Gormley & Gormley (No 4)

Case [2023] FedCFamC1F 673

FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA

(DIVISION 1)

Gormley & Gormley (No 4) [2023] FedCFamC1F 673

File number: CAC 2949 of 2020
Judgment of: CAMPTON J
Date of judgment: 15 August 2023
Catchwords: FAMILY LAW – PROPERTY – Adjustment of property pursuant to s 79 of the Family Law Act 1975 (Cth) – Disputed balance sheet – Where the vast majority of the current property of the husband and wife originated from intergenerational transfers of rural properties from the husband’s father during their marriage – Where the wife contends the intergenerational transfers were intended to benefit both herself and the husband – Where the transferred properties have been held by the husband’s family for more than 100 years – Whether a discretionary trust established by the husband’s father prior to the parties’ relationship is property of the husband and wife – Where the wife does not contend the trust is a sham, and a finding is made that the husband’s father retains ultimate control of the trust – Consideration of whether a financial resource is capable of being valued – Where a just and equitable division of the parties’ property is found to be 77.5 per cent in favour of the husband and 22.5 per cent in favour of the wife.
Legislation:

Child Support (Assessment) Act 1989 (Cth) Pt 6A

Family Law Act 1975 (Cth) ss 4, 75, 79, 106A, 117

Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) r 12.06

Trustee Act 1925 (NSW) s 44

Cases cited:

Barrett & Winnie (2022) FLC 94-093; [2022] FedCFamC1A 99

Biltoft and Biltoft (1995) FLC 92-614; [1995] FamCA 45

Conrad & Conrad and Anor [2019] FamCA 106

Figgins and Figgins (2002) FLC 93-122; [2002] FamCA 688

Gormley & Gormley (No 2) [2023] FedCFamC1F 433

Gormley & Gormley [2023] FedCFamC1F 296

Gosper and Gosper (1987) FLC 91-818; [1987] FamCA 43

Hall v Hall (2016) 257 CLR 490; [2016] HCA 23

Harris & Dewell and Anor (2018) FLC 93-839; [2018] FamCAFC 94

Horrigan & Horrigan [2020] FamCAFC 25

Kardos v Sarbutt (2006) 34 Fam LR 550; [2006] NSWCA 11

Kennon v Kennon (1997) FLC 92-757; [1997] FamCA 27

Kennon v Spry (2008) CLR 366; [2008] HCA 56

Kessey and Kessey (1994) FLC 92-495; [1994] FamCA 162

NHC and RCH (2004) FLC 93-204; [2004] FamCA 633

Pencious & Pencious and Anor [2014] FamCAFC 171;

Pierce v Pierce (1999) FLC 92-844; [1998] FamCA 74

Shaw and Shaw (1989) FLC 92-030; [1989] FamCA 29

Stanford & Stanford (2012) 247 CLR 108; [2012] HCA 52

Trevi & Trevi (2018) FLC 93-858; [2018] FamCAFC 173

TWN and PAQ (2005) FLC 93-230; [2005] FamCA 677

Division: Division 1 First Instance
Number of paragraphs: 300
Date of hearing: 10–13 July 2023
Place: Sydney
Counsel for the Applicant: Mr Matthews KC with Ms Tulloch
Solicitor for the Applicant: Orman Solicitors
Counsel for the Respondent: Mr Puckey KC
Solicitor for the Respondent: Walsh & Blair

ORDERS

CAC 2949 of 2020

FEDERAL CIRCUIT AND…

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Gormley & Gormley (No 4) [2023] FedCFamC1F 673
Case
[2023] FedCFamC1F 673
Decision Date

CaseChat Overview and Summary

In the matter of Gormley & Gormley, the parties were engaged in a protracted dispute concerning property settlement and contributions to their relationship. The court was tasked with determining the contributions of each party towards the relationship and making appropriate financial adjustments. The husband and wife presented divergent views on the commencement of their cohabitation, the husband contending it began at their marriage in 2008, while the wife claimed it started in 2002. Additionally, the dispute extended to the Gormley Family Trust, established by the husband's father in 1994, which owned several significant rural properties. The court had to evaluate the contributions made by each party, both during their relationship and post-separation, to arrive at a fair division of assets.

The legal issues before the court involved the assessment of contributions made by both parties during their relationship, the interpretation of the Gormley Family Trust deed, and the implications of intergenerational transfers of property. The wife argued for a 60/40 split in favour of the husband up to separation and a 55/45 split in her favour post-separation. The husband proposed a monetary sum of $5 million in favour of the wife. The court had to consider these submissions and determine the appropriate method for assessing contributions, whether by percentage or monetary sum, and apply a holistic approach to the assessment. The court also needed to address the implications of the intergenerational transfer of the rural properties and the subsequent lease and mortgage arrangements.

The court found that the contributions were to be assessed in a holistic manner, considering all contributions collectively rather than compartmentalised. Based on this assessment, the contributions were found to favour the husband by 82.5 per cent and the wife by 17.5 per cent, resulting in a disparity of $19,010,450 in favour of the husband. The court also considered the financial implications of the intergenerational transfer of the rural properties, including the lease and mortgage arrangements. The court ordered an adjustment to the contributions to account for the financial disparity and the future earning capacity of both parties.

The final orders of the court included a determination that the husband’s contributions were to be adjusted to reflect the disparity identified, and that the wife was to receive a payment to equalise the contributions. The court also addressed the intergenerational transfer of the rural properties, confirming the validity of the lease and mortgage arrangements. The orders ensured a fair and equitable division of the parties' assets, taking into account their respective contributions and future needs.

Orders

Orders of the court

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Background

Background to the litigation

Exhibit 29 highlighted the tendency of the parties to fail to identify important issues in dispute between them and instead focus on other issues of lesser moment. It contains more disputed than agreed items, and in reality, extends and refines the divergent orders sought by each of them in their Further Amending Initiating Application filed 9 June 2023 and Amended Response filed 27 June 2023. For example, it contains a series of disputed orders as to what ought to happen in the event the husband defaults on paying the wife the determined adjusting sum, including as to the allocation of liability of any Capital Gains Tax (“CGT”) that may accrue on the sale of real properties. Many of the issues in Exhibit 29 were important, but were not the subject of evidence or submissions at trial. They were more akin to afterthoughts at the conclusion of three and a half years of litigation.BACKGROUND AND FINDINGS The husband’s father was born in 1939. His grandfather (the husband’s great grandfather) moved to the J Town district in 1909, and purchased rural property in the area. The land he purchased in 1909 was the genesis of a significant business aggregation which has passed down the patrilineal line. The aggregation has been expanded on by the husband’s great-grandfather, his grandfather and his father since 1909, each of whom improved, purchased and sold real properties in the area, including relevantly for the purpose of these reasons:(a)A property at L Street, M Town known as E Property, the property in which the husband’s grandfather was born and is now where his father lives and continues to work; (b)A property at H Street, J Town known as D Property, purchased by the husband’s father from his brother in 1964; (c)A property at the corner of H Street and FF Street, J Town known as F Property, purchased by the husband’s father in 1989. Also in 1989 the husband’s father established a company;(d)A property at N Street, M Town known as G Property, purchased by the husband’s father in 1999. G Property is a portmanteau of the husband’s grandfather’s name, the husband’s father’s name (Mr B) and the husband’s nickname. These four rural properties total over 2,000 acres. In late 2000, the husband began working with his father. He was about 16 years of age at that time and had just finished high school. The husband and wife met in late 2001 and began dating. They were 17 or 18 years old. They were each living on their parents’ rural properties. The wife contends the parties commenced cohabitation in 2002. The husband contends cohabitation commenced on their marriage in 2008. This is controversial and will be dealt with later in these reasons.The Gormley Family Trust In 1994, when the husband was 10 years old, his father by deed established the Gormley Family Trust. C Pty Ltd was its original trustee. The husband’s father and mother, Ms HH, were the shareholders and directors C Pty Ltd. The deed and variations thereto (dated 31 August 2001, 1 July 2002 and 31 January 2014) form part of Exhibit 19. The settlor was Mr GG. The deed made provision for broad classes of beneficiaries of the Gormley Family Trust. The husband’s father, the husband’s two older sisters (their mother is not the husband’s mother, who was the husband’s father’s second wife), the husband, the wife and the children, are within classes of beneficial objects of the Gormley Family Trust.

Evidence

Evidence Before The Court

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Decision

Reasons for decision

To the extent the wife made complaint in her affidavit that the husband has wasted funds since separation, that issue fell away and was not pressed in submissions. Conclusion as to contributions Both parties adopted a single pool approach to the assessment of contributions of both superannuation and non-superannuation property The wife contended for contributions finding in favour of the husband of 60 per cent and in her favour of 40 per cent up to separation. She submitted that up to the date of the trial, by reason of her superior post-separation parenting contributions, an overall contribution finding should be made in favour of the husband of 55 per cent and in her favour of 45 per cent. The husband contended contributions should be assessed in a monetary sum of $5 million in favour of the wife. On the balance sheet he constructed (which had a net value in the range of $26 million), this equated to the wife purchasing the P Street property without encumbrance and he paying a cash sum to her in the range of $1 million, so that she would receive approximately 20 per cent of his pool of property. It was accepted during submissions that a number of Full Court authorities have confirmed that it is not mandatory to assess the contribution based entitlements as a percentage of the pool of the property of the parties and that a trial judge could, in an appropriate case, assess contribution as a monetary sum (see Figgins and Figgins (2002) FLC 93-122). The Full Court in Horrigan & Horrigan [2020] FamCAFC 25 emphasised that the proper approach to the assessment of contributions is:…well established that an assessment of contributions is not a mathematical exercise, but rather involves the identification and assessment of all of the parties respective contributions, in a holistic way across the course of the relationship and in the post separation period to the point of assessment When engaging in such holistic assessment, all contributions must be weighed collectively and not by way of so compartmentalising one against others or the remainder. Taking into account all of the contributions identified in these reasons, contributions are assessed as favouring the husband as to 82.5 per cent and the wife as to 17.5 per cent. This will see a disparity between the husband and wife in dollar terms that equates to $24,128,648 to the husband and $5,118,198, a difference of $19,010,450.Adjustments to the contributions Each of the parties are 39 years old and are in good health. The wife currently receives income from a number of different sources in the range of $1,000 per week. The husband’s Financial Statement records his current income to be $1,000 each week, which he derives from the enterprise conducted by the Gormley Family Trust. He was not challenged on this evidence. An analysis of the financial statements of the Gormley Family Trust from 2018 to 2022 record sequentially that:·In the 2018 financial year, the Gormley Family Trust generated a profit of $232,457 (page 56 of Exhibit 23).·In the 2019 financial year, the Gormley Family Trust generated a loss of $409,399 (page 272 of Exhibit 20).·In the 2020 financial year, the Gormley Family Trust generated a loss of $89,038.94 (page 298 of Exhibit 20).·In the 2021 financial year, the Gormley Family Trust generated a profit of $395,990 (page 325 of Exhibit 20).·In the 2022 financial year, the Gormley Family Trust generated a loss of $669,254 (page 351 of Exhibit 20).

Ratio Decidendi

Legal Principle Established

In mid-2012, the husband’s father made a will (Exhibit 12).The intergenerational transfers In early 2014, a series of discussions occurred between the husband, the wife and the husband’s father, between the husband’s father and his accountant, and between the husband, the wife, the husband’s father, the husband’s accountant and a local solicitor, as to a succession plan for the enterprise, including D Property, E Property, F Property and G Property. KK Valuers provided a report opining that those properties were valued together at $6,550,000 as at early 2014 (pages 115–129 of Exhibit 20). In mid-2014, the husband’s father and the husband and the wife entered a single contract for the sale of D Property, E Property, F Property and G Property (pages 108–114 of Exhibit 20). Also on that date, the husband’s father executed: (a)An Acknowledgement of Gift in relation to the four rural properties in favour of the husband and the wife (page 150 of Exhibit 20). One impact of the Acknowledgement of Gift was that was no stamp duty payable in circumstances of the transaction being an intergenerational transfer; and (b)A document entitled “Legal Advice Acknowledgment Certificate” (pages 130–136 of Exhibit 20). The husband and wife also executed a document entitled “Legal Advice Acknowledgment Certificate” in mid-2014 (page 94 of Exhibit 20), recording that:We [the husband and the wife] certify that: 1. We have read the document(s) to which this certificate is attached (“the Documents”).2. We have been given the opportunity to obtain legal advice on the nature and effect of the Documents but have chosen not to do so.3. We understand the nature and effect of the Documents.4. ‘We understand the obligations and risks involved in signing the Documents.5. We sign the Documents freely, voluntarily and without pressure from any person. (As per the original) In mid-2014, a single real property transfer document was executed in respect of the title of the four properties, transferring them from the husband’s father to the husband and wife for a recorded consideration of $6,550,000 (“the intergenerational transfer”) (pages 59 and 60 of Exhibit 20). No monetary consideration was paid to the husband’s father by the husband and wife. As part of the arrangements, simultaneously with the intergenerational transfer:(a)The husband’s father was granted a 20-year lease over the homestead and curtilage at E Property (pages 137–149 of Exhibit 20); and(b)A mortgage was registered in favour of the husband’s father securing a loan by him in the sum of $500,000 secured upon the E Property (pages 90–93 of Exhibit 20). The loan and mortgage facility does not carry interest. The principle is to be repaid in 2034. The husband’s father later undertook significant renovations on E Property at his cost. The wife in her affidavit said that: 165.…[The husband’s father] wanted to renovate the […] home on the [E Property] property, which he later did. [The husband’s father] sold his flat in [J Town] for $200,000 to pay for the renovations to the [E Property]