HAGI & HAGI
[2014] FamCA 478
•3 July 2014
FAMILY COURT OF AUSTRALIA
| HAGI & HAGI | [2014] FamCA 478 |
| FAMILY LAW – CHILDREN – Christmas school holidays and surety for overseas travel FAMILY LAW – PROPERTY – where the wife made substantial initial financial contributions and contributions to the welfare of the family – where the husband had the use of a capital withdrawal from the parties’ joint account – where notwithstanding the disparity in the property of the parties the wife was entitled to a further adjustment in respect of s 79(4)(d) - (g) considerations |
| Evidence Act 1995 (Cth) Family Law Act 1975 (Cth) |
| Bevan & Bevan (2013) FLC 93-545 Bremner and Bremner (1995) FLC 92-560 |
| APPLICANT: | Mr Hagi |
| RESPONDENT: | Ms Hagi |
| INDEPENDENT CHILDREN’S LAWYER: | Mr Walkden |
| FILE NUMBER: | SYC | 1719 | of | 2011 |
| DATE DELIVERED: | 3 July 2014 |
| PLACE DELIVERED: | Sydney |
| PLACE HEARD: | Sydney |
| JUDGMENT OF: | Watts J |
| HEARING DATE: | 24 - 27 June 2014 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr Watkins |
| SOLICITOR FOR THE APPLICANT: | Sage Solicitors |
| COUNSEL FOR THE RESPONDENT: | Mr Wong |
| SOLICITOR FOR THE RESPONDENT: | Taylor & Scott Lawyers |
| SOLICITOR FOR THE INDEPENDENT CHILDREN’S LAWYER: | Legal Aid NSW |
Orders
The child B born … 2002 (“the child”) will spend time with his father for half of the child’s Christmas school holiday period as follows:
1.1.For the Christmas period December 2014, and each alternate year thereafter, from 8 January 2015 through to two days before the commencement of the child’s new school year, and the husband be permitted to remove the Child from the jurisdiction of the Commonwealth of Australia to exercise such time. Noting that this is less than half the Christmas school holidays, by way of make-up time the husband will have additional days in the term 4 school holidays in the following year for the days that have been lost in the prior year as a result of this order.
1.2.For the Christmas period December 2015, and each alternate year thereafter, from the first day of the child’s Christmas school holidays for half of the Christmas school holiday period, (together with the additional days so that when taken together the number of days the child is with his father for this Christmas school holidays and the previous Christmas school holidays are equal to the days that the Child spends with his mother and if the number of days are uneven, then the wife will have the additional day) and the husband be permitted to remove the child from the jurisdiction of the Commonwealth of Australia to exercise such time.
Prior to the child leaving Australia to spend time with the husband, the husband is to secure the wife’s costs associated with her seeking to have the husband return the child to Australia in circumstances where he has failed to do so by arranging for:
2.1.The deposit of an amount of $20,000 by way of a bank guarantee no less than 30 days prior to the child’s departure from Australia and for the duration of the period of time the child is out of Australia with the husband providing written evidence to the wife that he has done so also no less than 30 days prior to the child’s departure from Australia; and
2.2.The paternal grandparents to provide the wife with a charge over their interest in real estate in Australia, no less than 30 days prior to the child’s departure from Australia, to secure a sum of $80,000 and the wife shall be entitled to lodge a caveat over such real estate interests, pursuant to the said charge; and
2.3.The husband shall be liable for and forthwith pay the lodgement fees and any other associated costs in respect of the bank guarantee, charge and caveat referred to above.
Pursuant to s 65DA(2) and s 62B, the particulars of the obligations these orders create and the particulars of the consequences that may follow if a person contravenes these orders and details of who can assist parties adjust to and comply with an order are set out in the Fact Sheet attached hereto and these particulars are included in these orders
Pursuant to s 79 Family Law Act, an order is made in the terms of paragraphs 5 to 12.
Within forty two (42) days from the date of these orders, the wife pay to the husband the sum of $218,873 and do all acts and things and sign all documents necessary to discharge the registered fixed home loan mortgage (account no. …00) and line of credit account (account no. …70) (collectively “the mortgage”) secured against the properties known as I Street, Suburb E and 55 F Street, Suburb E in the State of New South Wales being all of the land contained in Certificates of Title Folio Identifier … and …, respectively (collectively “the Suburb E properties”) and simultaneously the husband transfer to the wife all of his right, title and interest in the Suburb E properties.
In the event that the wife fails to pay the sum of $218,873 to the husband within a period of forty two (42) days, then the parties are to do all things and sign all necessary documents to sell 55 F Street, Suburb E (the property) by private treaty at a price to be agreed upon between the parties and failing agreement at a price to be determined by the nominee of the President for the time being of The Australian Property Institute and that the proceeds of sale be distributed as follows:
6.1.Payment of the costs of sale including agent’s and solicitor’s fees;
6.2.Discharge all encumbrances upon the property;
6.3.Payment of outstanding rates and charges upon the property;
6.4.31.2 per cent of the gross sale price of the property to the husband;
6.5.Balance to the wife.
Both parties are given liberty on 14 days’ notice to seek implementation of this order for sale of the property.
In respect of order 4 herein, any costs incurred as a result of, or incidental to, the discharge of the mortgage and/or transfer of the Suburb E properties, such as stamping fees, Department of Lands’ registration fees and the like are to be borne by the parties in equal shares, but to the exclusion of solicitor fees, if any, incurred by either party which are to be borne by the parties respectively.
Within forty two (42) days from the date of these orders, the parties do all things and sign all documents necessary to cause the jointly owned … Ford … motor vehicle in the wife’s possession (registration no. …), to be transferred to the wife and from thereon she indemnify and keep indemnified the husband in respect of any liability arising from the said transfer.
Within forty two (42) days from the date of these orders, the parties do all things and sign all documents necessary to discharge the debt and close the jointly held St George Bank mastercard in the approximate sum of $5,000 with each party to simultaneously pay one-half of the said debt to give effect to this order.
Except as specifically provided for by these orders, and to the contrary, the husband is declared to be the sole owner and the wife has no interest in the following:
10.1.The husband’s superannuation entitlements;
10.2.The husband’s bank accounts;
10.3.The husband’s motor vehicles and motorcycle;
10.4.All other property in the husband’s name, possession or control.
Except as specifically provided for by these orders, and to the contrary, the wife is declared to be the sole owner and the husband has no interest in the following:
11.1.The wife’s real estate, whether solely or jointly owned;
11.2.The wife’s bank accounts;
11.3.The wife’s motor vehicle;
11.4.All other property in the wife’s name, possession or control.
Except as specifically provided for by these orders and to the contrary:
12.1.The husband indemnifies and keeps indemnified the wife from and in respect of all actions, claims, suits and demands as may be made against the wife in relation to any liabilities in the name of the husband; and
12.2.The wife indemnifies and keeps indemnified the husband from and in respect of all actions, claims, suits and demands as may be made against the husband in relation to any liabilities in the name of the wife.
If either party refuses or neglects to sign (within fourteen (14) days of a written request to do so) any documents necessary to effect the terms of these Orders, the Registrar of the Sydney Registry of the Family Court of Australia is hereby appointed pursuant to the provisions of s 106A of the Family Law Act 1975 (Cth) to execute such documents on behalf of such party.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Hagi & Hagi has been approved by the Chief Justice pursuant to s 121(9)(g) of the Act.
| FAMILY COURT OF AUSTRALIA AT SYDNEY |
FILE NUMBER: SYC 1719 of 2011
| Mr Hagi |
Applicant
And
| Ms Hagi |
Respondent
REASONS FOR JUDGMENT
INTRODUCTION
The parties were in dispute about a range of parenting issues. Most of those matters resolved during the course of the trial. Only two remain. The parties also seek a property settlement in circumstances where the wife points to substantial initial contributions and where both parties have attempted to meticulously account for monies which they have each had and spent, particularly since the separation.
APPLICATIONS
Parenting
Eventually the competing applications in relation to the child were substantially resolved by agreement, subject to two matters:
2.1.There is still controversy in relation to Christmas school holiday time. The orders which each of the parents seek are set out in Schedule 1.
2.2.There is still controversy in relation to the security which the husband provides, relevant to the child leaving Australia. The wife seeks orders identical to the current interim orders except that she seeks that the time when the cash security is lodged is increased from seven days to 30 days. The orders that each parent seeks are set out in Schedule 1.
Property
The orders that the husband seeks are set out in Schedule 1. A general description of the orders that the wife seeks is set out in Schedule 1.
DOCUMENTS RELIED UPON
The documents each party relied upon at the hearing are set out in Schedule 2. The Independent Children’s Lawyer did not rely on any document that was not otherwise relied on by either or both the parties.
SHORT HISTORY
The wife was born in 1972 and is currently aged 42.
The husband was in 1975 and is currently aged 39.
The parties were married in January 2000.
The parties’ child B (“the child”) was born in 2002 and is currently 12 years of age.
The parties separated in April 2009 and their divorce became absolute in August 2011.
CREDIT
Both parties gave evidence in a reasonably straightforward manner. In any area where I doubted the evidence of either of the parties or the husband’s father, I specifically discuss those doubts later in the reasons.
DETAILED CHRONOLOGY
The wife was born in 1972 and is currently aged 42.
The husband was born in 1975 and is currently aged 39.
The wife’s family moved to Australia in 1980 and the husband’s family moved to Australia in 1981.
The wife completed her degree in 1993.
In December 1993 the wife purchased a property at G Street, Suburb H, NSW (“the Suburb H property”) for $124,000.
In 1996 the wife assisted her parents in purchasing 33A and 33B F Street, Suburb E (two villas on one title) (“33 F Street”). The husband asserts the wife holds a 50 per cent interest and the wife asserts she holds no financial interest in this property and has made no financial contributions towards the property but rather it was a requirement of the bank that she go on the title. In 2003 the wife’s late father retired and he used his superannuation towards paying off the loan over the property. In 2005 the joint tenancy was severed and the wife and her father held the property as tenants in common.
In or about 1997 the wife and her family purchased Unit 7, J Street, Suburb K (“Unit 7, J Street”). The wife holds 33 per cent interest in that property. The purchase price was $240,000 and was purchased in the name of the wife, her mother and her father. In February 2008 the wife’s father transferred his interest to the wife’s brother.
In 1998 the wife and her family purchased Unit 5, J Street, Suburb K (“Unit 5, J Street”). The wife holds 33 per cent interest in that property. The husband asserts the purchase price to have been $218,000 and was purchased in the name of the wife, her father and her mother.
The parties were married in January 2000. At this time the husband was completing his Masters degree working as a full time professional. The wife was working as a scientist with Company L. The parties moved into the property 33B F Street.
In July 2000 the husband received an offer to work in a Tech Consultancy firm earning $14,000 per month. At this time the husband incorporated M Pty Limited as a vehicle for undertaking work.
In August 2001 the husband secured an employment contract working in Saudi Arabia and in September 2001 the parties moved to Saudi Arabia.
In December 2001 the parties purchased the property 55 F Street, Suburb E (“55 F Street”). The purchase price was $490,000, funded by way of $70,000 from savings and a mortgage over 33 F Street. This property comprises of two separate residences; 55A and 55B F Street and is currently rented and managed by a Real Estate Agent. The property is a negatively geared investment property which has been managed by the wife.
The parties’ child B was born in 2002 and is currently 12 years of age. One week after the child was born the husband returned to Saudi Arabia, working as a manager.
In April 2002 the wife travelled to Saudi Arabia with the child and stayed for about three months before returning to Australia.
Between 2002 - 2004 the wife regularly travelled to Saudi Arabia with the child to spend time with the husband.
The husband asserts that on 5 November 2003 the mortgage over the property 33 F Street was discharged.
In 2004 the husband returned to Australia (however he accepted a short term assignment of three months during 2004 in Egypt).
In 2005 the parties purchased the property at N Street, Suburb A (“the Suburb A property”) for $420,000. The parties borrowed monies to complete the purchase.
Later in June 2005 the parties purchased I Street, Suburb E (“I Street Property”) for $603,000.
The husband asserts that in 2006 the parties moved into the I Street property.
Later, in November 2006 the husband was given a government posting to Egypt and the husband moved to Egypt.
The wife took trips in 2007 to Egypt to join the husband.
In December 2007 the Suburb A property was damaged, and the parties received an insurance claim of about $15,000 ten months later after a successful complaint to the ombudsman.
In January 2008 the husband returned to Australia for a short time to visit the family.
In March 2008 the wife’s father was diagnosed with cancer and the wife decided to stay in Australia and care for him.
In April 2008 (the wife says late 2008) the parties sold the Suburb A property for $400,000. The wife asserts a loss of $40,000 from the purchase price, as well as $136,000 in negative gearing losses.
In September 2008 the wife and child again travelled to Egypt to visit the husband and the wife returned in November 2008. On 13 March 2009 the husband returned to Australia and in April 2009 the parties separated and the husband returned to Egypt.
The husband returned to Australia in September 2009. He asserts he spent time with the child on an every weekend basis and sometimes during the week. The wife says the husband spent time with the child every second weekend and for half the school holidays. The husband moved in with his parents at this time and in October 2009 the husband became ill.
On 28 October 2009 the husband withdrew $140,000 from the parties’ line of credit/portfolio loan. The wife says that the loan has a 7-8 per cent interest charge per annum that she has paid to date on this withdrawal.
During the period from October 2009, to on or about June 2010, the husband was on sick and unpaid leave and paid his credit card and car loan debts out of the parties’ joint account. Since then the husband has failed to contribute to the joint debts in respect of properties in the parties’ joint names.
The husband returned to work in April 2010 on a progressive schedule as set by the government agency doctor.
During 2010 the child attended O Psychology and Q Support Service.
In August 2010 the wife attended R Support Service.
In October 2010 the husband’s brother, Mr P Hagi, purchased a property at S Street, Suburb T (“S Street”). The purchase price was $1,000,000. Mr P Hagi took out a loan of $600,000 for a property purchase of $1,000,000 and the husband’s father, Mr U Hagi, gave oral evidence that he contributed $400,000 to the purchase price as well as the stamp duty. The wife asserts the husband has an interest in this property.
On 13 January 2011 the husband transferred $18,000 into his father’s bank account, he says by way of back pay of board payments whilst he was living in his parents’ home. The husband then continued to deposit money into his father’s account until October 2012; a total of $58,780 has been identified in transfers from the husband’s Commonwealth Bank account to his parents’ and brothers’ accounts in this period. On that same day, 13 January 2011, two other lots of $18,000 cash were also deposited into the husband’s father’s account and the wife contends these were payments by the husband’s two brothers.
The parties divorce became absolute in August 2011.
The husband re married his current wife, Ms C Hagi, in November 2011.
In late 2011 Mr P Hagi lodged a development proposal with Suburb T Council for S Street, to demolish the dwelling on that property and build some villas. The husband’s parents also lodged a development proposal to change the boundaries of their land to allocate more land to S Street.
During Easter 2013 the police were called because the child did not want to spend time with the husband, but later changed his mind.
On 8 June 2013 the husband took up an Australian government posting to Kuwait.
On … June 2013 the maternal grandfather died, and the husband alleged that the wife did not allow him to communicate with the child and disconnected the home telephone line. The husband says the only way he could communicate with the child was on his mobile number.
On 20 September 2013 orders were made for the child to spend time with the husband overseas. Those orders were amended on 4 December 2013.
The child travelled overseas in January 2014 and upon return to Australia he commenced high school.
REMAINING PARENTING ISSUES
As set out above, there are now only two outstanding issues in relation to the child.
Christmas school holiday time
The parties’ respective proposals in relation to Christmas school holidays are set out in Schedule 1.
Both parties generally agree that the child should spend substantially the same amount of time with each of his parents during the Christmas school holidays.
There are two days in the Christmas school holidays which are of particular interest. The first is 25 December and the second is Coptic Christmas which falls on 7th January.
The wife’s proposal has the merit of precisely defining particular times when the child would be with his father during Christmas school holiday periods in alternate years. On this forthcoming Term 4 school holiday period in 2014, the child would spend Christmas Day with his father (having not been with his father last Christmas Day in 2013) through to 6 January 2015. That end date would enable the child to spend Coptic Christmas with his mother in the forthcoming Term 4 school holidays. The wife then proposes that in the alternate year, the child would spend from 1 January to 23 January with his father. That arrangement would mean that the child would spend ordinary Christmas Day with his mother, Coptic Christmas Day with his father and given that the child would probably be with his father in Kuwait during this period, he would be able to be back well and truly in time to get over jetlag for the start of school.
The wife’s proposal provides that the child would spend 18 nights with his father in the first year and 22 nights with his father in the second year. Although it does depend on the actual length of time of the child’s school holidays, it is likely that the wife’s proposal falls short of the child spending one half of the school holidays with his father if the Term 4 school holidays are considered over a two year cycle.
The husband’s proposal works on a two year cycle. In the first year, the husband proposes that the child be with his mother for both ordinary and Coptic Christmas; that the child be with his father from 8 January 2015, and be back in Australia two days before the commencement of the child’s new school year. In the second year, the child would travel to his father at the start of the holidays and be with his father for a period of time (it will be more than half of the Term 4 school holidays in the second year) so that overall when the two years are taken together, the child is with his father for an equal amount of time to the time that he is with his mother. If there is an odd day in the calculation, the husband is prepared to concede that day to the wife.
Although again it is dependent upon the length of the child’s school holidays, it is likely that in the second year the child would be with his father for both ordinary and Coptic Christmas.
The husband’s proposal that the child be returned in the first year to Australia two days before the commencement of school is consistent with the consent order that the parties have entered into in relation to June/July school holidays (in circumstances where the child travels internationally with his father during June/July school holidays, the husband is to return the child to Sydney before midday on Saturday prior to the end of holidays in readiness to be returned to the wife at the conclusion of the husband’s time).
The husband’s proposal is one that would lead to the child spending equal time with both his parents across two consecutive periods of Term 4 school holidays.
There is not a lot of difference between the two proposals. The wife points to the extent to which the parties have not been able to agree on matters of detail over a long period of time. The wife seeks to eliminate the need to do a calculation as to when the child would be returned in the second year of Term 4 school holidays.
Whilst I accept what the wife says about the problems in parental communication, the parties have been able to agree on a large number of parenting issues which were outstanding at the commencement of the hearing.
The parties have agreed to an order that they have equal shared parental responsibility for the child (order 1 made 25 June 2014). Consequently, the provisions of s 65DAA of the Family Law Act 1975 (Cth) (“the Act”) apply and I am required to consider whether or not equal time is reasonably practicable. I find it is reasonably practicable.
I also have to consider whether or not it would be in the child’s best interests. Given that the child primarily lives with his mother and his father will, in the foreseeable future, be working overseas, the more time that the child can spend with his father during school holidays, the stronger the chance of the child having the benefit of the meaningful relationship that he currently has with his father.
The acknowledgment by the parties that equal shared parental responsibility is an appropriate order gives me some comfort in thinking that the parties can agree on a diary date ahead of time. I accept the husband’s evidence that the end date of Term 4 and the start date of Term 1 are published well ahead of time and I also accept his concession that if there are an odd number of days, then the wife will receive the extra day.
The child has and will continue to benefit from a meaningful relationship with his father. The child also has a very close relationship with his paternal grandparents and uncles, he spends time at their houses and they take him on various outings. The orders providing for the child to spend one weekend in every four weekends with his paternal grandparents will allow the child to continue to enjoy this relationship with his paternal family. Although the husband asserts that the wife “instils fear in [the child] that he will be punished if he shows any love or interest towards [the father]” the wife denies this assertion and sets out in her affidavits examples demonstrating the communication she has had with the husband in order to encourage him to contact the child, and she has whenever possible encouraged the child to contact his father. There is no difficulty in the child contacting the mother whilst in Kuwait via telephone or Skype. The father provided the child with a tablet in order to facilitate this communication and also communication between him and the child when the child is in Sydney. Despite the husband asserting that the mother had not been facilitating communication between the child and himself, the parties resolved this issue and consent orders were made on 25 June 2014 (order 11). By having frequent communication with his father, the child is able to maintain and continue to develop a meaningful relationship with his father.
Whilst the mother provided evidence of the child suffering jet lag following his return from Kuwait in January 2014, the consent orders made by the parties on 25 June 2014 provide for a two day period intended for the child to settle and rest prior to commencing the school term.
There have been no allegations of family violence involving the child or any other member of the family. I have also taken into account that the orders that have been made reflect both parents’ cultural and religious backgrounds and enable both parents to be able to experience and celebrate with the child their respective culture and Christmas.
I conclude that it is in the child’s best interest to make the orders sought by the husband in relation to Christmas school holidays.
Security deposit
The husband is currently employed in an Australian government posting to Saudi Arabia and Kuwait. It is the intention of the parties that the child would spend time with his father on holidays overseas and particularly in Kuwait. On 25 June 2014 extensive consent orders were made in relation to the child, including a restraint on each party taking the child to a foreign country that has a travel advisory (as advised by the Australian Department of Foreign Affairs and Trade) higher than “exercise a high degree of caution”.
The husband has given evidence that he would not think of retaining the child overseas and is of the view that the child is best placed with his mother in Australia. He has agreed to orders to that effect. Nonetheless, the husband has expressed the view that his preference would be for the child to be living with him in the Middle East.
The husband currently has strong connections with Australia through his employment and his immediate family. He works for the Australian government and is paid in Australia. It was an agreed fact that should the husband retain the child in Kuwait contrary to an order of this court, he would almost certainly lose his job.
The husband was born in the Middle East. Whilst the husband said he would not be able to be a resident in the Middle East, I am not satisfied that if he obtains different employment, he would not be able to stay. The husband conceded during cross examination that he has extensive contacts in the business world in the Middle East. The husband agreed that although his immediate family lives in Australia, he has extensive family in the Middle East with whom him he is close. The husband has remarried a woman who was born in the United States of America. At the conclusion of these property proceedings, the husband will not have any real estate in his own name in Australia.
Previous interim orders were made requiring the husband to lodge cash security in the sum of $20,000 and for his parents to provide a further surety of $80,000, secured against real estate in the husband’s parents’ name. The wife provides by way of hearsay evidence, an assertion that the costs of attempting to recover the child from Kuwait would be in the order of $100,000. Kuwait is not a Hague Convention country. The husband’s father gave evidence in the property aspect of this matter and was not asked any questions about his attitude to maintaining the surety that he and his wife have currently provided. The husband’s parents remain actively involved in the child’s life and he spends time with them on one weekend each four weeks.
Although it is a fine balance, given all the circumstances, it is reasonable for the wife to ask for the surety that she has as some additional comfort to assuage her fear that the husband may decide to attempt to retain the child overseas. I find it is in the child’s best interests to make the order for security deposit as sought by the wife, except that it is not appropriate to make an order against the grandparents for them to be liable for any costs associated with the surety deposit.
PROPERTY
Approach
In this matter my task is to:
79.1.Identify according to ordinary common law and equitable principles and then value the property, assets, financial resources and liabilities of the parties;
79.2.Determine whether it is just and equitable to make an order altering those interests and if so;
79.2.1.Identify relevant contributions and assess them;
79.2.2.Consider relevant matters referred to in s 79(4)(d) – (g) of the Act;
79.3.Determine what order adjusting the property, assets and liabilities of the parties is just and equitable.
Balance sheet
Throughout the preparation of the hearing there were a number of versions of the balance sheet. During the hearing and particularly during final submissions, a final version of the balance sheet was discussed. It was not marked as an exhibit but I now do so. It will be exhibit 33. The items and values of those items on the balance sheet were substantially agreed by the end of final submissions. The assets and liabilities of the parties are as follows:
| Assets | ||||||
| Item no. | Title | Description | Wife | Husband | Agreed/ Determined | Value |
| 1 | J | I Street, Suburb E | $650,000.00 | $650,000.00 | Agreed | $650,000.00 |
| 2 | J | 55 F Street, Suburb E | $700,000.00 | $700,000.00 | Agreed | $700,000.00 |
| 3 | J | Ford motor vehicle | $9,000.00 | $9,000.00 | Agreed | $9,000.00 |
| 4 | W | G Street, Suburb H | $490,000.00 | $490,000.00 | Agreed | $490,000.00 |
| 5 | W | Unit 5, J Street, Suburb K | $170,000.00 | $170,000.00 | Agreed | $170,000.00 |
| 6 | W | Unit 7, J Street, Suburb K | $173,333.00 | $173,333.00 | Agreed | $173,333.00 |
| 7 | W | 33 F Street, Suburb E | $350,000.00 | $350,000.00 | Agreed | $350,000.00 |
| 8 | W | Westpac bank savings (…85) | $0.00 | $0.00 | Agreed | $0.00 |
| 9 | W | St George Bank operational account (…46) | $416.00 | $416.00 | Agreed | $416.00 |
| 10 | W | Shares - various | $4,000.00 | $4,000.00 | Agreed | $4,000.00 |
| 11 | W | Household contents | $5,000.00 | $5,000.00 | Agreed | $5,000.00 |
| 12 | W | Jewellery | $3,000.00 | $3,000.00 | Agreed | $3,000.00 |
| 13 | H | Commonwealth Bank smart access a/c (…54) | $1,020.00 | $1,020.00 | Agreed | $1,020.00 |
| 14 | H | Commonwealth Bank netbank saver a/c (…42) | $111.00 | $111.00 | Agreed | $111.00 |
| 15 | H | St George investment cash a/c (…25) | $1,940.00 | $1,940.00 | Agreed | $1,940.00 |
| 16 | H | National Bank of Kuwait a/c (…08) | $1,398.00 | $1,398.00 | Agreed | $1,398.00 |
| 17 | H | Mini motor vehicle | $23,500.00 | $23,500.00 | Agreed | $23,500.00 |
| 18 | H | Honda motorcycle | $7,500.00 | $7,500.00 | Agreed | $7,500.00 |
| 19 | H | Household contents | n/k | $5,000.00 | Determined | 0.00 |
| 20 | H | Shares - various | $3,910.00 | $3,910.00 | Agreed | $3,910.00 |
| 21 | H | Jewellery | n/k | $1,000.00 | Determined | 0.00 |
| 22 | H | Household furniture - overseas | n/k | Determined | 0.00 | |
| 23 | H | Public Sector Super | $194,889.00 | $194,889.00 | Agreed | $194,889.00 |
| 24 | H | Summit Super | $802.00 | $802.00 | Agreed | $802.00 |
| 25 | H | ING Super | $978.00 | $978.00 | Agreed | $978.00 |
| 26 | H | Supertrace | $321.00 | $321.00 | Agreed | $321.00 |
| 27 | H | Asteron Super | $19.00 | $19.00 | Agreed | $19.00 |
| 28 | W | MLC Super | $119,131.00 | $119,131.00 | Agreed | $119,131.00 |
| 29 | W | Australian Super | $49,958.00 | $49,958.00 | Agreed | $49,958.00 |
| Total assets | $2,960,226.00 | |||||
| Liabilities | ||||||
| Item no. | Title | Description | Husband | Wife | Agreed/ Determined | Value |
| 30 | J | St George portfolio loan | $875,754.00 | $875,754.00 | Agreed | $875,754.00 |
| 31 | J | St George home loan (…00) | $276,165.00 | $276,165.00 | Agreed | $276,165.00 |
| 32 | W | St George home loan (…00) | $126,654.00 | $126,654.00 | Agreed | $126,654.00 |
| 33 | J | St George mastercard (…87) | $4,303.00 | $4,303.00 | Agreed | $4,303.00 |
| 34 | W | St George portfolio loan (…28) | $21,854.00 | $21,854.00 | Agreed | $21,854.00 |
| Total liabilities | $1,304,730.00 | |||||
| Total net assets | $1,655,496.00 | |||||
There were a number of significant amounts claimed by way of “add backs” on the balance sheet (Exhibit 33) which have been eliminated. The parties agreed however (given the obiter guidance by the Full Court in Bevan & Bevan (2013) FLC 93-545), that these matters might more properly be dealt with by considering them in discussion of either contributions or s 79(4)(d) – (g) assessments.
WHETHER AN ORDER ALTERING INTERESTS SHOULD BE MADE
The parties have separated and their partnership has ended. After the separation, there was no longer a continuing commitment to the mutual use of assets and a shared responsibility for liabilities. As the balance sheet set out above demonstrates, the assets and liabilities remaining with each party are $202,778 held jointly; $236,388 held by the husband and $1,216,330 held by the wife.
The parties both seek that I make a property settlement order pursuant to s 79 of the Act. I find that in all the circumstances, it is just and equitable to make an order altering property (including adjusting liabilities).
TWO POOLS?
Counsel for the wife submitted that 33 F Street should be put into a separate pool and that contributions to that property should be assessed differently from all other contributions.
At all times the wife has been a 50 per cent legal owner of that property. Initially the wife asserted that 100 per cent of the beneficial ownership in that property was held by her parents and since her father’s death in June 2013, by her mother.
The wife supported this assertion by exhibit 28 which was tendered during final submissions by consent. That exhibit provides some evidence that, at least for some period of time, although the wife received rent from 33 F Street, it was regularly thereafter transmitted to her father. In her affidavit filed 16 August 2013 she says that her father, and then her brother serviced and repaid the loan and property costs for the properties the wife owned with her parents. She asserts to have not contributed towards the repayments but rather her contribution was to assist her family in providing additional security to service their loan.
During submissions, there was discussion with counsel for the wife as to whether or not that submission could be maintained.
The wife has at all times claimed the deductions in relation to 33 F Street, Suburb E. The wife says that because of a tax ruling, she was compelled to claim this tax advantage (the ruling tended by the wife is Exhibit26). It is not clear to me that that ruling is relevant for present purposes. The wife has avoided paying tax on personal exertion income by representing to the Australian Tax Office that she has been paying half the outgoings on this property. She now attempts to assert in this hearing that she had not been paying those outgoings.
Chisholm J in Jordan & Jordan (1997) FLC 92-736, departed from the principle enunciated in Elias & Elias (1977) FLC 90-267 and subsequent cases;[1] that a party who makes representations of fact to third parties and gains an advantage from doing so, cannot, in proceedings under s 79 FLA, lead evidence that contradicts those representations. Justice Chisholm held that the Elias principle was not based in estoppel, but derived from the provisions of the Family Law Act; ss 79(2), 75(2)(o) or in the principle of full and frank disclosure. His Honour reformulated the principle as being:
When a party has made representations of fact to third parties and has gained advantage from doing so, it is open to the Court in subsequent proceedings under s 79 of the Family Law Act to decline to accept from that party evidence which contradicts those representations. [emphasis added]
[1] For example, see Lee Steere & Lee Steere (1985) FLC 91-626; Dawes & Dawes (1990) FLC 92-108; Ferraro & Ferraro (1993) FLC 92-335.
Reference was made during submissions to the High Court decision of Nelson v Nelson (1995) 184 CLR 538. In that case a property was registered in the names of the appellant’s children. The purpose of that registration was so that the appellant could remain eligible for Commonwealth benefits. The plurality (Deane and Gummow JJ with whom McHugh J agreed) allowed the appellant to assert an equitable interest in the property, but on the basis the appellant was ordered to pay back to the Commonwealth the amount she had obtained as a result of the family arrangement.
In this case, the wife has avoided having to pay tax as a result of her legal ownership of the property (it may also be that her parents received additional Commonwealth benefits as a result of them not being the 100 per cent legal owners of 33 F Street). Up until the 2002/2003 financial year, the property at 33 F Street was encumbered and the wife claimed one half of the interest that related to that encumbrance and other outgoings as a deduction against personal exertion income. Even after the property became unencumbered, the wife continued to claim other deductions against the income from that property. For example, in the 2009 tax year the wife claimed a loss in respect of 33 F Street in the amount of $3,744 (which was primarily generated by the wife claiming capital works – special building write off for that year in the sum of $6,876 – see page 379 of Exhibit 27). In the 2011 tax year, the wife claimed a capital works deduction of $3,600 against this property (see page 339 of Exhibit 27). There is no suggestion by the wife that she would amend her tax returns, eliminating the negatively geared losses that have been claimed and pay the additional tax to the Commonwealth.
In the circumstances, I decline to accept from the wife evidence which contradicts the representations that she has made to the Australian Tax Office in relation to her payment of outgoings for 33 F Street.
As a consequence of the discussion during final submissions in relation to Nelson’s case, counsel for the wife made an alternate argument as to why 33 F Street, Suburb E should be in a separate pool. In doing so, counsel for the wife submitted that the Court treat this asset on the basis that there was no evidence of any direct financial contribution by the husband. The parties only lived in 33B F Street for one and a half years without paying rent.
The fact that the wife brought 50 per cent of the value of 33 F Street into the marriage is not disputed, nor is the fact that her father discharged the mortgage in the 2002/2003 financial year. It follows from what I have already said that the wife is unable to now assert that she has not made contributions to the outgoings of that property. I conclude it is not necessary to place 33 F Street into a separate pool in order to consider what contributions have been made to it. It is not appropriate to adopt a two pooled approach by placing 33 F Street into a pool of its own.
CONTRIBUTIONS
The history of jurisprudence on legal contributions is well known: see Bremner (1995) FLC 92-560; Pierce (1999) FLC 92-844.
The Full Court in Williams [2007] FamCA 313 said:-
We think that there is a force in the proposition that a reference to the value of an item as at the date of the commencement of cohabitation without reference to its value to the parties at the time it was realised or its value to the parties at the time of trial, if still intact, may not give adequate recognition to the importance of its contribution to the pool of assets ultimately available for distribution towards the parties.
Thus, where the pool of assets available for distribution between the parties consists of say an investment portfolio or a block of land or a painting that has risen significant in value as a result of market forces, it is appropriate to give recognition to its value at the time of hearing or the time it was realized rather than simply pay attention to its initial value at the time of commencement of cohabitation.
But in so doing it is equally as important to give recognition to the myriad of other contributions that each of the parties has made during the course of their relationship.
The wife contends that she should be assessed as having made contributions pursuant to ss 79(4)(a) to (c) of the Act, to the value of 75 per cent of the net assets as at the date of the trial.
The husband contents that the adjustment of the net assets based on contributions should be 55 - 60 per cent to the wife and 40 - 45 per cent to the husband.
Initial Contributions
The wife was the registered proprietor of four properties as at the date of the marriage in which she held equity of about $392,000. That value is calculated on the basis of retrospective valuations which were carried out in respect of four properties:
99.1.G Street, Suburb H with an equity of $113,000 ($185,000 less $72,000 mortgage);
99.2.50 per cent interest in 33 F Street with an equity of $225,000 (being 50 per cent of the total $450,000);
99.3.One third interest in Unit 7, J Street with an equity of $32,333 (being 33 per cent of the total of $250,000 minus a mortgage of $153,000);
99.4.One third interest in Unit 5, J Street with an equity of $21,666 (being 33.3 per cent of the total of $218,000 minus a mortgage of $153,000).
The historic value of what the wife brought into the marriage represents about 23.5 per cent of the current value of the net assets (392,000/1,655,000).
The following table sets out the increase in value in the properties which the wife held at the date of cohabitation:
Property
Value at
marriage
Value at trial
Increase in
value
G Street, Suburb H
$185,000.00
$490,000.00
$305,000.00
33 F Street, Suburb E (50 per cent)
$225,000.00
$350,000.00
$125,000.00
Unit 7, J Street (33.3 per cent)
$83,250.00
$173,333.00
$90,083.00
Unit 5, J Street (33.3 per cent)
$72,666.00
$170,000.00
$97,334.00
$565,916.00
$1,183,333.00
$617,417.00
It can be seen that the total value of these properties has doubled between the date of marriage and the date of trial and that increase, in an amount of $617,417, forms a significant part of the net asset pool available for disposition (37 per cent).
At the date of the marriage the liabilities in relation to these four properties were as follows:
G Street, Suburb H $72,000
33 F Street, Suburb E not known
Unit 7, J Street $51,000
Unit 5, J Street $55,000
$174,000
There was a mortgage in relation to 33 F Street, Suburb E but it was discharged in the 2002/2003 financial year by the wife’s father.
At the date of the hearing, the liabilities of the parties were in the sum of about $1.3 million. Counsel for the parties could not assist during final submissions in tracing how much of the original borrowing of $174,000 still remained. At some point the Suburb H property was refinanced, although the exact timing of that was not made clear. The Suburb H property was used as security for the purchase by the parties of I Street, Suburb E and 55 F Street, Suburb E. The wife also gave evidence that the parties had to refinance the units at J Street when the wife’s father sold his former home which had been used as security for the J Street units.
Counsel for the husband submitted that although the wife brought these properties into the marriage, each of the parties worked throughout the marriage and used their joint pool of funds to pay the mortgages. This assertion is true to the extent that negatively geared losses were claimed in respect of the properties.
Other than these properties, at the date of the marriage the parties had a small amount of superannuation and personal effects of little note. The husband contended in his affidavit and in his oral evidence that he brought into the marriage $50,000 in savings, but this assertion is inconsistent with the husband’s statement in his initial financial questionnaire filed in 2012. Given that there is no other corroboration; I am not prepared to accept the husband’s current assertion as to his cash savings at the date of the marriage.
The marriage was of nine years duration. The parties have been in paid employment since the marriage, save for a short period of time where the wife took maternity leave, and when the husband took sick leave between the end of 2009 and April 2010.
The parties’ income was also used for the payment of mortgage repayments and outgoings upon properties the parties purchased during the marriage, namely, 55 F Street; I Street and N Street, Suburb A. It was agreed that for a period of time that the husband’s income was deposited into an overseas account and it was conceded that those savings were used to buy the Suburb A property. Little has been said about the property investment at N Street, Suburb A. The property was sold by the parties at a loss.
The wife has been the primary carer of the child. The husband asserted in oral evidence that his parents cared for the child for a period of one year where the wife would only pick him up for the weekend. The wife was not asked any questions about this in her oral evidence. In her affidavit filed 23 June 2014 the wife disputes this assertion and says she has always been the primary carer of the child (particularly of recent times as the child has special needs; namely learning difficulties, stunted emotional and social development). The wife was also not asked about the child’s special needs during cross examination. Significantly, the wife had the sole parenting of the child whilst the husband was employed in Saudi Arabia during 2002-2004 and Egypt during 2006-2009, and now Kuwait from late 2013 to present.
The parties have been separated for five years. Much of the focus of the hearing revolved around a detailed exposition by both parties as to how funds had been expended in that period. Both parties had served summaries pursuant to s 50 Evidence Act 1995 (Cth) which extensively summarised voluminous financial material that the parties then tendered.
There was a focus during the hearing upon certain assets and how certain funds were expended. I shall now discuss those matters.
Withdrawal by the husband of $140,000
The husband withdrew $140,000 on 28 October 2009 from the parties’ joint account. It was an agreed fact that the husband paid $6,000 back into the parties’ joint account on 7 December 2009. The amount therefore that the wife points to as being joint funds to which the husband had access was in the sum of $134,000.
In his affidavit filed 23 May 2014, the husband sets out a table of expenditure. Payments were made primarily on the husband’s Commonwealth Bank credit card and towards his car loan payments with ANZ/Esanda.
The husband asserts that some of the $140,000 was used to acquire assets that are otherwise taken into account on the balance sheet. These including item 17, the Mini motor vehicle and item 18, the Honda motor cycle. He also asserts that monies were used to buy furniture (items 19 and 22). I accept it would be reasonable for the husband to expend some funds to re-establish his household goods once he had left the matrimonial home.
The husband otherwise asserts that these monies were used by him in respect of his living expenses.
During the relevant period, the husband was earning an income through personal exertion. Up until May 2011 the husband was depositing his wage, sometimes with more regularity than others, into the joint Freedom account. The husband would then draw from that account. It is not a matter of controversy that the husband from time to time withdrew a similar amount (if not more) than the amounts that he deposited. It follows that the $140,000 that the husband took from joint capital to use partly for living expenses, funded expenditure and lifestyle in excess of expenditure of his personal exertion income.
One payment from these funds was a sum of $18,000 which the husband paid to his father. His father used those monies in connection with the funding of S Street, Suburb T. The husband’s involvement in that property is discussed below.
Counsel for the husband submitted that the court does not embark upon an accounting exercise in relation to income and expenditure in the five years since the separation and even if it did, the husband has provided adequate explanation in relation to the expenditure of funds. I am unable to accept that submission. I shall have some regard to a significant amount of the money taken by way of capital by the husband from the offset account on 28 October 2009, but guard against double counting to the extent that those funds were used to acquire other assets on the balance sheet or payments to the husband’s father (discussed below).
Payment by the wife to Elias Gates of $60,000
The wife made these payments prior to separation.
Documents produced by Elias Gates Solicitors establish that the wife paid to those solicitors $40,000 (by way of payments of $5,000 on 30 April 2008 and $35,000 on 13 June 2008 for “[Mr V], bankruptcy, money on account of settlement.”) During the hearing it was established that the wife paid another $20,000 by way of cheque to Elias Gates Solicitors on 25 March 2008. The total amount paid was $60,000.
In oral evidence the wife explained that she paid these monies with the intention of entering into a business venture with Mr V who was a friend of her family, and like an “uncle” to her. She had known him to be a successful businessman who had started many companies and was looking to begin something new. The business she believed she was going to start was buying goods in Australia and selling them in Egypt. The intention was for the wife to make a sustainable income from this business so she could leave her job in Australia and move to Egypt to be with the husband. The wife said she was let down by Mr V and received nothing from the monies she paid to him and did not know it was actually going towards his bankruptcy. The wife confirmed that Mr V turned out to be a bankrupt and she doesn’t expect to recover funds from him.
Counsel for the husband submits that the facts concerning these transactions were not properly disclosed by the wife and submitted that the wife has not made full and frank disclosure and the court would not be confident that the wife did not have some interest in some businesses that have been undisclosed.
These transactions took place during the marriage (all in 2008). There is no reason in my view to doubt the wife’s explanation as to how these monies got lost. The evidence does not sufficiently establish recklessness on the part of the wife (see Kowaliw and Kowaliw (1981) FLC 91-092; Browne and Green (1999) FLC 92-873).
The husband’s 2011/2012 tax refunds
The husband’s 2011 tax refund was $12,672. The husband’s 2012 tax refund was $13,265. The husband says that those monies have been expended by him on general living expenses and there is no reason to doubt that explanation.
Wife’s claim for adjustment of interest on sums withdrawn by the husband
The husband’s withdrawal of the sum of $140,000 on 28 October 2009 (to which reference has already been made) came from a joint offset account. The wife has calculated that interest incurred because those funds were no longer in the offset account over the period of the last five years, and amounted to a sum of $43,511.
In a similar way the wife has calculated that had the amount that the husband transferred to his personal account from credit cards in the sum of $7,715 been invested, it would have generated interest of $1,600.
That type of precise mathematical accounting is not warranted. I have taken into account in a general way that the husband did use the parties’ capital to live on post separation, in circumstances where he was receiving income from wages. Counsel for the husband made the point that no interest calculation was attempted to be made in relation to the $60,000 which the wife lost when it was paid to Mr V.
The husband’s assertion that $141,105 was paid by the wife from joint accounts to unidentified accounts
Pursuant to s 50 Evidence Act 1995 (Cth), the husband tendered summaries of transactions (exhibit 27). The husband asserted that the wife had not explained where monies had been spent. The calculation of $141,105 represents three amounts. The first one is on page 20 of the tender bundle associated with the husband’s s 50 notice, and the other two are on page 21.
When the wife was asked questions about these payments, there was an agreement that she was going to look at these payments overnight and produce a response. Exhibit 32 was tendered by counsel for the wife during final submissions by consent. It appeared at that time that counsel for the husband seemed to accept that there was a significant explanation in the records produced by the wife as to what account and for what purposes various alleged “unidentified” withdrawals had been expended. The timing of the tender of exhibit 32 meant that the normal opportunity for cross examination of the wife about these matters, had the husband wished to do so, was not available, however counsel for the husband did not seek to re-open the cross examination of the wife based on the tender of the exhibit.
The wife’s “undisclosed” account with her father
Up until February 2013 the wife held a joint account in her name with her father. It was the wife’s evidence that this was her father’s account that he operated and that she had no beneficial interest in.
The husband’s position was that the wife had failed in her duty of full and frank disclosure, to disclose the existence of this account and had deprived the husband of an opportunity of examining it. The husband also asserted that this non-disclosure went to the wife’s credit. I do not accept either of those submissions.
The wife gave an explanation as to how that account was used. An examination of the account would indicate that it was almost certainly primarily the wife’s father’s account and I accept the explanation that it was closed in February 2013 by her father when he had been diagnosed with a terminal illness. Some of the transactions in the account do demonstrate the fluidity with which the wife’s family dealt with income and expenditure from jointly held assets.
Husband’s jewellery
The wife claims that financial disclosure by the husband shows that he procured jewellery in 2009 and 2011 for approximately $13,000. The husband said that the only jewellery which he owned is his wedding ring valued at $1,000. He asserted that the jewellery purchased in 2009 was for his mother and that jewellery that he purchased in 2011 was engagement and wedding rings in respect of his current marriage. In oral evidence counsel for the wife took the husband through his bank statements showing the jewellery purchased. The husband agreed that he purchased wedding and engagement rings in 2011, jewellery for his parents in the Middle East for which he claimed he was reimbursed, and gold cartouches for himself from Egypt that he still had. The husband said the other purchase the wife claimed to be jewellery was actually for shoes for work.
Husband’s furniture and chattels
The wife asserts that the husband has not provided proper valuations in relation to items that the husband returned to Australia in April 2009 from the Middle East. The husband asserted that those items had been placed in storage by his employer. In response to the wife’s request that she be able to have an expert inspect them, the husband had made some cursory inquiries but had failed to ascertain their current location. Given that the husband conceded that he could have done better in making those inquiries, the court is left in a position of wondering what the value of these items might be.
The expenditure for the husband’s second wedding and monies spent on his new partner and other family members from the parties’ joint funds
In the wife’s affidavit filed 16 August 2013 she states at [174]:
Notable costs that I claim as add-backs or assets are those attributed to Husband’s second wedding costs and other monies spent on his family members. His wedding reception costs, new wife’s costs, 22 year old brother’s orthodontics, scout uniforms and scout band musical instruments. These wedding and other family member costs are estimated at $30,000 over a period of about 12 months and have depleted the funds that Husband took from the Joint bank accounts. These are referred to in the balance sheet items 20 – wedding costs and 34 Jewellery ($11560) totalling a conservative $41,558 of the $160,753 the Husband has spent on his credit card.
At [280] the wife sets out a table of wedding related costs she has taken from the husband’s bank account totalling $35,101.97.
The notes to the balance sheet say “financial disclosure by the husband showed cost of his second wedding costs (excluding jewellery), his current wife and his brother’s medical orthodontist expenses are a few examples, such assets have depleted the asset pool”. The husband does not seem to be cavilling with a notion that that amount of money was expended in the way asserted by the wife. The husband submits however that they are all legitimate living expenses incurred after separation and there is no reason to take them into account.
In so much as the amount expended by the husband on his second wedding and money spent on his new partner and other family members came from the parties’ joint funds (and are not otherwise taken into account when tracing the husband’s expenditure of the withdrawal of $140,000 on 28 October 2009), it is appropriate to have regard, in the wife’s favour, to that type of expenditure by the husband from joint funds.
Conclusion on contributions
Both parties made various types of contributions from the date of marriage to the date of trial. Both parties were, during that time, substantially involved in well remunerated employment. The wife’s initial contribution of capital was significant and as has already been mentioned, representing about 23.5 per cent of the current value of the net assets of the parties. The properties were maintained and conserved since the date of marriage and have more than doubled in value. The wife has had the benefit of the jointly owned property at I Street, Suburb E since the separation. It has also been the primary residence of the child of the marriage. The wife has made the major contributions towards parenting, particularly in circumstances where the husband has been absent from Australia as a result of his employment. The husband has had the use of a significant capital withdrawal from the parties’ joint account. The wife has had the major responsibility of maintaining negatively geared properties since the separation.
I find that it is appropriate, based on contributions, that the wife receive 67.5 per cent of the net assets of the parties and the husband receive 32.5 per cent of those net assets.
FUTURE NEEDS - SECTION 79(4)(d) - (g) MATTERS
The wife proposes that she receive a 10 per cent adjustment on account of s 79(4)(d) – (g) considerations. The husband proposed that no adjustment be made on account of s 79(4)(d) – (g) considerations.
The parties have similar income earning capacities and are both well-educated and on significant incomes. Both are in good health.
I have regard to the fact that based on contribution findings, the wife would receive 67.5 per cent of the net assets, with a value of $1,117,459.8 and the husband would receive assets with a value of $538,036.2.
Capital gains tax
Mr W provided a report in relation to the estimation of capital gains tax on the wife’s share of properties held by her. His report is based upon the assumption that all five properties would be sold in the one tax year. He estimated the net capital gain on the wife’s share of the Suburb H property, 33 and 55 F Street, Unit 5 and Unit 7, J Street to be $461,884 and the estimated total tax payable on this net Capital Gain after accounting for the Medicare Levy, to be $221,723. Rosati & Rosati (1998) FLC 92 – 804 provides the basis upon which a capital gains tax and selling expenses should be dealt with in this case. The general principles set out in Rosati at para 6.36 are as follows:-
(1) Whether the incidence of capital gains tax should be taken into account in valuing a particular asset varies according to the circumstances of the case, including the method of valuation applied to the particular asset, the likelihood or otherwise of that asset being realised in the foreseeable future, the circumstances of its acquisition and the evidence of the parties as to their intentions in relation to that asset.
(2) If the Court orders the sale of an asset, or is satisfied that a sale of it is inevitable, or would probably occur in the near future, or if the asset is one which was acquired solely as an investment and with a view to its ultimate sale for profit, then, generally, allowance should be made for any capital gains tax payable upon such a sale in determining the value of that asset for the purpose of the proceedings.
(3) If none of the circumstances referred to in (2) applies to a particular asset, but the Court is satisfied that there is a significant risk that the asset will have to be sold in the short to mid term, then the court, whilst no making allowance for the capital gains tax payable on such a sale in determining the value of the asset, may take that risk into account as a relevant s.75(2) factor, the weight to be attributed to that factor varying according to the degree of the risk and the length of the period within which the sale may occur.
(4) There may be special circumstances in a particular case which, despite the absence of any certainty or even likelihood of a sale of an asset in the foreseeable future, make it appropriate to take the incidence of capital gains tax into account in valuing that asset. In such a case, it may be appropriate to take the capital gains tax into account at its full rate, or at some discounted rate, having regard to the degree of risk of a sale occurring and/or the length of time which is likely to elapse before that occurs.
The wife has made an assertion that she cannot keep servicing negatively geared debt.
The wife says in her affidavit filed in court 24 June 2014 at [4]:
While admittedly I derive a benefit from minimising my personal income tax to some extent due to negative gearing, as our only son – 12 year old [the child B] – is progressing at high school with what I anticipate will be increased expenses for which I will continue to be primarily responsible, as well as recent discussions I have had with my elderly mother – 68 year old [Ms X] – on dates I cannot now re call about wanting to seek alternative accommodation and possibly find somewhere we might all (me, [the child] and my mother) be able to live together, I will need to reassess and pool my funds following the conclusion of these proceedings subject to my mother’s health, [the child’s] needs, the property market, as well as tax implications so as to minimise those as well.
Notwithstanding that evidence, I am unable to find that the wife has a present intention of selling all or any of the properties in the foreseeable future. I accept that all of the properties were acquired as investments but the intention about if and when they would be sold is far from clear. To date, the wife has held the properties as negatively geared investments in what seems to be a long term strategy. The orders that will be made in this case will require the wife to refinance the current borrowings (so that the husband is removed as a borrower) and to raise an additional amount of money for payment to the husband. I have insufficient evidence to assess whether or not the wife will be able to be achieve this refinance without selling assets. The default order which will be made will be a requirement that the wife sell 55 F Street, Suburb E. Based on the expert’s evidence, capital gains tax in relation to that sale would be approximately $67,072 (about $33,500 each, assuming the wife’s income is otherwise $134,000 and the husband has a similar income). I will take that possibility into account and also in a more general way take into account the remaining latent capital gains tax associated with the other properties to be retained by the wife.
The husband’s asserted interest in S Street, Suburb T
This property is adjacent to the property owned by the husband’s father. It was acquired in the name of the husband’s brother Mr P Hagi on 22 October 2010. The contracts for the purchase were exchanged for $1,000,000. The purchase price was 100 per cent financed. About $600,000 was borrowed in the husband’s brother’s name and the balance of the purchase price came from a facility in the husband’s father’s name. Proximate to the settlement of the purchase of the property, each of the husband and his two brothers respectively paid into the facility of the husband’s father an amount of $18,000 and thereafter made regular payments into that facility. The husband and his father asserted that the $18,000 paid by the husband, related to a retrospective charge by the husband’s father to the husband of “board” (and was a lump sum back payment on a larger ($25,000) amount owing) and the ongoing payments by the husband were also for “board”. There were inconsistencies in the evidence of the husband and his father about these transactions. Counsel for the wife pointed to these inconsistencies in final submissions; the husband’s father said that his son had come up with the $18,000 back payment figure and he did not know why, whereas the husband had said his father told him to pay that amount and he did not know why; the husband told the court that his father and brother had asked him to go to Suburb T Council to lodge a document whereas his father said he could not recall a time the husband went on his own or was asked to go, but rather that he may have gone with his father on one or more occasions.
Counsel for the wife also made a submission relying upon Jones v Dunkel (1959) 101 CLR 298 to the effect that the husband failed, in his case, to call his brother who was the registered proprietor of S Street, and who was otherwise available to be called as a witness. I accept that the court should infer that evidence given by the husband's brother would not have assisted the husband's case.
It is unlikely that the payment by the husband of $18,000 was for board.
The other circumstantial evidence that the wife points to is the fact that on the husband’s evidence, the husband on two occasions went to Suburb T Council and on one of those occasions seems to have had a significant discussion with Council officers in relation to the number of units Suburb T Council would allow to be built on this development site. In addition, the property currently has a pool and the husband on a number of occasions agreed that he bought chemicals for that pool (he says on behalf of his brother). The other curious connection between the husband and this property is that on the day of exchange of contracts where a deposit of $100,000 was required, the husband moved $100,000 from one of his accounts to another of his accounts (he says because of his interest in another unspecified property).
The husband’s father gave evidence that monies have been expended to develop plans (including a quantity survey) for the purposes of obtaining a development application in respect of the property.
The wife has provided evidence (without objection) that the property is currently on the market for $1.55 million (this is, of course, not evidence of the current value of the property).
It is clear from the husband’s father’s evidence that he is the driving force behind this business opportunity. I take into account in a general way that the husband is likely to receive some benefit from this enterprise should it turn a profit. The husband at best would receive a quarter of any profit but it is otherwise too difficult to speculate in any more precise manner.
Like the wife, the husband is a member of a close family group. The families of both parties provide some financial resource to them each as they provide a financial resource to their families.
The wife’s current use of assets
Counsel for the husband suggested in final submissions that the wife could sell the matrimonial home at I Street and move the child and herself in with her mother at 33A F Street. In oral evidence the wife deposed that she would not move in with her mother at 33A F Street as that property was too small and I Street, where the wife currently resides, has a big backyard and pool for the child. It would be unreasonable to require the wife to do so.
The wife is going to continue to be the primary carer of the child in the circumstances where the husband continues working in the Middle East.
The wife applied for Child Support on or about 23 December 2011 (more than 2 years after separation). Since then, the wife says the husband has applied for a review of the assessment which she says caused delay and arrears to accumulate. She does not say in her written material that the husband has failed to pay but that he disputed additional child support costs related to special needs (he refused to support the child attending speech therapy and psychologist appointments for his learning delays). None of this attracted any focus at the hearing.
Conclusion in relation to s 79(4)(d) – (g) matters
Having regard to the relevant s 79(4)(d) – (g) matters which have been discussed, I find that it is appropriate that the wife receive a further adjustment of 5 per cent.
JUST AND EQUITABLE
The husband contends for an overall division of 55-60 per cent to the wife and 40-45 per cent to the husband because of the wife’s initial contributions.
Counsel for the wife submitted that a 10 per cent adjustment above equality would not give sufficient weight to the extent of the wife’s initial contribution (particularly as those properties have since more than doubled in value).
The wife seeks an overall adjustment of 85 per cent (75 per cent + 10 per cent) in her favour.
My findings in relation to contributions and s 79(4)(d) – (g) matters would result in an adjustment of assets as to 72.5 per cent to the wife and 27.5 per cent to the husband.
That adjustment could be achieved by the following distribution:
Husband receives 27.5 per cent Assets Item No. Description Percentage Value 13 Commonwealth Bank smart access a/c (…54) 100% $1,020 14 Commonwealth Bank netbank saver a/c (…42) 100% $111 15 St George investment cash a/c (…25) 100% $1,940 16 National Bank of Kuwait a/c (…08) 100% $1,398 17 Mini motor vehicle 100% $23,500 18 Honda motorcycle 100% $7,500 19 Household contents 100% $0 20 Shares - various 100% $3,910 21 Jewellery 100% $0 22 Household furniture - overseas 100% $0 23 Public Sector Super 100% $194,889 24 Summit Super 100% $802 25 ING Super 100% $978 26 Supertrace 100% $321 27 Asteron Super 100% $19 Husband receives from Wife $218,873 Net Assets to Husband $455,261 Wife receives 72.5 per cent Assets Item No. Description Percentage Value 1 I Street, Suburb E 100% $650,000 2 55 F Street, Suburb E 100% $700,000 3 Ford motor vehicle 100% $9,000 4 G Street, Suburb H 100% $490,000 5 Unit 5, J Street, Suburb K 100% $170,000 6 Unit 7, J Street, Suburb K 100% $173,333 7 33 F Street, Suburb E 100% $350,000 8 Westpac bank savings (…85) 100% $0 9 St George Bank operational account (…46) 100% $416 10 Shares - various 100% $4,000 11 Household contents 100% $5,000 12 Jewellery 100% $3,000 28 MLC Super 100% $119,131 29 Australian Super 100% $49,958 Liabilities Item No. Description Percentage Value 30 St George portfolio loan 100% $875,754 31 St George home loan (…400) 100% $276,165 32 St George home loan (…300) 100% $126,654 33 St George mastercard (…87) 100% $4,303 34 St George portfolio loan (…28) 100% $21,854 Wife pays Husband $218,873 Net Assets to Wife $1,200,235
The wife’s Response seeks an order that splits the husband’s superannuation so that she receives an amount of $116,187 from the husband’s superannuation interests. That order was sought in the context of the wife seeking an 85 per cent adjustment of net assets including superannuation. Based upon the above table if the wife obtains all the other adjustments to property which she seeks, she will be required to pay the husband $218,873. During the trial and during final submissions, there was no suggestion by either side that a splitting order should be made. If an order of that nature were made as proposed by the wife in her Response, then she would be required to pay to the husband a further cash amount similar to the amount she receives by way of a splitting order. In the circumstances, I find that it is not appropriate to make a splitting order.
Standing back I find that the distribution set out in the table above and payment by the wife to the husband to be just and equitable.
In the event that the wife fails to pay the sum of $218,873 to the husband within a period of forty two days, then the parties are to join in the sale of 55 F Street, Suburb E and the husband is to receive 31.2 per cent of the gross sale price of the property (218,873/700,000).
I certify that the preceding one hundred and sixty-seven (167) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Watts delivered on 3 July 2014
Associate:
Date: 3.7.2014
SCHEDULE 1
Husband
Christmas school holidays
For half of the Child’s Christmas school holiday period as follows:
For the Christmas period December 2014, and each alternate year thereafter, from 8 January 2015 through to two days before the commencement of the child’s new school year, and the Father be permitted to remove the Child from the jurisdiction of the Commonwealth of Australia to exercise such time. Noting that this is less than half the Christmas school holidays, by way of make-up time the Father will have additional days in the term 4 school holidays in the following year for the days that have been lost in the prior year as a result of this order.
For the Christmas period December 2015, and each alternate year thereafter, from the first day of the Child’s Christmas school holidays for half of the Christmas school holiday period, (together with the additional day from Order 3.2.1 above, and in 2015 an extra day at the end of school term December 2015 to make up for the lost day in January 2014) and the Father be permitted to remove the Child from the jurisdiction of the Commonwealth of Australia to exercise such time.
Security deposit
The husband’s primary position is that he offers a deposit of an amount of $20,000 into a controlled monies account with the father’s solicitors of his choice at least seven days prior to the child’s departure from Australia and for the duration of the period of time the child is out of Australia with the solicitor for the father to confirm that deposit with the mother in writing.
In the alternative, in the event the court requires security of $100,000, that the paternal grandparents provide to the wife a charge over their property at Y Street, Suburb T in respect of security required by the court, up to $100,000 in the event that the husband wrongfully retained or detained the child overseas in breach of court orders, such sum to be accessed by the wife for the payment of her legal costs in securing the return of the child.
The paternal grandparents are to agree to the lodgement of a caveat in respect of such charge pursuant to these orders.
Property
That within forty-two days the wife transfer to the husband all her right title and interest in the property at 55 F Street, Suburb E (being folio identifier … free from encumbrance and
Simultaneously with Order 1 hereof, the husband pay to the wife the sum of $156,000.
Simultaneously with Order 1 hereof, the husband transfer to the wife all his right title and interest in the property at I Street, Suburb E.
That simultaneously with Order 1 hereof, the wife to be responsible for and indemnify the husband in respect of the mortgage to St George Bank and the parties are to do all acts and things to discharge the said mortgage and have the husband removed from any indebtedness by the husband in respect of the property at I Street, Suburb E or G Street, Suburb H.
That each of the parties pay one half of the Credit Card liability to St George Bank (…87) presently standing at approximately $4,300.
The husband to be declared the owner of and the wife to have no claim upon
a.All items of personal property presently in his possession
b.All bank accounts and other deposits with financial institutions presently standing in his names, including but not limited to Superannuation Funds.
Wife
Christmas school holidays
That as to the child’s Term 4 school holiday periods, the child shall spend time with the father as follows:
1.1From 12 noon on 19 December 2014 until 12 noon on 6 January 2015 and each alternate Term 4 school holiday period; and
1.2From 12 noon on 1 January 2016 until 12 noon on 23 January 2016, and each alternate Term 4 school holiday period.
Security deposit
Prior to the child leaving Australia to spend time with the father, the father is to secure the mother’s costs associated with her seeking to have the father return the child to Australia in circumstances where he has failed to do so by arranging for:
2.1 The deposit of an amount of $20,000 by way of a bank guarantee no less than 30 days prior to the child’s departure from Australia and for the duration of the period of time the child is out of Australia with the father providing written evidence to the mother also no less than 30 days prior to the child’s departure from Australia; and
2.2 The paternal grandparents to provide the mother with a charge over their interest in real estate in Australia, no less than 30 days prior to the child’s departure from Australia, to secure a sum of $80,000 and the mother shall be entitled to lodge a caveat over such real estate interests, pursuant to the said charge; and
2.3 The father and/or the paternal grandparents shall be liable for and forthwith pay the lodgement fees and any other associated costs in respect of the bank guarantee, charge and caveat referred to above.
Property
Consistent with the wife’s case outline, the wife sought 85 per cent of the net assets of the parties (including superannuation). The wife relied upon a Response to Initiating Application filed 28 February 2012. That Response required the wife to discharge the current encumbrance on I Street, Suburb E and 55 F Street, Suburb E and for the husband to transfer his interest in those properties to the wife with the costs of doing so to be borne equally between the parties. The wife also sought transfer to herself of the jointly owned Ford motor vehicle. She also sought that each party pay one half of the joint St George Bank mastercard. The wife sought a super splitting order in her favour in the sum of $116,187 out of the husband’s interest in the Public Sector Superannuation Fund. Otherwise, the parties were to retain assets currently in their sole and possession and mutually indemnify the other in relation to any liabilities pertaining to those assets.
At the hearing, counsel for the wife did not otherwise indicate any change to the distribution of the assets. However there was no submission made in respect of a proposed splitting order. (although a change may be obviously required mathematically to the splitting order to achieve the result which the wife sought).
SCHEDULE 2
Husband
Amended Initiating Application filed 10 April 2013
Husband’s affidavit filed 23 May 2014
Husbands affidavit filed 13 August 2013
Husbands affidavit filed 1 August 2013
Affidavit Mr Z filed 27 November 2013
Affidavit of Mr AB filed 18 June 2013
Affidavit Mr U Hagi filed 23 May 2014
Affidavit Ms BB filed 11 June 2014 (valuation of real estate)
Financial Statement and Affidavit of Ms C Hagi filed in Court 26 June 2014
Wife
Response to Initiating Application filed 28 February 2012
Wife’s Affidavit filed 23 June 2014
Wife’s Affidavit filed 29 November 2013
Wife’s Affidavit filed 29 August 2013
Wife’s Affidavit filed 16 August 2013
Wife’s Affidavit filed 31 May 2013
Wife’s Affidavit filed 31 August 2012
Wife’s Financial Questionnaire filed 10 October 2012
Wife’s Financial Statement filed 18 February 2012
Affidavit of Mr W filed 23 June 2014
Affidavit of Mr CC filed 24 June 2014
Key Legal Topics
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Family Law
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Property Law
Legal Concepts
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Costs
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Damages
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Injunction
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Jurisdiction
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Remedies
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Statutory Construction
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