on 21 June 2018.
[43] Case Outline filed by the husband on 24 July 2018; the figure taken is as at 10 May 2018.
The wife’s Super Fund 3
The wife holds nominal superannuation. I prefer her value of $752.00 to the husband’s value of $282.00.
The husband’s cash at bank and credit card debts
Counsel for the wife submitted that the evidence established that, as at the date of separation, the only credit card liability the husband had was in the amount of $2,548.00. I agree. Consequently, I include only that liability for the purposes of determining the value of the property of the parties; however, I note that the additional credit card liabilities exist and that the husband is responsible for payment of the same.
Whilst the evidence was also that the husband had about $19,000.00 in cash at bank, I consider that there is a real risk of double-counting if this amount is included in the list of the property of the parties for the purpose of arriving at the total value of the same because his evidence was to the effect that these funds represent part of the funds drawn down by him from the partnership in July 2018. Given that manner in which I have determined to treat his drawdowns – as discussed elsewhere in these Reasons – I consider the most appropriate thing to do is to decline to add the funds at bank into the list of property for the purpose of establishing the value of the property of the parties.
The husband’s taxation liability
The husband owes $26,000.00 to the Australian Taxation Office by way of unpaid taxation on his income for the 2017 financial year. Counsel for the wife submitted, in essence, that given his income post-separation, it would be unjust and inequitable for the husband’s liability in this respect to be deducted from the gross value of the property of the parties because to do so would mean that the wife would share in the burden of the same without sharing equitably in the income earned by the husband which gave rise to the liability.
I have determined not to include the husband’s taxation liability for FY2017 (in the amount of about $26,518.00) as I consider that he prioritised paying his legal expenses over meeting this liability. Given this, I am not persuaded that it just or appropriate that, in essence, the wife be called on to contribute to the payment of the same, as would be the reality of the situation if this liability was included for the purpose of determining the nett value of the property of the parties.
Add-back of the husband’s legal fees
I acknowledge that adding back notional property is an exception rather than the rule. In exercising the wide discretion afforded to judges at first instance, I am not persuaded that it is just and equitable or appropriate to notionally add back to the property of the parties the funds spent by the wife on legal expenses or the entirety of the funds spent by the husband on the same. In arriving at this conclusion, I have taken into account that there is no evidence before me to distinguish those fees spent on these proceedings and those spent by the husband on the six day parenting proceedings and, further, that, save as discussed here, there is no evidence to establish the quantum of the legal fees the husband met from his post-separation income.
However, I consider it appropriate that I notionally add back the drawings taken by the husband from the partnership between the 2016FY and the 2018FY (in the amount of $293,506.00), given his evidence that the majority of the same was spent on legal fees and the level of his income at the time. I am persuaded that, but for his decision to apply these funds to pay his legal expenses, this property would have existed and been available for consideration in these proceedings; therefore, I consider these drawings to constitute a premature distribution by the husband of a portion of “matrimonial assets” in which the wife had a legitimate interest.[44]
[44] See: In the Marriage of Townsend (1994-1995) 18 Fam LR 505 per Nicholson CJ at 509-510.
In arriving at my conclusion about the quantum of property to be notionally added-back for the purpose of determining the total value of the property of the husband and the wife, I have also taken into account that, in addition to the legal fees he has paid, the husband paid $29,000.00 to meet the costs of expert investigations/report.
Conclusion about the property of the parties and value
Incorporating the findings I have outlined above with the agreed values to be accorded to the property of the husband and the wife, I find their respective interests in property (other than the husband’s 21 per cent interest in the partnership) and the value of the same to be as follows:
| Item | Ownership | Description | Value |
| ASSETS | |||
| 1. | Joint | S Street, Suburb AA | $325,000.00 |
| 2. | Husband | Motor vehicle 1 | $44,000.00[45] |
| 3. | Husband | Motor vehicle 2 | $28,900.00 |
| 4. | Joint | NAB Bank Account (Everyday) | Nominal |
| 5. | Husband | NAB Bank Account (Offset) | Nominal |
| 6. | Husband | NAB Bank Account (Personal) | Nil |
| 7. | Wife | NAB Bank Account | $401.00 |
| 8. | Husband | Notional Add-back of monies spent on legal fees | $293,506.00 |
| LIABILITIES | |||
| 9. | Husband | NAB Business Loan (secured against the Suburb AA property) | $285,000.00 |
| 10. | Husband | Motor vehicle 1 Finance | $75,263.00 |
| 11. | Husband | Motor vehicle 2 Finance | $38,364.00 |
| 12. | Husband | NAB Visa Credit Card | $2,548.00. |
| SUPERANNUATION | |||
| 13. | Husband | Super Fund 1 | $52,365.00 |
| 14. | Wife | Super Fund 3 | $752.00 |
[45] Exhibit 9A.
The s 79(4) considerations
In considering the relevant matters mandated by s 79 of the Act, it must be remembered that:
a)“community of ownership arising from marriage has no place in the common law”[46]; and
b)there is no presumption of equality of contribution between parties to a marriage, irrespective of the length of their union;[47] and
c)the exercise of the discretion conferred must not proceed on an assumption that the parties’ interests in property are or should be different from those determined by common law and equity.[48]
Financial and non-financial contributions to the acquisition, conservation or improvement of property
[46] Stanford v Stanford (2012) 247 CLR 108, 121 [39] citing Hepworth v Hepworth (1963) 110 CLR 309, 317 per Windeyer J.
[47] In the Marriage of Mallet (1984) 156 CLR 605.
[48] Bevan & Bevan (2013) FLC 93-545, 87,232 [73].
I accept that the husband and wife had nominal assets when they commenced their cohabitation. Given the difference in the husband’s evidence about whom paid for the costs of the wedding and the honeymoon – in his affidavit he said that he had paid all the cost of the wedding and the honeymoon in an amount of $11,000.0 but, when cross-examined, he said that his father paid the same on his behalf- I am not persuaded to accept his evidence about the extent of his savings when the parties started to live together.
I consider that, whatever payments were made by members of the husband and wife’s respective families for their benefit were more likely to have been in the nature of gifts made from love and affection than contributions of the kind to be considered in proceedings such as these, especially where whatever the quantum of the funds paid by the husband and wife’s families to the renovation of the husband’s grandmother’s unit in which they lived in Egypt likely resulted in improvements to the same which likely benefitted his grandmother.
I consider it more likely than not that at least some of the $8,000.00 the husband said he paid to meet the costs associated with their immigration to Australia was paid before he and the wife married.
I accept that, after they married, both the husband and the wife applied whatever income they earned to joint expenses; I accept that they both contributed what they could. I consider that each of them contributed to the acquisition of the Suburb AA property (directly and indirectly) in that savings accumulated after their marriage were applied to the same. I consider that both contributed to the acquisition of the husband’s 21 per cent interest in the partnership as the funds used to purchase the same were borrowed against their equity in the Suburb AA property.
I accept that, during the period the wife and the children lived in Egypt, she was almost totally responsible for their day-to day care; I accept that the husband provided financial support for the wife and their children during this pre-separation time. I think it more likely than not that, whatever income the wife earned from the work she did on occasions whilst in Egypt, the proceeds of the same went toward her support and that of the children.
I am not persuaded by the submissions made by Counsel for the husband that I should regard the husband as having made additional contributions because he acted to have his qualifications recognised in Australia whilst the wife did not. I consider that each party to the marriage did, during the marriage, those tasks and things that were jointly agreed to, or acquiesced in, by each of them.
I accept that, after the marital separation, the husband continued to pay the NAB business loan repayments; his evidence was that the balance owing on the same at trial was $276,000.00 and that the loan was being repaid by $3,000.00 per month.
I also accept that, whatever income the wife earned after the marital separation has been applied by her to meeting her living expenses and those of the children. Similarly, I accept that the husband continued to contribute to the financial support of the wife and the children after separation by paying the costs of some utilities until about mid-2016 (after which the wife paid the same), meeting the lease repayments, registration insurance costs for the motor vehicle 2 driven by the wife and paying child support in the various amounts assessed at various times.
Contribution to the welfare of the family including in the capacity of homemaker or parent (both during cohabitation and after separation in September 2015)
I accept that the wife was, during the marriage and after the parental separation, the person who overwhelmingly provided the care for the children. I accept that whilst she did so the husband was engaged in working hard for remuneration. I accept that the wife undertook the vast majority of the necessary household tasks.
I accept that, during the various visits to Egypt and when she and the children lived there between November 2012 and August 2015, the wife bore almost total responsibility for the children’s day to day care and support during this period.
I accept that, whilst the husband cared for the children for two days per week from separation until November 2016, and for overnight time from about July 2017, increasing to four nights per fortnight and for five nights per fortnight from October 2017, the wife has continued to provide the majority of the care for the children. I accept that this will continue to be the case given the orders permitting their relocation to live with her in Egypt.
I accept the submission that, during the marriage, the wife made contributions – mostly of a non-financial nature, in the role of homemaker and parent – which freed the husband from the obligation of the same and, thus indirectly contributed to the acquisition of the interest in the partnership.
Conclusions as to contributions: ss 79(4)(a)-(c)
In assessing the contributions made by the parties the Court embarks upon a process involving the exercise of a broad discretion in respect of which reasonable minds may differ. Whilst this process is neither an accounting or mathematical exercise,[49] it does involve a movement from “a qualitative evaluation of contributions to a quantitative reflection of such evaluation” – that is, a “leap” from words to figures.[50] Further, the contribution of any party as a homemaker and parent must be assessed not in any “merely token way”, but in terms of its ‘true worth’ to the accumulation of property during the cohabitation.[51]
[49] See: Norbis v Norbis (1986) 161 CLR 513, 522; In the Marriage of Brandt (1997) FLC 92-758.
[50]Steinbrenner v Steinbrenner [2008] FamCAFC 193 at [234] per Coleman J.
[51] See, for example, In the Marriage of Mallet (1984) 156 CLR 605.
Having regard to the evidence before me, I have concluded that, during the period from the commencement of their cohabitation until their September 2015 separation, the contributions made by each party were, albeit made in different forms, equal. In so far as the contributions made from their September 2015 separation until the date of trial, I consider that the situation was the same.
In arriving at this conclusion, I reject the submissions made by Counsel for the wife to the effect that the husband’s actions vis-à-vis his 21 per cent interest in the partnership should be regarded as constituting a negative contribution. I also consider that the post-separation financial contributions made by the husband to debt reduction were met by the wife’s greater contribution to the care of the children. Having regard to the quantum of the funds the husband had available to him for his own use from the business after separation, I am not persuaded that his payment of various expenses after the marital separation persuades of conclusion other than that of the equality of contribution outlined above.
I consider that none of the orders proposed by either party will have any effect on the earning capacity of either party. What the orders for the sale of the husband’s 21 per cent partnership interest will do, it seems to me, is impact on his ability to utilise that capacity; such restriction will also have flow-on effects to the assessment of child support.
Relevant s 75(2) matters
The primary consideration in my view is that the wife will, in the future, be significantly responsible for the day-to-day care of the children. I consider that this is more likely than not to adversely impact on her capacity to engage in paid employment, whilst the husband – whom Mr Cason in essence described as very capable, competent and successful in the operation of the business – will be able to utilise his qualifications, either as a an employee or, over time, to re-establish himself in another business. I accept the submissions to the effect that, by virtue of his work experience, the husband has a superior capacity to rebuild his financial circumstances.
Whilst the sale of his interest may well result in him having to work as an employed medical professional on a salary of between $70,000.00 and $80,000.00 and whilst the wife is a qualified medical professional in Egypt, there is no evidence before me to suggest that her earning capacity will be match even this, particularly given her responsibility to care for the children.
Having regard to the submissions made by Counsel for the wife – which I generally accept in this respect – and the matters discussed particularly above, I consider that an adjustment in the wife’s favour of 10 per cent is that which properly reflects and weighs the various s 75(2) considerations.
The consequence of the conclusions outlined above is that, having regard to the parties’ respective contributions to trial as I have found them to be and the relevant s 75(2) matters as I have found and assessed them to be, at the conclusion of a nine year marriage, productive of two children, I consider that the orders which are appropriate and which are just and equitable are orders which will see the wife receive property with a value of 60 per cent of the total value of the property of the parties and the husband receive property valued at 40 per cent of the total value of the property of the parties.
What orders are just and equitable in the circumstances?
The parties were seemingly agreed that they should share equally in the combined value of their respective entitlements to superannuation and that a superannuation splitting order should be made in the terms necessary to achieve this result. Even if there had not been agreement about this, I consider such a result to be appropriate in the circumstances of this case, especially given that the husband and wife are of similar age, that the entitlements to superannuation were acquired during the course of their marriage and that each will have to meet expenses associated with re-establishing themselves.
As I have calculated it, the combined entitlement of the parties to superannuation is $53,117.00. The wife already has an entitlement to superannuation in the amount of $752.00. Accordingly, for the parties to share equally in the combined superannuation entitlements, it is necessary for there to be a superannuation splitting order by which the wife is accorded $25,806.50 from the husband’s entitlement to superannuation.
I consider that those orders outlined at the commencement of these Reasons are the orders which are just and equitable and appropriate and which reflect the conclusions expressed in these Reasons.
Child Support Departure
Whilst the wife sought an order departing from the administrative assessment of child support, no oral submissions were made about this issue. In any event, the wife’s application proceeds where the administrative assessment requires the husband to pay child support of $474.00 weekly. He also contributes 50 per cent of the children’s private school fees. The departure sought by the wife is that the husband’s adjusted taxable income for child support purposes be varied to $385,000.00 per annum and that, in addition to paying payments as assessed on this basis, he also be required to pay, by way of non-periodic child support, the costs of all of the children’s private school fees and expenses relating to their primary and secondary education.
I decline to accede to the wife’s application for an order departing from the administrative assessment of the child support the husband has been assessed to pay. I consider that the financial circumstances of the husband following the sale of his interest in the partnership are incapable, at this stage, of clear determination or prediction. In addition, it is impossible to know, with any precision, what the wife’s financial circumstances will be, other than to know that she will receive whatever cash sum is required from the nett sale proceeds of the husband’s interest to ensure that she receives property valued at 60 per cent of the total value of the property of the parties.
On the evidence before me, once the sale of his interest occurs, the husband will likely (even if only initially) work as an employed medical professional, for which he anticipates he will be paid between $70,000.00 and $80,000.00 per annum. Given this, I am not persuaded that it is just or equitable or otherwise proper to now make an order departing from the administrative assessment of child support he has been assessed to pay; whilst his earning capacity whilst owning a 21 per cent interest in the partnership can easily be accepted as being his 2017 taxable income of $384,594.00, I am not persuaded that such capacity can automatically be assumed following the disposition of his partnership interest.
Whilst the husband said during his cross-examination that, once his legal fees cease he will have the capacity to pay all of the children’s school fees in an amount of $11,000.00 or even $14,000.00 per annum, I consider that this evidence needs to be seen in the context of his income and financial capacity as an owner of the partnership interest – whether the position remains the same once his partnership interest is sold will, obviously, depend on a number of matters which include the quantum of the funds (if any) that he receives following the sale and the employment that he subsequently obtains.
I certify that the preceding ninety-nine (99) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Hogan delivered on 9 August 2019.
Associate:
Date: 9 October 2019
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