Hanigan & Hanigan (No 2)
[2024] FedCFamC1F 516
•9 August 2024
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
FIRST INSTANCE
Hanigan & Hanigan (No 2) [2024] FedCFamC1F 516
File number: BRC 12409 of 2020 Judgment of: CAREW J Date of judgment: 9 August 2024 Catchwords: FAMILY LAW – PROPERTY SETTLEMENT – Where the husband contends the asset pool is negative and the wife contends that the asset pool, including numerous add backs, is positive – Where it is just and equitable to make an order – Where the single expert and adversarial expert valuers differ on whether the main business has goodwill and the proportion of tax losses that should be treated as an asset – Where the evidence of the single expert is preferred – Where the net assets of the group of entities which have a negative value are treated as a separate pool and retained by the husband – Where the husband will nevertheless retain ongoing income and benefits from the negative pool – Where the contributions are assessed in a proportion of 80/20 in favour of the husband – Where an appropriate adjustment in favour of the wife is 10 percent – Where the assets in the positive pool will be divided in the proportion 70/30 in favour of the husband. Legislation:
Family Law Act 1975 (Cth) ss 75, 79
Limitation of Actions Act 1974 (Qld) s 10
Cases cited:
AJO & GRO (2005) FLC 93–218
Biltoft and Biltoft (1995) FLC 92–614
Candle & Falkner (2021) FLC 94–069
C & C [1998] FamCA 143
Kowaliw and Kowaliw (1981) FLC 91–092
M & M [1998] FamCA 42
NHC and RCH (2004) FLC 93–204
Stanford v Stanford (2012) 247 CLR 108
Townsend and Townsend (1995) FLC 92–569
Trevi & Trevi (2018) FLC 93–858
Vass v Vass (2015) 53 Fam LR 373
Number of paragraphs: 134 Date of hearing: 22 – 26 July 2024 Place: Brisbane Counsel for the Applicant: Mr S Taylor Solicitor for the Applicant: SLF Lawyers Counsel for the Respondent: Mr B Dodd Solicitor for the Respondent: Michael Lynch Family Lawyers ORDER
BRC 12409 of 2020 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN: MS HANIGAN
Applicant
AND: MR HANIGAN
Respondent
ORDER MADE BY:
CAREW J
DATE OF ORDER:
9 AUGUST 2024
THE COURT ORDERS THAT:
Transfer of 2 G Street property
1.The wife shall retain and the husband shall relinquish all right, title and interest in and to the property at 1 G Street, Region J in the State of Queensland described more particularly as Survey Plan …, Title Reference … ("[1 G Street] property") and within 30 days of the date of this Order the wife shall do all such things and sign all such documents as is necessary to transfer to the husband all of her right, title and interest in and to the property at 2 G Street, Region J in the State of Queensland described more particularly as 2 G Street, Survey Plan …, Title Reference … ("[2 G Street] property").
2.Contemporaneously with the immediately preceding paragraph:
(a)The husband shall do all such things and sign all such documents necessary to remove Caveat No. … secured over the 2 G Street property and Caveat No. … secured over the 1 G Street property;
(b)The wife shall refinance into her sole name and/or discharge the Australia and New Zealand Banking Group Limited (“ANZ”) Home Loan (Account No. …76) secured over the 1 G Street property and the 2 G Street property; and
(c)The wife shall discharge and release Registered Mortgage No. … encumbering the 1 G Street property and the 2 G Street property.
3.Pending the transfer of the 2 G Street property or, in default, the sale of the 1 G Street property:
(a)The wife shall make the minimum repayments on all loans secured over the 1 G Street property and the 2 G Street property as and when those repayments fall due, including minimum repayments for the ANZ Home Loan (Account No. …76);
(b)The wife shall pay all other outgoings on the 1 G Street property and the 2 G Street property, including rates and insurances as and when they fall due and indemnify the husband against same; and
(c)The wife is restrained from encumbering or further increasing the ANZ Home Loan (Account No. …76) secured over the 1 G Street property and the 2 G Street property without the consent in writing of the husband.
Default provisions
4.In the event the wife does not or is unable to refinance the 1 G Street property into her sole name (“the default”) within 28 days of the date of default by the wife (or such other time as agreed between the parties in writing), the 1 G Street property is to be listed for sale and the following provisions apply:
(a)The parties shall appoint a real estate agent for the sale of the 1 G Street property by private treaty with the wife to do all such things and sign all such documents in relation to the appointment;
(b)The 1 G Street property shall be sold by private treaty within 30 days from the date of the default by the wife and the 1 G Street property shall be listed at a price as agreed between the parties and failing agreement as stipulated by the Chief Executive Officer of the Real Estate Institute of Queensland or his/her nominee from time to time;
(c)In the event the 1 G Street property is not sold within 30 days from the date of the default by the wife (or such further time as agreed between the parties in writing), then the parties shall do all acts and things necessary, including signing all documents so as to list the 1 G Street property for sale by public auction within 60 days of the date of this Order;
(d)In the event an auction occurs, the parties shall appoint an auctioneer for the sale of the 1 G Street property with the wife to do all such things and sign all such documents necessary for the 1 G Street property to be auctioned;
(e)In the event the 1 G Street property is not sold by auction, then unless otherwise agreed in writing by the parties, the property be submitted to a second auction within one month of the date of the first auction and the reserve price shall be set by the parties with the auction to be conducted by the sale auctioneer as previously nominated by the parties;
(f)In the event the 1 G Street property is not sold at the second auction, then unless otherwise agreed in writing by the parties, the 1 G Street property be submitted to a third auction and any subsequent auctions until the property is sold with each auction to occur within one month of the date of the previous auction with a reserve price 10 percent less than the preceding auction with the auction to be conducted by the sale auctioneer as previously nominated subject to mutual agreement to the contrary by the parties;
(g)Either party is entitled to bid at the auction; and
(h)The wife is restrained from signing any contract of sale of the 1 G Street property without the written consent of the husband.
5.Contemporaneously at settlement of the 1 G Street property:
(a)The wife shall do all such things and sign all such documents necessary to transfer to the husband all of her right, title and interest in and to the 2 G Street property; and
(b)The husband shall do all such things and sign all such documents necessary to remove Caveat No. … secured over the 2 G Street property and Caveat No. … secured over the 1 G Street property.
6.The sale proceeds of the 1 G Street property shall be divided in the following manner and priority:
(a)To pay all necessary selling costs associated with the property, including commission fees, auctioneer’s fees, conveyancing fees, legal costs and other necessary selling costs;
(b)To pay any council and water rates and maintenance levies outstanding in respect of the 1 G Street property and the 2 G Street property;
(c)To meet all reasonable marketing costs of sale as invoiced from time to time by the agent conducting the sale and/or auction (as applicable);
(d)In discharge of the ANZ Home Loan (Account No. …76) secured over the 1 G Street property and the 2 G Street property;
(e)In discharge and release of Registered Mortgage No. … secured over the 1 G Street property and the 2 G Street property; and
(f)The balance of the net sale proceeds to be paid to the wife.
Personal property of the husband
7.The husband shall retain as his property absolutely and the wife relinquish and/or transfer to the husband all of her right title and interest (if any) in and to the following:
(a)The husband's property at K Street, Region J;
(b)Monies to the credit of the husband in any bank account in his sole name or held jointly with any other person;
(c)The husband’s vessel;
(d)The husband’s household furniture and effects;
(e)The husband's Motor Vehicle 1 (Registration No. …);
(f)The husband's equipment;
(g)The husband's interests in the entities B Pty Ltd, C Pty Ltd, D Pty Ltd, E Pty Ltd, L Unit Trust, L Pty Ltd, the Hanigan Family Trust, the Hanigan Family Trust No. 1, the M Property Trust, the F Trust, the O Partnership (“husband’s group of entities”);
(h)The husband's superannuation subject to paragraph 17 of this Order; and
(i)All other interest in property and financial resources of whatsoever nature that the husband has under his control, custody, or possession.
Personal property of the wife
8.The wife shall retain as her property absolutely and the husband relinquish and/or transfer to the wife all of his right title and interest (if any) in and to the following:
(a)Monies to the credit of the wife in any bank account in her sole name or held jointly with any other person;
(b)The wife’s household furniture and effects;
(c)The wife’s superannuation;
(d)The wife's Motor Vehicle 2 (Registration No. …);
(e)The wife’s interests in the entities P Pty Ltd and R Pty Ltd as Trustee for the T Family Trust (“wife’s group of entities”); and
(f)All other interest in property and financial resources of whatsoever nature that the wife has under her control, custody, or possession.
Motor Vehicle 3
9.Within 30 days of the date of this Order the husband shall do all such things and sign all such documents in his personal capacity and as director of B Pty Ltd, to transfer Motor Vehicle 3 (Registration No. …) to the wife noting that such vehicle is owned by B Pty Ltd.
Liabilities
10.The husband is responsible for the payment of any liability in his name including but not limited to the following:
(a)Personal loan from Mr S;
(b)Personal loan from Mr & Ms U;
(c)Personal loan from Mr & Ms V;
(d)Any liabilities and loans owing by the husband or the husband’s group of entities; and
(e)The husband's credit card debt.
11.The wife is responsible for the payment of any liability in her name including but not limited to the following:
(a)The wife's credit card debt; and
(b)Any liabilities and loans owing by the wife or the wife’s group of entities.
Entity loan accounts
12.Within 30 days of the date of this Order, the wife in her personal capacity and as a director of R Pty Ltd as Trustee for the T Family Trust shall do all such things and sign all such documents to:
(a)relinquish all beneficial entitlements and loan accounts owed to the wife or the wife’s group of entities (including the T Family Trust) by the husband or the husband’s group of entities including but not limited to B Pty Ltd, C Pty Ltd, the Hanigan Family Trust and the Hanigan Family Trust No. 1; and
(b)transfer and assign to the husband all of her right, title and interest in any loan account with the husband’s group of entities including B Pty Ltd, C Pty Ltd, the Hanigan Family Trust and the Hanigan Family Trust No. 1.
13.Within 30 days of the date of this Order, the husband in his personal capacity and in his capacity as director shall do all such things and sign all such documents (at the wife’s cost) to:
(a)relinquish all beneficial entitlements and loan accounts owed to the husband or the husband’s group of entities by the wife or the wife’s group of entities including but not limited to the T Family Trust; and
(b)transfer and assign to the wife all of his right, title and interest in any loan account with the wife’s group of entities including the T Family Trust.
Other Court proceedings and claims
14.Both the husband and the wife in their personal capacity and as the director of their respective groups of entities hereby release the other from all actions, proceedings (including the District Court Claim by B Pty Ltd v P Pty Ltd and the wife), claims, demands and actions including in relation to the recovery of loan accounts against each other or their respective entities.
15.Within 30 days of the date of this Order, the husband and the wife shall do all such acts and sign all such documents to discontinue proceedings number … in the District Court of Queensland.
Superannuation
16.Having been afforded procedural fairness, paragraphs 17 to 20 of this Order are binding on W Pty Ltd as the Trustee ("the Trustee") of Super Fund 1 ("the Fund"), member number ….
17.In accordance with s 90XT(1)(a) of the Family Law Act 1975 (Cth) ("the Act"), whenever a splittable payment becomes payable on or on behalf of the husband from his interests in the Fund, the wife is entitled to be paid by the Trustee an amount calculated in accordance with Part 6 of the Family Law (Superannuation) Regulations 2001 (Cth), using a base amount of $27,405.82 (provided that such base amount shall not exceed the value of the interest determined under s 90XT(2)) and there shall be a corresponding reduction in the amount the husband be entitled to receive but for this Order.
18.Paragraph 17 of this Order has effect from the operative time.
19.The operative time for the purpose of paragraph 17 of this Order is the fourth business day after the day on which a certified sealed copy of this Order is served on the Trustee of the Fund.
20.The Trustee and the parties in accordance with the obligations set out under the Act, the Family Law (Superannuation) Regulations 2001 (Cth), and the Superannuation Industry (Supervision) Act and Regulations 1994 (Cth), shall do all acts and things and sign all such documents as may be necessary to calculate the entitlement and make the payment in accordance with this Order.
Miscellaneous
21.Save for the assets specifically mentioned herein, the parties shall each retain for his/her sole use and benefit absolutely all other assets in their respective possession, or of which he/she is the legal owner.
22.The parties shall each be responsible for liabilities incurred in their name including all borrowings, personal loans, and credit card facilities and shall indemnify and keep indemnified the other against any liability that may occur in respect thereof.
23.The parties shall each do all acts and things necessary including signing all necessary documents so as to give full force and effect to the provisions of this Order and in the event that either party refuses or neglects to comply with any provision of this Order within 14 days of a written request to do so by the other party, then a Registrar of the Federal Circuit and Family Court of Australia (Division 1) at Brisbane, be hereby appointed, pursuant to s 106A of the Act, to execute all documents in the name of that party and to do all acts and things necessary to give validity and operation to the Order.
24.The transferee party shall prepare any documents necessary to give effect to the provisions of this Order at their cost and further be responsible for the payment of registration fees (if any) in relation to the transfer of any properties into their name.
25.Any duty payable on transactions arising from this Order or any documents executed pursuant to this Order shall be paid by the transferee party.
26.The parties shall comply promptly with all requisitions issued by the Office of State Revenue, Land Titles, Department of Main Roads, and any other Government Department in relation to any document executed or transacted pursuant to or to put into effect the terms and conditions of this Order.
NOTATIONS
27.The parties acknowledge that the terms of the Order are intended to end their financial relationship as far as possible in relation to property settlement and maintenance pursuant to the provisions of s 81 of the Act.
28.Paragraphs 7, 8(a) – (d) and (f), 9, 10, 11(a), 13 and 21 – 26 are made by consent.
Note: The form of the order is subject to the entry in the Court’s records.
Note: This copy of the Court’s Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 10.14(b) Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 10.13 Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).
Part XIVB of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish an account of proceedings that identify persons, associated persons, or witnesses involved in family law proceedings.
IT IS NOTED that publication of this judgment by this Court under a pseudonym has been approved pursuant to subsection 114Q(2) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
CAREW J:
The parties to this property dispute, Ms Hanigan (“the wife”) and Mr Hanigan (“the husband”), were a married couple who separated in early 2019. Their relationship in its entirety endured for only six years and two months and they have now been separated almost as long as their relationship. There were no children of the relationship, and it is common ground that the husband came into the relationship with significantly more assets than the wife, including four real properties and a transport business, all of which he retained at the end of the relationship.
The proceedings were commenced by the wife in the Federal Circuit Court (as that Court was then known) on 9 September 2020, and transferred to this Court on 7 August 2023.
The husband maintains that there is a negative asset pool of approximately ($1,300,000) while the wife maintains the asset pool (with numerous add backs) should be valued at approximately $8,000,000.
I have determined that the net assets of the Hanigan Group (which have a negative value) should be treated as a separate pool and retained by the husband. The Hanigan Group comprises the group of entities valued by the single expert, Mr H. I have determined that the net assets, excluding the Hanigan Group, total $1,777,979.09 and will be divided in the proportion 70/30 in favour of the husband. The practical effect of this determination is set out in [132] of these reasons.
Each party has incurred legal fees and outgoings of approximately $800,000.
PROPOSALS OF EACH PARTY
The order sought by the wife is set out in exhibit 16. The wife seeks a substantial payment to her of over $2,000,000, an additional payment of unpaid present entitlements in a trust, a superannuation split of $16,686, and that she retain her motor vehicle, two real properties, and other personal items. The percentage distribution to the wife reflected by the order sought on the wife’s figures, is about 38 percent.
The order sought by the husband is set out in exhibit 14. The husband seeks to retain the Hanigan Group, the real properties in the wife’s name, and that the parties otherwise retain all property (including superannuation) in their respective names and/or control, save for the wife’s car which will be transferred to her. On the husband’s figures he will retain a negative asset pool and the wife will retain a modest positive asset pool.
ISSUES
At the time I set this matter down for trial, the parties identified six issues for my determination. That list of issues was abandoned. The task of identifying the issues in dispute appeared to be one that the parties continued to struggle with right up until the last day of trial when a list of 11 issues (so called) was provided (exhibit 18).[1] The identified issues mainly relate to disputes about the balance sheet.
[1] Some of the identified issues in exhibit 18 are no longer issues in dispute given concessions made during submissions.
One other ‘issue’ identified in the list (issue 8) relates to the interpretation of an order made on 21 June 2024 restraining the husband from dealing with assets, and a ‘dollar for dollar’ order in relation to legal fees. There is no application before me directed to such an issue and I do not propose to entertain it. An attempt by the wife during submissions to seek an order that the husband’s solicitors’ issue an invoice to the husband was not entertained.
A further ‘issue’ in the list (issue 9) relates to a premature costs application by the wife for the husband to pay her legal fees prior to 21 June 2024.
Issues 10 and 11, simply identify, rather unhelpfully, that an assessment of contributions and s 75(2) factors will need to be undertaken.
BACKGROUND
It will be helpful to set out some background to the parties’ dispute.
The parties commenced cohabitation in or about late 2012 and married in late 2017. The wife moved out of the former matrimonial home in November 2018, but the parties agree that they did not separate until 6 February 2019. They divorced in late 2020.
There are no children of the relationship. However, each party has three adult children from previous relationships. At the time the parties commenced cohabitation, the husband’s three children were aged seven, nine, and 11 respectively and the wife’s children were aged seven, nine, and 15 respectively. The wife’s two youngest children lived with the parties full time as they did not have a relationship with their father, and he did not pay child support. The husband’s two youngest children lived in a week about arrangement between their parents and his eldest child lived with the husband’s first wife and spent time with the husband as agreed.
The wife is 48 years of age and is employed as a co-ordinator for a government agency and receives a weekly wage of $1,938. She is in good health. The wife also receives weekly rent of $660 from an investment property at 1 G Street, Region J (“[1 G Street]”). The wife’s average weekly income is thus $2,598. The wife’s claimed weekly expenditure is $2,309. The wife lives on a property owned by her mother in Victoria.
The husband is 50 years of age and continues to operate the transport business he had at the commencement of the relationship. The husband conducts his business activities through several companies and trusts which have been referred to by the single expert as the Hanigan Group (although this also includes a trust controlled by the wife called the T Family Trust). I will adopt the same nomenclature. The husband is in good health and his average weekly income is $4,894 per week, although he contends his personal expenditure is approximately $6,213 per week. The husband concedes that he has access to other funds by way of loans from the Hanigan Group.
The husband has re-partnered with Ms Z and they were married in 2022. Ms Z is aged 39 years. She has three children, aged 20, 13, and eight. The eldest two children live with the husband and Ms Z. The youngest lives in Country Y with the child’s father. The husband and his family live at K Street, Region J, (“[K Street]”) near Region Z, in Queensland. The land on which this home is built was owned by the husband at the commencement of his cohabitation with the wife.
Since their separation, the parties have been engaged in litigation in several jurisdictions.
In mid-2020, the husband’s company, B Pty Ltd (“B Pty Ltd”), filed a Claim and Statement of Claim in the District Court of Queensland against the wife and her company, P Pty Ltd, seeking repayment of a loan and damages for failure to return certain chattels, including a sauna and bath and Motor Vehicle 3. The proceedings have been stayed pending the outcome of these proceedings.
In September 2020, the wife filed an application for property settlement and an urgent application for spousal maintenance in the Federal Circuit Court of Australia (as it then was called). The wife’s application for spouse maintenance was dismissed in October 2020.
At about the same time, the wife filed an application for unfair dismissal against B Pty Ltd with the Fair Work Commission which she later withdrew.
P Pty Ltd also served a statutory demand against B Pty Ltd seeking payment of approximately $450,000. In late 2020, B Pty Ltd filed an application in the Supreme Court of Queensland seeking that the statutory demand made by P Pty Ltd be set aside. The statutory demand was set aside in early 2021. P Pty Ltd was ordered to pay B Pty Ltd the sum of $10,000 which has not yet been paid. P Pty Ltd was placed into liquidation in mid-2022.
In November 2020, the wife filed another application for spousal maintenance which she withdrew in February 2021.
In late 2022, another one of the husband’s companies, C Pty Ltd, filed a Claim in the Supreme Court of Queensland against CC Pty Ltd. The husband, with two others, incorporated CC Pty Ltd in mid-2014. The husband resigned as director and secretary of CC Pty Ltd in mid-2021. In late 2023, CC Pty Ltd went into liquidation. There is no suggestion that C Pty Ltd will recover any monies from litigation commenced against CC Pty Ltd.
Another of the husband’s companies, DD Pty Ltd, was placed into liquidation in late 2022. In mid-2023, proceedings were commenced by the liquidators of DD Pty Ltd in the Supreme Court of Queensland against the husband seeking payment of $3,000,000 most of which represented a taxation debt owed by DD Pty Ltd. Those proceedings were settled in mid-2024 for $300,000 and the husband has made one payment of $25,000 to date.
After separation the wife continued to operate P Pty Ltd which was the payroll arm of the Hanigan Group for about a year. An issue arose as a result of the wife withdrawing funds from P Pty Ltd that had been received from B Pty Ltd for the payment of business expenses for her own purposes. The wife also carried out a subdivision of a property purchased in her name during the marriage, being 1 G Street and 2 G Street, Region J (collectively “[G Street]”). The wife has retained the rent from 1 G Street. 2 G Street remains a vacant block of land. The subdivision was completed without the husband’s knowledge.
APPLICABLE LEGAL PRINCIPLES
In property settlement proceedings, the Court may make such order as it considers appropriate, altering the interests of the parties to the marriage in the property of the parties or either of them, including an order for a settlement of property in substitution for any interest in the property for the benefit of the parties, and an order requiring either or both of the parties to the marriage to make, for the benefit of either or both of the parties, such settlement or transfer of property as the Court determines (s 79(1) of the Family Law Act1975 (Cth) (“the Act”)).
The Court cannot make an order unless it is satisfied that, in all of the circumstances, it is just and equitable to make the order (s 79(2)).
In considering what order (if any) should be made in property settlement proceedings, the Court is required to take into account the following (s 79(4)):
(a)The financial contribution made directly or indirectly by or on behalf of a party to the acquisition, conservation or improvement of any property of the parties or either of them, whether or not that property still exists;
(b)The contribution (other than financial) made directly or indirectly by or on behalf of a party to the acquisition, conservation or improvement of any property of the parties or either of them, whether or not that property still exists;
(c)The contribution made by a party to the welfare of the family constituted by the parties and any children, including any contribution made in the capacity of homemaker or parent;
(d)The effect of any proposed order upon the earning capacity of either party;
(e)The matters referred to in s 75(2) of the Act so far as relevant;
(f)Any other order made under the Act affecting a party; and
(g)Any child support under the Child Support (Assessment) Act 1989 (Cth) that a party has provided, is to provide, or might be liable to provide for a child of the marriage.
The High Court of Australia in Stanford v Stanford[2] identified certain principles to be applied in property settlement proceedings. In particular, when considering whether it is just and equitable to make an order, it is firstly necessary to identify, according to ordinary common law and equitable principles, the existing legal and equitable interests of the parties in the property.[3] Secondly, the discretion as to whether or not to make a property settlement order, although extraordinarily wide, must nevertheless be exercised in a principled way.[4] Thirdly, there is no presumption that the parties’ rights to or interests in property are or should be different from those that currently exist.[5] The consideration of whether it is just and equitable to make an order should not be considered by reference only to the matters in s 79(4). It is necessary to give separate consideration to s 79(2) and (4) and not to ‘conflate’ the two subsections.[6]
[2] (2012) 247 CLR 108.
[3] Ibid at 120, [37].
[4] Ibid at 120–121, [38].
[5] Ibid at 121, [40].
[6] Ibid at 120, [35].
IS IT JUST AND EQUITABLE TO MAKE AN ORDER?
The husband and the wife contend that it is just and equitable to make an order. That position is understandable given that the husband and wife separated over five years ago and “there is not and will not thereafter be the common use of property” by the parties.[7] Additionally “the express and implicit assumptions that underpinned the existing property arrangements have been brought to an end by the voluntary severance of the mutuality of the relationship”.[8] In such cases, the “just and equitable requirement is readily satisfied”[9] and I am satisfied in this case that it is just and equitable to make an order.
[7] Ibid at 122, [42].
[8] Ibid.
[9] Ibid.
BALANCE SHEET
A joint balance sheet was tendered by consent and is exhibit 17 in the proceedings. During submissions certain further concessions were made and those concessions are reflected in the table set out below:
Ownership Description Wife’s value Husband’s value ASSETS Husband K Street as per EE Valuers valuation dated 17 July 2024 $1,525,000 $1,525,000 Wife 2 G Street as per EE Valuers valuation dated 17 July 2024 $320,000 $320,000 Wife 1 G Street as per EE Valuers valuation dated 17 July 2024 $740,000 $740,000 Husband All household chattels including vessel, Motor Vehicle 1 and equipment owned by the husband as per FF Valuers valuation dated 7 May 2023 $78,825 $78,825 Wife All household chattels including Motor Vehicle 2 owned by the wife as per FF Valuers valuation dated 7 May 2023 $12,810 $12,810 Husband Motor Vehicle 3 (Registration No. …) $18,000 $18,000 Husband and Wife Parties’ interests in the entities B Pty Ltd, C Pty Ltd, DD Pty Ltd, the Hanigan Family Trust No. 1, the L Unit Trust, L Pty Ltd, the Hanigan Family Trust, the M Property Trust, D Pty Ltd, E Pty Ltd, P Pty Ltd, the F Trust, and O Partnership $3,042,614
(does not include parties’ interests in T Family Trust)($2,168,677)
(does include parties’ interests in T Family Trust)Wife T Family Trust (Outstanding unpaid present entitlements to wife) $328,633.39 $0 Wife Outstanding unpaid present entitlements to wife personally $0 $0 Total Assets $6,065,882.39 $525,958.00 ADD BACKS Husband Advances received by the husband post separation from the Hanigan Family Trust No. 1, C Pty Ltd, and B Pty Ltd from 2019 to 2023 $2,359,642.82
$0
Husband Personal expenditure paid by the husband from the proceeds of sale of K Street post separation $40,000
$0 Husband Personal expenditure paid by the husband from the proceeds of sale of the GG Street, Region HH (“[Region HH Property]”) post separation $72,000 $0 Husband Personal expenditure paid by the husband from the proceeds of sale of 1 JJ Street, Region KK (“[1 JJ Street]”) post separation $99,761.11 $0 Husband Legal fees paid from B Pty Ltd to Michael Lynch Family Lawyers (“the husband’s solicitors”) $40,000 $0 Husband Legal fees paid by husband $532,751.28 $38,930.80 Wife Legal fees paid by the wife to SLF Lawyers (“the wife’s solicitors”) $87,436.28 $87,436.28 Husband Superannuation entitlements to employees of D Pty Ltd paid by refinance of K Street $0 $0 Husband Funds transferred to B Pty Ltd bank account ending …36 from 16 February 2024 to 28 February 2024 from refinance of K Street $320,000 $320,000
Husband Funds paid to the Hanigan Family Trust No. 1 Australia and New Zealand Banking Group Limited (“ANZ”) bank account ending …13 on 26 February 2024 from refinance of K Street $8,000 $0 Husband Alleged personal loan to Mr S, the husband’s brother (recorded as a non-current liability in the Hanigan Family Trust) $127,000 $0 Husband Alleged personal loan to Mr and Ms U, the husband’s parents (recorded as a non-current liability in the Hanigan Family Trust) $76,434 $0 Husband Alleged personal loan to Ms V (recorded as a non-current liability in the Hanigan Family Trust) $100,000 $0 Total $3,863,025.49 $446,367.08 LIABILITIES Husband LL Financial Services (“[LL Financial Services]”) Home Loan (account no. …85 and …86) Refinanced loan over K Street ($917,990.41)
*agreed if items 18 and 19 are added back
($917,990.41) Wife ANZ Home Loan account (account no. …76) encumbering 1 G and 2 G Street
($397,369.43) ($397,369.43) Husband Personal loan from Mr S $0 ($761,833.13)
Husband Personal loan from Mr & Ms U $0 ($94,165.51) Husband Personal loan from Mr & Ms V $0 ($100,000) Wife ATO Personal Debt – Activity Statement
($8,024.21) ($8,024.21) Wife Legal fees owing to the wife’s solicitors ($454,495.18) $0
Husband ATO Personal Debt – Income Tax ($122,633.52) ($122,633.52) Total ($1,900,512.75) ($2,402,016.21) SUPERANNUATION Member Name of Fund Wife’s value Husband’s value Wife Super Fund 2 $53,135.27 $53,135.27 Husband Super Fund 3 $87,302.66 $87,302.66 Total $140,437.93 $140,437.93 Total Net Assets (including add backs and super) $8,168,833.06 ($1,289,253.20) FINANCIAL RESOURCES Ownership Description Wife’s value Husband’s value Husband Estimated tax losses and potential tax benefits – as per paragraph 4.1. of the MM Valuers Report dated 13 November 2023 $3,243,000 $0 Husband Husband’s reward points as at 11 June 2024 (… points) Total $3,243,000 $0
The wife contends that the net assets of the parties including add backs and superannuation are $8,168,833.06.
The husband contends that the net assets of the parties including add backs and superannuation are ($1,289,253.20).
Item 7 – Value of the Hanigan Group
Item 7 in the balance sheet, namely, the value of the Hanigan Group, is the most contentious issue in the proceedings. The main business operated by the Hanigan Group is a transport business. The single expert, Mr H, valued the parties’ interests in the Hanigan Group, as set out in exhibit 3. An adversarial expert, Mr NN, valued only the core business entities comprising, C Pty Ltd, DD Pty Ltd, B Pty Ltd, and the Hanigan Family Trust No.1 as the owner of C Pty Ltd and B Pty Ltd.
The husband relies upon the single expert valuation for the Hanigan Group, save for an adjustment of $18,000 representing a motor vehicle that will be retained by the wife at an agreed value of $18,000, thus he adopts the value of ($2,168,677).
The wife relies upon the valuation of Mr NN in relation to the core business entities and adopts Mr H’s valuation for the parties’ interests in the other entities, save that the wife has not included the value of the T Family Trust, a trust that she controls, which she adds as a separate item. The wife agrees that an allowance should be made for her motor vehicle. The wife adopts the value of $3,042,614 for the Hanigan Group.
The T Family Trust is included in Mr H’s valuation as represented by the husband’s unpaid present entitlements of $46,805 and the wife’s unpaid present entitlements of about $280,619. The trust does not have the capacity to payout the entitlements until it is paid unpaid present entitlements from the Hanigan Family Trust No. 1. The Hanigan Family Trust No. 1 has been valued by Mr H at ($2,053,362) and does not presently have the capacity to pay.
The valuation of the Hanigan Group adopted by both parties also includes a debt owed by the wife to B Pty Ltd of $170,326. As I understand it, the husband proposes that the debt be forgiven. No submissions were made about the taxation consequences of doing so, if any. There is no suggestion by the wife that she would repay the debt, which she disputes, as I understand it.
The two most significant areas of dispute between the experts are firstly, whether the transport business has goodwill and secondly, what proportion of the tax losses spread across the entities should be treated as an asset.
The experts agree that to determine market value, an appropriate methodology is to capitalise future maintainable earnings and then compare that figure with the tangible business assets (working capital and fixed assets) of the trading entities. Mr H adopted the tangible business asset value as a consequence of that value exceeding his capitalised future maintainable earnings value. Mr NN adopted the capitalised future maintainable earnings as a consequence of his value exceeding the tangible business asset value. A comparison of the experts’ conclusions is set out in the table below:
Mr H Mr NN Future maintainable earnings (earnings before interest and tax) $1,170,000 $2,023,464 Multiple 4.44 7 Capitalised business value $5,194,800 $14,164,248 Adopted business value * $10,721,822 $14,164,248 Plus Other assets Additional fuel levy $67,000 $67,000 Non-current taxation $580,203 $2,254,569 OO Street property $475,000 $475,000 Total other assets $1,122,203 $2,796,569 Less other liabilities Chattel mortgage B Pty Ltd ($6,049,836) ($6,049,836) Chattel mortgage C Pty Ltd ($6,846,775) ($6,846,775) UU Company liability ($181,619) ($181,619) Total other liabilities ($13,078,230) ($13,078,230) Less working capital deficit Loan OO Street properties ($182,527) ($182,527) Current taxation losses $370,797 $677,483 Other net items ($1,008,940) ($1,110,809) Total working capital deficit ($820,670) ($615,853) Total adjustments ($12,776,697) ($10,897,514) Total value of entities ($2,054,874) $3,266,734 *Mr H considers the value of the business using the capitalisation of future maintainable earnings methodology results in a value less than the tangible business assets (working capital and fixed assets). Mr H has adopted the (higher) value of the tangible business assets as the value of the business in the above table.
In my view, Mr NN’s valuation of the entities is problematic for the following reasons:
(a)Mr NN’s use of a multiple of 7 relied, at least to some extent, on his stated knowledge of a confidential sale of a business about which no details are known, where the multiple used was 7. However, leaving aside the usefulness of such a sale when the reasons for the use of the multiple cannot be tested, Mr NN made the candid concession that he does not know if the business sold for market value or whether some special value was attributed to it;
(b)Mr NN was very much focussed on the increase in sales over the period 2021 to 2023 in particular, but as Mr H pointed out, the focus must be on profit;
(c)Mr NN conceded that the multiple adopted by Mr H of 4.44 was not overly conservative and Mr NN had himself adopted a multiple of 4.75 in his report dated 28 February 2024 being a midway between what he then considered to be an appropriate multiple;
(d)In arriving at his opinion that the business group of entities had goodwill, Mr NN included the tax losses as an asset valued at $2,932,052 whereas Mr H discounted the value of the tax losses to $951,000. I prefer Mr H’s approach which takes into account the many uncertainties surrounding the tax losses, including the absence of any guarantee that the various entities will make profits in future years against which the existing losses can be offset; the time period in which the various entities will, if at all, recoup their losses in the future is unknown; and in current day prices, the value of any losses, even if ultimately recouped, may be substantially less than the gross value.
I prefer the evidence of Mr H over the evidence of Mr NN and find that the value of the Hanigan Group, with the adjustment for the motor vehicle to be retained by the wife to be ($2,168,677).
Item 8 – T Family Trust
The wife seeks to add back the entirety of the unpaid present entitlements in the T Family Trust of $328,633.39.[10] This includes the husband’s unpaid present entitlements of $46,805. The wife seeks an order that the husband cause the Hanigan Family Trust No. 1 to pay $328,633.39 to the T Family Trust. Presumably, the wife would then cause the husband to be paid his unpaid present entitlements in the T Family Trust (although no submission was made to that effect). The husband proposes that each party relinquish their direct and indirect beneficial entitlements in the T Family Trust and in the Hanigan Family Trust No. 1. Neither party made any submissions about the taxation consequences, if any, of their respective proposals. The Hanigan Family Trust No. 1 currently has no funds from which to make the payments to the T Family Trust.
[10] The wife had initially sought to include an even greater sum, $435,783.39, but conceded during submissions that the figure she had initially adopted was incorrect.
It is not in dispute that during their relationship the parties jointly benefited from the ability to minimise their taxation liabilities by utilising the entities within the Hanigan Group. In those circumstances, it seems somewhat artificial for the wife to now claim payment of unpaid present entitlements.
The value of the T Family Trust (being the unpaid present entitlements) is included in the husband’s value of the Hanigan Group in the balance sheet and so is the liability of the Hanigan Family Trust No. 1 to the T Family Trust. Accordingly, I propose to adopt the proposed order of the husband to deal with the unpaid present entitlements and the T Family Trust.
Items 10 – 22 (item 17 is agreed to be nil) – Add backs
It is trite to observe that the discretion to include notional property or ‘add backs’ in the balance sheet are “the exception rather than the rule”.[11] A review of the relevant authorities reveal the following principles: [12]
(a)The Court must generally take the property of the parties as it finds it as at the date of trial subject to certain exceptions;
(b)‘Add backs’ fall into “three clear categories”[13]: where a party has expended money on legal fees, where there has been a premature distribution of matrimonial assets, and waste or wanton, negligent, or reckless dissipation of assets;
(c)The latter category may call for a consideration of the use to which funds were put;
(d)Parties do not “go into a state of suspended economic animation”[14] after separation;
(e)Reasonably incurred expenditure is unlikely to be considered exceptional and thus is unlikely to be the subject of an ‘add back’;
(f)Before notionally adding back property, proper consideration must be given to the existing legal and equitable interests of the parties in the property;
(g)The overarching principle that guides the exercise of the discretion is to achieve justice and equity;
(h)It may be preferable to take the circumstances into account as a relevant factor under s 75(2).
[11] C & C [1998] FamCA 143 at [46].
[12] M & M [1998] FamCA 42; NHC and RCH (2004) FLC 93–204 (“NHC and RCH”); AJO & GRO (2005) FLC 93–218 at [30] (“AJO & GRO”); Vass v Vass (2015) 53 Fam LR 373; Trevi & Trevi (2018) FLC 93–858; Candle & Falkner (2021) FLC 94–069; Kowaliw and Kowaliw (1981) FLC 91–092; Townsend and Townsend (1995) FLC 92–569.
[13] AJO & GRO (fn 12) at [30].
[14] NHC and RCH (fn 12) at [2.11].
Item 10 - Add back of $2,359,642.82
The wife seeks to add back the entirety of benefits attributed to the husband from the Hanigan Group since separation as set out in the following table:
Financial year Source Amount 2019 Hanigan Family Trust No. 1 $428,787.10 2020 Hanigan Family Trust No. 1 $390,085.41 2021 C Pty Ltd $35,557.50 B Pty Ltd $89,651.38 Hanigan Family Trust No. 1 $363,427.31 2022 C Pty Ltd $8,291.76 B Pty Ltd $24,734.20 Hanigan Family Trust No. 1 $296,650.76 2023 C Pty Ltd $28,500 Hanigan Family Trust No. 1 $693,957.40 Total $2,359,642.82
The husband resists this add back on the following bases:
(a)The wife has not established that the husband has actually received the sum asserted;
(b)The wife also ignores:
(i)That the advances from the Hanigan Family Trust No. 1 and/or the companies are loans which will need to be addressed by the husband at some point either by way of repayment or by paying tax on a declared dividend; and
(ii)The existence of the loans (at least up until 30 June 2022) are reflected in the valuation of the husband’s interests in the Hanigan Group.
It seems to me that the approach taken by the wife is unduly simplistic.
In relation to the add back of benefits attributed to the husband in the 2019 financial year, the parties did not separate until February 2019 and the parties continued their financial relationship until the wife left the employ of the Hanigan Group about a year later. An add back of funds in relation to the 2019 financial year would not achieve justice and equity.
There is no doubt that the husband has received certain benefits since separation over and above his taxable income e.g., he has been able to pay all legal fees up to 24 June 2024 while the wife has not had the same ability, and he concedes that at least some of his legal fees have come from loans from the Hanigan Group. However, in relation to such loans, the husband would either be required to enter into Division 7A loan agreements (which the evidence establishes he has in relation to many of the ‘advances’) and meet the ongoing interest on the loans or pay a higher rate of tax on money received.
It seems to me that benefits received by the husband from advances from the Hanigan Group after separation are more appropriately taken into account as a s 75(2)(o) factor.
Items 11 and 19 – Add backs from refinance of K Street
K Street was owned by the husband and his first wife at the commencement of cohabitation between the husband and the wife. It was at that time a block of land with a liveable shed on it and it was unencumbered. K Street was transferred into the husband’s sole name in November 2014.
After separation, in mid-2020 the husband signed a residential building contract with PP Pty Ltd (“the builder”) to build a house on K Street. The contract price was $680,936. The husband was required to meet staged payments to the builder under the contract. The husband borrowed money from ANZ and from his brother, Mr S, to complete the purchase.
In early 2024, the husband refinanced the existing loan of $411,823 with ANZ secured by way of mortgage on K Street, and he and B Pty Ltd together borrowed a total of about $920,000 from LL Financial Services. Of that sum, $420,000 represents the previously existing home loan. At settlement, $495,463.91 was deposited into the husband’s ANZ account number ending …16 and the funds were dispersed as follows:
(a)To B Pty Ltd to pay superannuation payments due to employees of D Pty Ltd (part of the Hanigan Group) – which is the subject of an agreed add back of $320,000 at item 18 of the balance sheet;
(b)To pay for improvements to the K Street home – which is not the subject of an add back claim;
(c)Other payments not the subject of an add back claim;
(d)For personal expenditure met by the husband in the sum of $40,000 at item 11 of the balance sheet particularised as follows:
(i)$20,000 to pay a credit card on 15 February 2024;
(ii)$10,000 to pay a credit card on 22 February 2024;
(iii)$5,000 into a joint account number ending …22 with his current wife on 22 February 2024;
(iv)$2,000 to pay a credit card in 2024; and
(v)$3,000 child support arrears on 26 February 2024 for his son with his first wife.
(e)A payment at item 19 of the balance sheet of $8,000 to the Hanigan Family Trust No. 1 bank account number ending …13 on 26 February 2024.
The wife contends that, given the advances received from the Hanigan Group, there was no need to use funds from a refinance to pay $40,000 off credit cards or to pay $8,000 to the Hanigan Family Trust No. 1 from this source.
I do propose to add back $48,000 in circumstances where the husband has incurred a liability for such payments which is included in the balance sheet as a debt. The wife should not have to bear responsibility for a debt incurred for after separation living expenses and other payments.
Item 12 – Add back of $72,000 from sale proceeds of the Region HH Property
The Region HH Property was also a property owned by the husband at commencement of cohabitation, subject to a mortgage. It was a holiday home and the parties spent holidays there with their respective children from time to time. There is no suggestion the wife made any direct financial contribution to this property. It is conceded by the husband that the wife assisted in its refurbishment during the marriage.
In early 2020, the husband sold the Region HH Property for around $750,000 and the net sale proceeds were $266,858.16. The wife seeks to add back the sum of $72,000 which was used by the husband for the following payments:
(a)$40,000 to pay down the loan owing to his parents;
(b)$27,000 to pay his credit card; and
(c)$5,000 to pay his credit card.
The wife disputes the existence of a loan by the husband to his parents.
The husband contends that he borrowed $180,000 from his parents in 2008 as evidenced by two acknowledgements of debt dated 5 June 2008 for $80,000 and $100,000 between the husband, his first wife, and his parents. The acknowledgements refer to interest at the rate of 10 percent. The husband contends that he used the loans to purchase shares as an investment through the Hanigan Family Trust to help cover the costs of development of JJ Street, Region KK (“[JJ Street]”). The current balance of the loan is allegedly $94,165.51.
The husband paid $40,000 to his parents in early 2020 from the sale proceeds of the Region HH property to reduce the alleged debt owing to them.
The Hanigan Family Trust balance sheets from 30 June 2016 to 30 June 2023 record the loan from “[Mr & Ms U]”, his parents. I accept that the husband has repaid $93,100 by numerous payments over the period 2 May 2018 to 7 July 2022 as evidenced by various bank statements.
On 21 December 2018, the husband and his first wife agreed to a property settlement which was the subject of a consent order. The schedule to the Application for Consent Orders includes the two loans to the husband’s parents as liabilities: one for $80,000 and one for $70,000.
The husband’s parents were not witnesses in his case. He explains their absence on the basis that they are elderly and frail. His mother is 82 years of age, and the husband contends that three weeks prior to him filing his trial affidavit, his mother sustained injuries from a fall requiring her hospitalisation. The husband’s father is 87 years of age, and the husband contends he is not in the best of health. The husband was not prepared to call him as a witness because he did not think he would cope with the stress. I have no reason to doubt the husband’s evidence on why he did not call his parents and he was not challenged on it.
I am satisfied that the loan exists given the acknowledgements of debt, the historic reference to the loan for shares in the balance sheets for the Hanigan Family Trust, the reference to the loan in his settlement with his first wife, and his history of repayments. I do not propose to add back the payment of $40,000 to the husband’s parents from the Region HH Property proceeds and accept that it was made to reduce the debt.
The wife contends that, given the advances received from the Hanigan Group, there was no need to use funds from the sale of the Region HH property to pay $32,000 off credit cards.
I do not propose to add back the payment of credit cards. I do not regard the identified payments as wastage, wanton, or reckless spending. Nor do I regard the payments as a premature distribution to the husband. These payments were made five years after separation from the sale of a property brought into the relationship by the husband.
Item 13 – Add back of $99,761.11 from the sale of the JJ Street Property
Although item 13 refers to an add back of $99,761.11, the particulars of this add back (in the wife’s outline of submissions) only refer to payments totalling $77,750. While not addressed in submissions, I infer that the difference relates to legal costs paid by the husband of $21,141.11 and $1,870 which may be taken up elsewhere.
JJ Street was also a property owned by the husband at the commencement of cohabitation subject to a mortgage. After separation, the husband subdivided JJ Street into two separate blocks, being 1 & 2 JJ Street. The husband paid the subdivision costs of approximately $70,000. 1 JJ Street included the home and pool in which the parties lived from 2014 to 2018. 2 JJ Street was a vacant block of land.
The husband contends that he borrowed $64,750 on 22 October 2020 from his brother, Mr S, to enable him to meet the payments due to the builder engaged to construct the home on K Street, on condition that he would repay him once JJ Street had sold.
The husband sold 1 JJ Street in late 2020 for around $500,000 and the net sale proceeds of $486,547.87 were deposited into his ANZ bank account number ending …29. The two mortgages secured on JJ Street remained outstanding, being $358,818.41 and $86,269.04. The wife seeks to add back a sum paid to the husband’s brother on 13 November 2020, being a payment of $64,750 allegedly borrowed on 22 October 2020.
The wife disputes the loan to the husband’s brother on the basis that it was not recorded in writing, there was no security offered, no demand made, and the wife relies on the brother’s oral evidence that no repayments to the husband have been repaid. However, on review of the brother’s evidence (set out below) that no repayments had been made, it is apparent that his evidence related to the loan advanced in 2014 and not the loan advanced on 22 October 2020. Further, the brother’s trial affidavit does record the repayment of $64,750 on 13 November 2020.
Counsel for the wife: There’s no security of any type for this loan. Is there?
Husband’s brother: No, there’s not.
Counsel for the wife: You say this loan was first made in 2014. Right?
Husband’s brother: Correct.
Counsel for the wife: And no repayments have been made for how many years? From 2014, the first repayment you ever saw or the sum of money you say…I withdraw that question. No money has ever formally been repaid to you, has it?
Husband’s brother: No.
Counsel for the wife: And the reason is that no money has been repaid to you is because it’s a not a genuine loan, is it?
Husband’s brother: Incorrect.
Counsel for the wife: If this loan was made on your evidence in 2014… and you have never sought any type of recovery, have you?
Husband’s brother: No.
Counsel for the wife: And you’ve not made any demands, have you?
Husband’s brother: No.
Counsel for the wife: Right. And obviously no legal action either?
Husband’s brother: No.
…
Counsel for the wife: but on the other hand, you say you charge your brother 7.5 percent per month. Is that correct?
Husband’s brother: Yes.
Counsel for the wife: It’s the fact that you’ll never seek repayment, isn’t it?
Husband’s brother: Incorrect.
Counsel for the wife: You haven’t sought any repayment since 2014, have you?
Husband’s brother: We’ve had discussions about it and when he’s at the point that he can, it will get repaid.
Counsel for the wife: But nothing since 2014?
Husband’s brother: Correct.
I am satisfied that the husband did repay his brother $64,750 and that this was a condition of the loan made on 22 October 2020.
The husband sold 2 JJ Street in early 2021 for $165,000 with net proceeds being $155,170.45. The wife seeks to add back two payments made from the sale proceeds to pay the husband’s credit cards: $7,000 on 24 February 2021 and $6,000 on 25 February 2021.
The wife contends that, given the advances received from the Hanigan Group, there was no need to use funds from the sale of JJ Street to pay $13,000 off credit cards.
I do not propose to add back the payment of credit cards. I do not regard the identified payments as wastage, wanton, or reckless spending. Nor do I regard the payments as a premature distribution to the husband. These payments were made five years after separation from the sale of a property brought into the relationship by the husband.
Items 14 and 15 – Add back of legal fees
The wife seeks to add back legal fees paid by the husband in the sum of $572,751.28. The husband concedes that $38,930.80 should be added back but otherwise he resists the add back.
It is not in dispute that the husband accessed funds from B Pty Ltd to pay some of his legal fees. Item 14 refers to a sum of $40,000. In fact, the husband concedes that three payments for his legal fees have been made on his behalf by B Pty Ltd:
(a)$17,241.30 in October 2022;
(b)$40,000 in November 2022; and
(c)$40,000 in November 2022.
However, the husband argues that as the Hanigan Group, including B Pty Ltd, have been valued at 30 June 2022 (by agreement) the payments of his legal fees have no impact on the valuation and thus should not be subject to an add back. Further, the husband contends that the payments are recorded as loans in B Pty Ltd’s records (exhibit 4).
The husband otherwise contends that the payment of legal fees has come from his “personal bank accounts from post separation income and management fees”.
I accept the husband’s submissions in relation to the legal fees paid by B Pty Ltd and do not propose to add them back. They are not funds that would otherwise have appeared on the balance sheet given the agreed date of valuation.
As to the remainder of his legal fees, it has been over five years since separation. It is entirely plausible that some legal fees have been paid from his income. However, it seems more likely that at least some of his legal fees have been paid from advances received from the Hanigan Family Trust No. 1. A more appropriate way to recognise this benefit is to take it into account under s 75(2)(o).
Items 20, 21 and 22 – Add back of personal loans
The wife seeks to add back to the balance sheet the following three loans:
(a)Alleged loan owing to Mr S - $127,000;
(b)Alleged loan owing to Mr and Ms U - $76,434; and
(c)Alleged loan owing to Ms V - $100,000.
The three loans are recorded as non-current liabilities in the Hanigan Family Trust. Thus, although the husband contends the loans were made to him personally, they are recorded as debts of the trust. In assessing the husband’s interest in the Hanigan Family Trust, Mr H includes the loans as credits in his value of the Hanigan Family Trust at $414,462 (exhibit 3). Accordingly, I do not propose to add back the loans and the wife did not press the add back.
Item 25 – Liability of $761,833.13 to husband’s brother
The husband seeks to deduct the total alleged loan owing to his brother including interest at 7.5 percent capitalised monthly.
The original loan in 2014 was for $127,000 and involved the husband’s brother paying out a debt of the husband to the O Partnership of $127,000 from his share of the sale proceeds of a property at City QQ which had been developed by the partnership and was the last property to be sold. The husband and his brother contend that while no written agreement or security was provided, the verbal agreement was for the husband to repay his brother when he could, with interest.
While the husband claims the 2014 loan is his personally, it is recorded in the balance sheet of the Hanigan Family Trust as a liability of the trust. Mr H explains as follows:
26.9 The balance sheet of the [Hanigan Family Trust] at 30 June 2022 includes a loan of $127,000 from [Mr S] (the Husband’s brother). I understand that the accuracy of this loan balance is a matter of contention between the Parties, the correct position of which I am unable to determine.
26.10 However, as I understand this loan to be a personal loan to the Husband in any event, I have treated it as an in substance a loan from the Husband to the [Hanigan Family Trust]. Accordingly, the loan of $127,000 has been added back in calculating the Parties’ interests in the [Hanigan Family Trust]. I note that the ultimately agreed/ determined balance of the loan should be separately included in the matrimonial pool as a personal loan from [Mr S] to the Husband.
(As per the original)
The husband’s brother claims that the debt relating to the 2014 loan with interest as at 10 October 2020 was $202,649.59. The relevance of that date reflects the date from which further loans were made by the husband’s brother to the husband.
The wife disputes the existence of the loan but alternatively contends that as no repayments have been made and no demands made, the recovery of the loan is statute barred[15] and should not be included in the balance sheet as a liability. I do not intend to include the 2014 loan as a liability in the balance sheet. I accept the submission that as no repayments have been made on this loan it is statute barred. The husband may have a moral obligation to repay the loan but there remains uncertainty about whether it will be repaid.[16]
[15] Limitation of Actions Act 1974 (Qld) s 10(1)(a).
[16] Biltoft and Biltoft (1995) FLC 92–614 at 82,125 (“Biltoft”).
The husband and his brother contend that additional loans were made by the brother to the husband as follows (not including $64,750 on 22 October 2020 and repaid on 13 November 2020):[17]
[17] Husband’s brother’s affidavit filed 1 July 2024, paragraph 10. See also husband’s affidavit filed 1 July 2024, paragraph 125.
…
(b) 50,000 in February 2021;
(c) $60,000 in July 2021;
(d) $40,000 in September 2021;
(e) $29,800 in January 2022;
(f) $28,000 in January 2022;
(g) $120,000 in February 2022;
(h) $10,000 in June 2022;
(i) $10,000 in June 2022;
(j) $48,000 in June 2022;
(k) $20,000 in April 2023.
…
The husband’s brother contends that the husband told him that as the wife had not repaid the $175,000 (to B Pty Ltd) that was borrowed for the purchase of G Street he needed to borrow the funds to complete the construction of the home at K Street and to meet general living expenses.
The husband sets out the above loans in his trial affidavit but does not differentiate between funds used for K Street construction or living expenses. The husband does particularise the use of two sums, $2,230.80 and $1,700 for legal fees and $17,967.35 for the valuation of the plant and equipment from TT Valuers (a single expert). I assume the sums paid for legal fees are reflected in the conceded add back for legal fees at item 15 of the balance sheet.
I do not propose to include any of the post 2014 loans other than the TT Valuers valuation of $17,967.35. It would not be just and equitable for the wife to be responsible for loans obtained by the husband to pay for after separation living expenses. While the funds used on the K Street construction would be reflected in the balance sheet, without particularisation, I can only take it into account in a general way under s 75(2)(o).
Item 26 – Liability of $94,165.51 to husband’s parents
This loan is discussed earlier in these Reasons. The husband and his first wife initially borrowed $180,000 from his parents in 2008 in order to purchase shares through the Hanigan Family Trust. The Hanigan Family Trust balance sheets from 30 June 2016 onwards record the loan from “[Mr & Ms U] (shares)”. The husband contends that he has made repayments in various sums on the loan from 2 May 2018 to 7 July 2022 totalling $93,100 (including the $40,000 paid from the Region HH Property sale proceeds in early 2020).
The single expert, Mr H, refers to the loan to the husband’s parents (and another loan dealt with below) as follows:
26.11 The balance sheet of the [Hanigan Family Trust] at 30 June 2022 include loans of $100,000 in respect of the [Q] Family and a Loan from the Husband’s parents of $87,476.
26.12 I understand that the accuracy and validity of these loan balances are matters of contention between the Parties, the correct position of which I am unable to determine. Accordingly, these loans have been added back in calculating the Parties’ interests in the [Hanigan Family Trust]. I note that the ultimately agreed/ determined balances of the loans should be separately included in the matrimonial pool as personal loans to the Husband.
(As per the original)
The debt to the husband’s parents was $87,476 as at 30 June 2022. I was not taken to any evidence to support the calculation of interest since that time. Accordingly, I propose to include $87,476 as a liability in the balance sheet.
Item 27 – Debt to Mr & Ms V
The husband contends that he borrowed $100,000 from Mr and Ms V as trustees for the Q Superannuation Fund on 2 July 2003 and that the funds advanced were loaned to the Hanigan Family Trust. The trustees of that trust at the time were the husband and his first wife. The husband relies on a Notice of Assignment, Guarantee (referred to as “loan agreement”) and Acknowledgement dated 2 July 2003 as proof of the existence of the loan. The husband quotes from paragraph one of the “loan agreement” recording that “the guarantors will from time to time pay to the lenders any or all monies, including limiting the generality thereof, the principal moneys, interest thereon, costs, charges and expenses which may be or become payable …”. The husband asserts that the interest rate agreed to was 10 percent and that he has only been making interest payments on the loan. The husband asserts that the total interest paid by him is $43,000 over the period 18 February 2019 to 17 April 2023. Given that no repayments were made prior to 18 February 2019, the debt would have been statute barred. The interest repayments did not commence until after separation. There is no evidence of any demand made for repayment or the payment of interest from the lenders since 2003.
I do not propose to include the alleged debt in the balance sheet as a liability. It remains uncertain whether it will in fact be repaid.[18]
[18] Biltoft (fn 16) at 82,125.
Item 33 – Tax losses as a financial resource
The wife seeks to include $3,243,000 of tax losses within the Hanigan Group as a financial resource of the husband. The tax losses have already been factored into the value of the Hanigan Group.
Item 34 – Reward points
The wife seeks to include reward points in the balance sheet as a financial resource of the husband that she proposes be transferred to her. No evidence was presented as to the value of the points, how the transfer proposed by the wife would occur, or whether it is possible to transfer points.
ADJUSTED BALANCE SHEET
The adjusted balance sheet reflecting the above findings is set out below:
Ownership Description Adopted value ASSETS Husband K Street as per EE Valuers valuation dated 17 July 2024 $1,525,000 Wife 2 G Street as per EE Valuers valuation dated 17 July 2024 $320,000 Wife 1 G Street as per EE Valuers valuation dated 17 July 2024 $740,000 Husband All household chattels including vessel, Motor Vehicle 1, and equipment owned by the husband as per FF Valuers valuation dated 7 May 2023 $78,825 Wife All household chattels including Motor Vehicle 2 owned by the wife as per FF Valuers valuation dated 7 May 2023 $12,810 Husband Motor Vehicle 3 (Registration No. …) $18,000 Husband Hanigan Group (including T Family Trust) ($2,168,677)
Wife T Family Trust (Outstanding unpaid present entitlements to the wife) $0 Wife Outstanding unpaid present entitlements to the wife personally $0 Total Assets $525,958.00 ADD BACKS Husband Advances received by the husband post separation from the Hanigan Group from 2019 to 2023 $0
Husband Personal expenditure paid by the husband from the refinance of the K Street loan post separation $40,000
Husband Personal expenditure paid by the husband from the proceeds of sale of the Region HH Property post separation $0 Husband Personal expenditure paid by the husband from the proceeds of sale of 1 JJ Street post separation $0 Husband Legal fees paid from B Pty Ltd to the husband’s solicitors $0 Husband Legal fees paid by the husband $38,930.80 Wife Legal fees paid by the wife to the wife’s solicitors $87,436.28 Husband Superannuation entitlements to employees of D Pty Ltd paid by refinance of K Street $0 Husband Funds transferred to B Pty Ltd bank account ending …36 from 16 February 2024 to 28 February 2024 from refinance of K Street. $320,000 Husband Paid to Hanigan Family Trust No. 1 ANZ account ending …13 on 26 February 2024 from refinance of K Street $8,000 Husband Personal loan to Mr S $0 Husband Personal loan to Mr and Ms U $0 Husband Personal loan to Ms V $0 Total Add backs $494,367.08 Husband LL Financial Services Home Loan (Account No. …85 and …86) encumbering K Street ($917,990.41)
Wife ANZ Home Loan (Account No. …76) encumbering 1 & 2 G Street ($397,369.43) Husband Personal loan from Mr S ($17,967.35) Husband Personal loan from Mr & Ms U ($87,476) Husband Personal loan from Mr & Ms V $0 Wife ATO Personal Debt – Activity Statement ($8,024.21) Wife Legal fees owing to the wife’s solicitors $0 Husband ATO Personal Debt – Income Tax ($122,633.52) Total ($1,551,460.92) SUPERANNUATION Member Name of Fund Wife Super Fund 2 $53,135.27 Husband Super Fund 3 $87,302.66 Total $140,437.93 Total Net Assets (including add backs and super) ($390,697.91) IF NO ADJUSTMENT IS MADE, WHAT WILL EACH PARTY RETAIN?
As the balance sheet reveals a negative asset pool, it will be helpful to set out what each party would retain if no adjustments were made:
Ownership Description Wife Husband ASSETS Husband K Street as per EE Valuers valuation dated 17 July 2024 $1,525,000 Wife 2 G Street as per EE Valuers valuation dated 17 July 2024 $320,000 Wife 1 G Street as per EE Valuers valuation dated 17 July 2024 $740,000 Husband All household chattels including vessel, Motor Vehicle 1, and equipment owned by the husband as per FF Valuers valuation dated 7 May 2023 $78,825 Wife All household chattels including Motor Vehicle 2 owned by the wife as per FF Valuers valuation dated 7 May 2023 $12,810 Wife Motor Vehicle 3 (Registration No. …) $18,000 Husband Hanigan Group (including T Family Trust) ($2,168,677)
Wife T Family Trust (Outstanding unpaid present entitlements to the wife) $0 Wife Outstanding unpaid present entitlements to the wife personally $0 Total Assets $1,090,810.00 ($564,852) ADD BACKS Husband Advances received by the husband post separation from the Hanigan Group from 2019 to 2023 $0
Husband Personal expenditure paid by the husband from the refinance of the K Street loan post separation $40,000
Husband Personal expenditure paid by the husband from the proceeds of sale of the Region HH Property post separation $0 Husband Personal expenditure paid by the husband from the proceeds of sale of 1 JJ Street post separation $0 Husband Legal fees paid from B Pty Ltd to the husband’s solicitors $0 Husband Legal fees paid by the husband $38,930.80 Wife Legal fees paid by the wife to the wife’s solicitors $87,436.28 Husband Superannuation entitlements to employees of D Pty Ltd paid by refinance of K Street $0 Husband Funds transferred to B Pty Ltd bank account ending …36 from 16 February 2024 to 28 February 2024 from refinance of K Street. $320,000 Husband Paid to Hanigan Family Trust No. 1 ANZ account ending …13 on 26 February 2024 from refinance of K Street $8,000 Husband Personal loan to Mr S $0 Husband Personal loan to Mr and Ms U $0 Husband Personal loan to Ms V $0 Total Add backs $87,436.28 $406,930.80 LIABILITIES Husband LL Financial Services Home Loan (Account No. …85 and …86) encumbering K Street ($917,990.41)
Wife ANZ Home Loan (Account No. …76) encumbering 1 and 2 G Street ($397,369.43) Husband Personal loan from Mr S ($17,967.35) Husband Personal loan from Mr & Ms U ($87,476) Husband Personal loan from Mr & Ms V Wife ATO Personal Debt – Activity Statement ($8,024.21) Wife Legal fees owing to the wife’s solicitors Husband ATO Personal Debt – Income Tax ($122,633.52) Total ($405,393.64) ($1,146,067.28) SUPERANNUATION Member Name of Fund Wife Husband Wife Super Fund 2 $53,135.27 Husband Super Fund 3 $87,302.66 Total $53,135.27 $87,302.66 Total Net Assets (including add backs and super) $825,987.91 (1,216,685.82)
I observe that while the wife is seeking an adjustment in her favour if the balance sheet produces a positive figure, she does not propose to share in the debts if the balance sheet produces a negative figure.
If no adjustment is made, I am not satisfied that such an outcome would be just and equitable.
During submissions an alternative option was discussed with counsel, namely, offsetting the husband’s loan account in the Hanigan Family Trust No. 1 being a net sum of ($2,055,362) against Mr H’s valuation for the Hanigan Group and thereby effectively removing the Hanigan Group altogether from the balance sheet. This seems to me to be an appropriate course in circumstances where the trust is a discretionary trust, the husband is the appointor of the trust, and is within the group of primary beneficiaries. The debt owed to the trust is effectively a debt owed by the husband to himself. Such an approach is not dissimilar to a two pools approach, which was one canvassed by the husband, and would have a similar outcome i.e., it would enable a distribution of the ‘positive’ asset pool.
The option discussed arose in circumstances where the husband conceded that although the asset pool is a negative one, he will retain the Hanigan Group which has provided him with an ongoing income and benefits by way of loans that have been advanced over many years. In my view, simply looking at the negative value of the asset pool does not take into account that the husband will retain and continue to operate a business that affords him substantial benefits. The husband’s alternative order (which remains with the Court papers) would see the wife retaining an income producing asset, namely, 1 G Street, and him receiving 2 G Street and effectively each of them retaining the other assets and liabilities in their names or control apart from the wife retaining her motor vehicle. The husband would also propose that any loan accounts in credit or debit would be forgiven or relinquished.
I propose to adopt the approach of effectively offsetting the husband’s loan account with the Hanigan Group value and thereby removing the Hanigan Group value. I turn now to consider the s 79(4) factors, commencing with contributions.
CONTRIBUTIONS
At the commencement of cohabitation in 2012, it is common ground that the husband owned the following property:
(a)Region HH Property subject to a mortgage. The Region HH Property was a holiday house purchased in 2008 for $760,000. It was sold after separation in 2020 for around $750,000 and the net sale proceeds were $266,858 which were used in part to reduce the debt to his parents and in part on living expenses;
(b)JJ Street property subject to a mortgage. From 2013 to 25 November 2018 the parties occupied this property. There were some renovations carried out to this property during the relationship which are unparticularised. In 2020, the husband subdivided the property into two lots at a cost of $70,000. 1 JJ Street sold in late 2020 for around $500,000 with net sale proceeds of $486,547.87 although two loans secured by mortgage remained outstanding, being $358,818.41 and $86,269.04, until early 2024 when the loans were refinanced with LL Financial Services. The sale proceeds were substantially used to pay for the construction of a home at K Street (including the repayment of a loan from the husband’s brother which was lent for that purpose on 22 October 2020 and repaid on 13 November 2020). 2 JJ Street was sold for $165,000 in early 2021 with net sale proceeds of $155,170.45. Most of the sale proceeds were used for the construction of K Street;
(c)K Street was an unencumbered vacant block of land on which there was a liveable shed. In mid-2020, the husband signed a contract for the construction of a home on K Street at a contract price of around $680,000. K Street is included in the balance sheet at a value of $1,525,000 encumbered by a mortgage of ($917,990.41);
(d)The transport business; and
(e)Superannuation at an unverified value.
In 2018, when the husband and his first wife divided their property, the husband retained the above properties. At that time, a half share in the Region HH property was valued at $500,000 with a mortgage of $537,000. JJ Street was valued at $450,000 and K Street was valued at $215,000 with a mortgage secured over both of $490,000. The pool was a negative pool taking into account the Hanigan Group and the husband’s first wife received a payment of $20,000 and retained a few modest possessions. The husband retained the vast majority of the debt but, similar to the current situation, most of the debt related to the Hanigan Group.
It is common ground that at the commencement of cohabitation, the wife had no assets of any significant value. She was operating a business which returned a nominal income and had some personal possessions.
At the commencement of cohabitation, the parties rented a property at RR Street, Region SS. While they set up a joint account, the husband paid the rent as any money earnt in the wife’s business was returned to her business. The husband also contends that he was making regular deposits into the wife’s account to prop up the business.
It is common ground that the wife did not make any direct financial contributions during the relationship and that two of her children were supported financially by the husband.
The JJ Street property was tenanted when cohabitation commenced. The husband and wife moved into JJ Street in 2013 and remained in the property until the wife vacated the home on 25 November 2018. The husband paid all outgoings for JJ Street throughout the relationship including mortgage repayments, rates, utilities, and repairs. The husband also paid for renovations to the house. The wife assisted the husband in retiling the house and in carrying out gardening, external maintenance, and cleaning after renovations were completed.
The wife’s business was flooded in 2013 and did not reopen. At about this time the wife opened another business with $40,000 provided by the husband. The wife worked up to 60 hours a week in the business. The husband assisted with the care of the wife’s children.
The wife commenced to work full time in the Hanigan Group after the business was sold in late 2015 for $35,000 being less that the sum advanced by the husband to set it up.
The wife initially worked for B Pty Ltd as a clerk on a part time basis from early 2014 to late 2015. The wife was not paid a wage by B Pty Ltd because the husband contends B Pty Ltd could not afford to do so. The wife nevertheless had the use of a credit card and a company vehicle.
P Pty Ltd was set up in mid-2015. The wife later became the sole director and shareholder and as such had all the responsibilities and exposure that a director of a company assumes. Through P Pty Ltd the wife provided services to the Hanigan Group business entities. This continued after separation until mid-2020. The husband contends that after separation and unbeknown to him the wife increased her wage from $50,000 gross per annum to $184,282 for the 2019 year and $285,645 for the 2020 year. P Pty Ltd went into liquidation after separation. The wife concedes that after separation she paid herself various “advances” from P Pty Ltd over and above her wage which she used in part to pay tax on the unpaid present entitlements attributed to her trust, the T Family Trust, from the Hanigan Family Trust but unpaid, and also to meet costs associated with the subdivision of G Street into Lots 1 and 2. The wife left JJ Street three days after the purchase of 1 and Lot 2 G Street settled.
It is common ground that the wife did not receive child support for her two children that were living with the parties, AA and BB, and that the husband paid for their expenses including private school fees for BB which were approximately $3,400 per term.
The husband and wife and their respective children holidayed at the Region HH Property on four occasions. In 2015, the husband and wife both repainted and refurbished the Region HH Property. The wife assisted with selecting some furniture.
The husband paid for the parties’ wedding in 2017, a cost of approximately $25,000. The husband paid for approximately six overseas holidays for himself and the wife. The wife underwent surgery on two occasions overseas which the husband paid for and the costs associated with the travel and accommodation.
Both parties assisted the other in the care of their children and carried out household duties.
Subsequent to separation, each party continued to make contributions to the operation of the Hanigan Group until the wife ceased her involvement in mid-2020 and thereafter the husband continued to operate the Hanigan Group. Each party organised the subdivision (unbeknown to the other) of a property under their control. In the case of the wife, it was G Street and, in the case of the husband, it was JJ Street.
Overall, I assess the myriad of contributions made by the parties in the proportion 80/20 in favour of the husband.
SECTION 75(2) FACTORS
The husband will retain a business which continues to produce a good income and/or benefits for him whether that be by way of management fees, dividends, or loans. To ignore this fact would be to visit upon the wife a most unfair outcome and one that could not in any sense be regarded as just and equitable. The business enabled the husband to provide for the family during the relationship and to provide overseas holidays and other benefits despite it having a negative value when he completed a property settlement with his first wife in 2018.
The benefits received by the husband after separation enabled him to meet ongoing personal expenses including to pay his legal fees, whereas the wife will have a significant debt for unpaid legal fees.
The wife earns a reasonable income of $100,000 and if she retains 1 G Street, as proposed by the husband (as an alternative to his primary position), she will continue to be able to supplement her income with the rent of $660 per week.
The husband has now remarried and supports his wife and two of her children.
The husband utilised unparticularised funds borrowed from his brother, and still owing, in the construction of K Street.
In my view, an appropriate adjustment in favour of the wife is ten percent.
WHAT PROPERTY ADJUSTMENT ORDER IS JUST AND EQUITABLE?
Turning then to consider how to give effect to my assessment of the s 79(4) matters, I have determined that the assets and liabilities as assessed should be divided as set out in the table below, including a superannuation split sought by the wife:
Description Wife to retain Husband to retain ASSETS K Street $1,525,000 2 G Street $320,000 1 G Street $740,000 All household chattels $78,825 All household chattels $12,810 Motor Vehicle 3 (Registration No. …) $18,000 Total Assets $770,810.00 $1,923,825.00 ADD BACKS Personal expenditure paid by the husband from the refinance of the K Street loan post separation $40,000
Legal fees paid by the husband $38,930.80 Legal fees paid by the wife to the wife’s solicitors $87,436.28 Funds transferred to B Pty Ltd bank account ending …36 from 16 February 2024 to 28 February 2024 from refinance of K Street. $320,000 Paid to Hanigan Family Trust No. 1 ANZ account ending …13 on 26 February 2024 from refinance of K Street $8,000 Total Add backs $87,436.28 $406,930.80 LIABILITIES LL Financial Services Home Loan (Account No. …85 and …86) encumbering K Street ($917,990.41)
ANZ Home Loan (Account No. …76) encumbering 1 & 2 G Street ($397,369.43) Personal loan from Mr S ($17,967.35) Personal loan from Mr & Ms U ($87,476) ATO Personal Debt – Activity Statement ($8,024.21) ATO Personal Debt – Income Tax ($122,633.52) Total liabilities ($405,393.64) ($1,146,067.28) SUPERANNUATION Name of Fund Member Super Fund 2 Wife $53,135.27 Super Fund 3 Husband $27,405.82 $59,896.84 Total superannuation $80,541.09 $59,896.84 Total Net Assets (including add backs and super) $533,393.73 $1,244,585.36
The percentage distribution of this further adjusted pool equates to a division of the total of $1,777,979.09 in the proportion of 30 percent to the wife and 70 percent to the husband.
I consider such a result to be just and equitable in the unusual circumstances of this case.
I certify that the preceding one hundred and thirty-four (134) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Carew. Associate:
Dated: 9 August 2024
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