HARIRI & HARIRI
[2015] FamCA 598
•27 July 2015
FAMILY COURT OF AUSTRALIA
| HARIRI & HARIRI | [2015] FamCA 598 |
FAMILY LAW – PROPERTY – Settlement in relation to marriage – Where the husband and wife were married for 18 years and have three children – Where contributions are found to be equal – Where some adjustment in favour of the wife is warranted – Where the husband will retain the family business – Where the husband’s earning capacity is substantially greater than that of the wife – Where a greater share of the parenting responsibility will fall to the wife – Where a 10 percent adjustment is appropriate in favour of the wife – Where an order is made for the wife to receive 60 per cent and the husband to receive 40 percent of the available property and superannuation.
| Evidence Act 1995 (Cth) Cerini and Cerini [1998] FamCA 143 | |
| Stanford v Stanford (2012) 87 ALJR 74; 293 ALR 70 | |
| APPLICANT: | Ms Hariri |
| RESPONDENT: | Mr Hariri | ||||
| FILE NUMBER: | SYC | 5451 | of | 2012 | |
| DATE DELIVERED: | 27 July 2015 |
| PLACE DELIVERED: | Sydney |
| PLACE HEARD: | Sydney |
| JUDGMENT OF: | Loughnan J |
| HEARING DATE: | 22 – 25 June 2015 |
REPRESENTATION
| SOLICITOR FOR THE APPLICANT: | McDonnell Milne Toltz |
| COUNSEL FOR THE APPLICANT: | Mr Lethbridge SC Ms Eldershaw |
| COUNSEL FOR THE RESPONDENT: | Mr Millar |
| SOLICITOR FOR THE RESPONDENT: | Barkus Doolan |
Orders
Leave is granted to the parties to apply within 14 days, on giving at least 48 hours notice to the Court and each other in relation to the wording of the draft orders set out at annexure 1 to these reasons.
In the event that no application is made pursuant to that leave, final orders will be made in terms of those draft orders.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Hariri and Hariri has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
| FAMILY COURT OF AUSTRALIA AT SYDNEY |
FILE NUMBER: SYC 5451 of 2012
| Ms Hariri |
Applicant
And
| Mr Hariri |
Respondent
REASONS FOR JUDGMENT
Introduction
These are property settlement proceedings between Ms Hariri and Mr Hariri, who were married for 18 years. Although they are now divorced, for convenience I will refer to them as the wife and the husband.
The parties established a business offering custom services through stores in Australia and later, in New Zealand operated by both company owned and third party franchisees.
The task of identifying a just and equitable property settlement was significantly complicated by the intermingling of the parties’ business and personal finances with those of members of the husband’s family and by the fact that business and personal debts of the parties and members of the husband’s family are the subject personal guarantees and of multiple and interlocking securities over real estate owned by the parties and by the parties and others.
Applications
The wife sought orders in terms of a document titled Further Amended Orders Sought By The Wife (24 June 2015)[1], as follows:
[1] Exhibit 2
1.In these orders, the following definitions apply:
(a)“Business Name” means “[B Pty Ltd]” the business name holder of which is [C Pty Ltd].
(b)“Companies” means any and all of the following entities:
(i)[C Pty Ltd] (ACN …);
(ii)[D Pty Ltd] (ACN …);
(iii)[E Pty Ltd] (ACN …);
(iv)[F Pty Ltd] (ACN …);
(v)[G Pty Ltd] (ACN 133 529 094);
(vi)[H Pty Ltd] a company registered in New Zealand; and
(vii)[I Pty Ltd], a company registered in New Zealand.
(c)“[Hariri Family Trust]” means the discretionary family trust with ABN … in respect of which [Ms Hariri] is co-trustee and sole Appointor and [Ms J] is co-trustee.
(d)“Partnerships” means each and all of:
(i)[Ms J], [Mr Hariri] & [Ms Hariri] trading as [K Pty Ltd];
(ii)[Mr L & Ms M Hariri] and [Mr N & Ms O Tuben] trading as [P Pty Ltd]; and
(iii)[Mr Hariri] & [Ms Hariri] trading as [Q Pty Ltd].
(e)“Trademarks” means Registered Australian Trademark No … and Registered New Zealand Trademark No …, both being property of the Hariri Family Trust.
2.Except as provided by any order to the contrary in these Orders, the wife shall be declared as against the husband the owner and thereby entitled to retain all right, title and interest in and to the following:
(a)real property situate at and known as [1 and 2 R Street, Suburb S] in the State of New South Wales being the whole of the land described in Folios Identifier … and … (“[Suburb S] Properties”); and
(b)all property of whatsoever nature and wheresoever situate in her sole name, possession or control, including but not limited to motor vehicles, furniture, furnishings and personal effects, moneys in bank, building society and like accounts and superannuation
AND the wife must, on and from the husband’s compliance with Order 12(a), indemnify and keep the husband indemnified with respect to all liabilities (including any mortgage) relating to such assets whatsoever.
3.Except as provided by any order to the contrary in these Orders, the husband shall be declared as against the wife the owner and thereby entitled to retain all right, title and interest in and to the following property:
(a)property situate at and known as [1 & 2 T Street, Suburb U] in the State of New South Wales being the land described in Folio Identifier … (“[the Suburb U] property”);
(b)property situate at and known as [V Street, Suburb W] in the State of New South Wales being the land described in Folio Identifier …) (“[the Suburb W] property”);
(c)the Companies, Business Name, Trademarks and Partnerships; and
(d)all property of whatsoever nature and wheresoever situate in his sole name, possession or control, including but not limited to motor vehicles, furniture, furnishings and personal effects, moneys in bank, building society and like accounts and superannuation,
AND the husband must indemnify and keep the wife indemnified with respect to all liabilities (including any mortgage, lease or charge) relating to such assets whatsoever.
4.Within 28 days of the date of these Orders, the Husband do all acts and things necessary in his capacity as director of the Companies to cause the relevant company to transfer to the wife its right, title and interest in [4WD] motor vehicle, registration number … on an unencumbered basis, the cost of such transfer to be borne by the relevant company.
5.Within 28 days of the date of these Orders, the wife shall do all acts and things necessary to transfer to the husband her right, title and interest in:
(a)the [Suburb U] Property; and
(b)the [Suburb W] Property .
6.The husband shall forthwith indemnify and keep indemnified the wife in relation to:
(a)any alleged loan between the husband and either or both of [Mr X Hariri] and [Ms Y Hariri]; and
(b)any personal income tax and Capital Gains Tax rendered to her General Ledger Account with the Australian Taxation Office for the financial years ending 30 June 2011, 30 June 2012, 30 June 2013, 30 June 2014 and 30 June 2015;
7.To give effect to Order 2(a), save and except of the housing mortgage (presently outstanding in the amount of approximately $1.2 million), the husband must no later than 42 days from the date of these orders obtain the consent of the Commonwealth Bank of Australia (“CBA”) in writing to extinguish, whether by release or discharge, all of the wife’s liabilities whatsoever, whether pursuant to the terms of any mortgage, charge, guarantee or other instrument.
8.In the event that the CBA decline to extinguish the wife’s liabilities referred to in Order 7, then:
(a) the husband and the wife do all acts and things necessary to place on the market for sale and to sell the Suburb S Properties; and
(b)the net proceeds of sale be paid to the wife but in the event that on completion the CBA requires repayment in an amount in excess of the amount then due under the housing mortgage, then the shortfall be added to the amount due to the wife pursuant to Order 12.
9.Pending the implementation of these Orders, the husband in his capacity as director of the Companies henceforth:
(a)be restrained by injunction from declaring any dividend in favour of the wife; and
(b)save and except for the sole purpose of complying with Order 12(a), selling or otherwise disposing of or charging or mortgaging or further charging or mortgaging his interest in the [Suburb U] property or [Suburb W] property or his interests in the Companies, or other than in the ordinary course of business, any asset.
10.Within 28 days of the date of these Orders, the parties shall do all acts and things and execute all documents necessary to dissolve the “[Mr Hariri & Ms Hariri] trading as [Q Pty Ltd]” partnership with a deemed date of dissolution being 1 July 2011 AND for the orderly implementation of this order, the husband shall forthwith direct and authorise a Chartered Practicing Account to perform the necessary professional services to dissolve the said partnership with the cost of such services to be borne the husband or a corporate entity controlled by him as advised by his accountant.
11.Within 42 days of the date of these orders, the wife must do all other acts and things necessary to:
(a)resign from all offices held by her in any of the Companies and any extant Partnership(s); and
(b)transfer and assign to the husband or his nominee all of her right, title and interest in and to any sums due to her from the Companies and any extant Partnership(s).
12.That simultaneously with the wife’s discharge of the preceding order:
(a)Subject to Order 7, the husband shall pay to the wife an amount equivalent to 65 per cent of the net assets and superannuation (using a one pool approach) of the parties and disregarding any tax liability which is the subject of Order 6(b); and
(b)in return for that payment, the wife must:
(i)transfer to the husband or his nominee all of her right, title and interest in any shareholding in the Companies, any extant Partnership(s), and the Business Name; and
(ii)do all acts and things to relinquish her position as trustee and Appointor of the [Hariri] Family Trust.
13.Pending full and final satisfaction of the husband’s obligations created by Order 12(a), the husband shall:
(a)cause the wife to be paid the sum of $1,500 per week by way of spouse maintenance with such payment to be paid on a weekly basis in advance to an account nominated by the wife AND FURTHER the husband in his capacity as director of the Companies be restrained by injunction from sourcing such funds from any loan account in the wife’s name; and
(b)meet all mortgage repayments, council and water rates and land tax payable relating to the property referred to in Order 2(a) as an when they fall due.
14.In the event the husband defaults on his obligations created under these Orders, then the husband and the wife do all acts and things to place on the market and to sell for fair market value the Companies or any part of them and, for the orderly implementation of these Orders:
(a)in the event of any dispute as to the manner or conduct of the sale, the parties have liberty to apply for such orders as they may consider necessary to give effect to this order.
(b)Upon completion of the sale of the Companies (whether sold as a group or in parts, the proceeds of sale shall be applied in the following manner and priority:
(i)in payment of the costs of sale and reasonable disbursements relating to the sale;
(ii)in payment of any bona fide third party creditor of the Companies;
(iii)…; and
(iv)of the balance:
(A)in payment to the wife in the amount of $1,449,000 plus any amount for a shortfall under Order 8(b); and
(B)the balance to the husband.
….
21.Except as otherwise provided in these orders, each party shall be solely liable for any personal loan, credit card liability or other debt which is standing in their name or to their account and shall indemnify and keep indemnified the other party for such liability.
22.That from the date of these orders:
(a)the husband shall indemnify and keep the wife indemnified against all or any manner of action, suits, causes of action, arbitrations, debts, and demands whatsoever both at law and in equity which the husband, any entity comprising the Companies and/or Partnerships and/or [Hariri Family Trust] now have or may have at any time in the future against the wife or which may arise by reason of her shareholding or partnership or trusteeship in or of such entities and or any loan account in her name and/ or the receipt by her of any monies from the said companies, Partnerships or trust or otherwise; and
(b)pursuant to s 90AE of the Family Law Act, in relation to any debit loan accounting the wife’s name due to any entity comprising the Companies, the husband and that entity must immediately do all acts and things necessary to substitute the husband as the liable party in lieu of the wife in relation to all such loan accounts.
23.The Companies be joined for the purpose of Order 22(b) only.
…
25.That in the event that either party fails to execute any document necessary to give effect to these orders, the Registrar of the Family Court of Australia at Sydney be appointed pursuant to s 106A of the Family Law Act to execute the document on behalf of the party who refuses or neglects to execute it and do all acts and things necessary to give force and effect to these orders AND FURTHER the party refusing or neglecting to execute the document or documents pay the costs of the other party on a solicitor-client basis in relation to obtaining the Registrar’s signature.
26.That the husband pay the wife’s costs of and incidental to these proceedings.
The respondent sought the following orders[2]:
[2] Exhibit 6
THE COURT NOTES:
A.The following definitions for the purposes of these Orders:
A.1."R Street" means the property situate and known as R Street, Suburb S, being the whole of the land contained in Folio Identifier … of which the Wife is the sole registered proprietor;
A.2."R Street" means the property situate and known as R Street, Suburb S, being the whole of the land contained in Folio Identifier 1/1062149 of which the Wife is the sole registered proprietor;
A.3."the Act" means the Family Law Act 1975;
A.4."the CBA Guarantees" means the various guarantees provided by Commonwealth Bank in relation to C Pty Ltd P/L, no's…., …, …, …, …, …, …, …, …, …, …, …, …, …, …, …, …, …, …, …, …, …, …, …, …, …, …, …, …, …, …, …, …, …, …, and …;
A.5."the CBA Bill Facility/loan" means the facility/better business loan facility granted to C Pty Ltd by Commonwealth Bank, account no. …;
A.6."the child" means [Z], born … 2005;
A.7."children" means [Mr AA] born … 1995, [Ms BB] born … 1996 and [Z] born … 2005;
A.8."[F Pty Ltd]" means the company known as [F Pty Ltd], ACN … of which the Husband is the sole director;
A.9."the Companies" means [C Pty Ltd], [D Pty Ltd Fund], [E Pty Ltd], [F Pty Ltd], [G Pty Ltd], [H Pty Ltd] and [I Pty Ltd];
A.10."[the Suburb W] mortgage" means the loan secured under registered mortgage number … with the Commonwealth Bank of Australia secured upon the title to the [Suburb W] property;
A.11."the [Suburb W property]" means the property situated at and known as [V Street], Suburb W, being the whole of the land contained in Folio Identifier … of which the parties are joint tenants as to ½ share and [Mr X Hariri] and [Ms Y Hariri] are joint tenants as to ½ share, as tenants in common;
A.12."[G Pty Ltd]" means the company known as [G Pty Ltd], ACN … of which the Husband is the sole director;
A.13.“[C Pty Ltd]” means the company known as [C Pty Ltd], ACN … of which the Husband is sole director and of which the parties each hold 1 of the 2 issued ordinary shares;
A.14.“[I Pty Ltd]” means the company known as [I Pty Ltd], registered in New Zealand;
A.15."[D Pty Ltd Fund]" means the company known as [D Pty Ltd Fund], ACN … of which the Husband is the sole director and [C Pty Ltd] holds the 10 issued ordinary shares;
A.16."[H Pty Ltd]" means the company known as [H Pty Ltd], registered in New Zealand;
A.17."[E Pty Ltd]" means the company known as [E Pty Ltd], ACN … of which the Husband is the sole direction and [C Pty Ltd] holds the 10 issued ordinary shares;
A.18."the [Suburb U] mortgage" means the loan secured under registered mortgage number … with the Commonwealth Bank of Australia secured upon the title to the [Suburb U] property;
A.19."the [Suburb U] property" means the property situated at and known as [T Street, Suburb U], being the whole of the land contained in Folio Identifier … of which the parties are joint tenants as to ½ share and [Mr X Hariri] and [Ms Y Hariri] are joint tenants as to ½ share as tenants in common;
A.20."[the Suburb S mortgage]" means the loan secured under registered mortgage number … with the Commonwealth Bank of Australia secured upon the title to the [Suburb S] properties;
A.21."[the Suburb S properties]" means the properties situated at and known as [R Street, Suburb S], being the whole of the land contained in Folio Identifiers … and … of which the Wife is the sole registered proprietor;
A.22.“the Partnerships” means [Ms J, Mr Hariri & Ms Hariri] T/A [K Pty Ltd], [Mr L & Ms M Hariri] and [Mr N & Ms Tuben] T/A [P Pty Ltd] and [Mr Hariri & Ms Hariri] T/A [Q Pty Ltd];
A.23."parties" means the Husband and the Wife; and
A.24."the [4WD]" means the [4WD] motor vehicle, registration number … registered in the name of [C Pty Ltd].
THE COURT ORDERS THAT:
Property Settlement
1.Within 60 days, but not earlier than 28 days, of the making of these Orders the Husband do all acts and things and use his best endeavours to cause the Wife's release from any and all security against [R Street] (including the [Suburb S] Mortgage), [including paying all monies (or causing all monies to be paid) to facilitate such release] and if not able to do so, to discharge such security (including the [Suburb S] Mortgage) within that same time frame.
2.Simultaneously with compliance with Order 1 above:
2.1pursuant to Section 78 of the Act, the Wife be declared the owner of all right, title and interest in [R Street]; and
2.2the Wife indemnify the Husband and keep him so indemnified from all actions, claims, suits, demands, taxes (including Capital Gains Taxes), and liabilities in respect of/pertaining to [R Street].
3.Simultaneously with compliance by the Husband with Order 1 above, the:
3.1Husband do all acts and things and use his best endeavours to cause the release of any and all security to which the Wife is a party (if any and including the [Suburb S] Mortgage if applicable) and/or as is required to facilitate the transfer of [R Street] to the Husband (or his nominee) pursuant to these Orders;
3.2Husband and Wife do all acts and things to transfer the Wife's entire right, title and interest in [R Street] to the Husband (or his nominee), at the Husband's cost; and
3.3Husband indemnify the Wife and keep her so indemnified from all actions, claims, suits, demands, taxes (including Capital Gains Taxes), and liabilities in respect of/pertaining to [R Street].
4.Pending compliance with:
4.1Order 2 above, the parties each be restrained from doing any act or thing that has its intention or effect, the increase of the liabilities secured against [R Street];
4.2Order 3.2 above, the parties each be restrained from doing any act or thing that has its intention or effect, the increase of the liabilities secured against [R Street]; and
4.3Order 2 above, the parties each be restrained from doing any act or thing that has its intention or effect, the increase of the [Suburb S] Mortgage.
5.Simultaneously with compliance with the last of Order 2 and Order 3 above:
5.1the Wife do all acts and things and sign all documents necessary to transfer to [Mr X Hariri] and [Ms Y Hariri] (or his/her nominee), the Wife's entire right, title and interest in the [Suburb U] property and the [Suburb W] property; and
5.2the Husband do all acts and things and sign all documents necessary to transfer to [Mr X Hariri] and [Ms Y Hariri] (or his/her nominee), the Husband's entire right, title and interest in the [Suburb U] property and the [Suburb W] property.
6.Simultaneously with compliance with Order 5.1 above:
6.1the Wife sign any documents provided to her by the Husband to facilitate a release and/or discharge of the Wife of her obligations under the [Suburb U] mortgage and the [Suburb W] mortgage, and the Husband thereafter indemnify the Wife and keep her so indemnified in respect of any such mortgage; and
6.2the Husband indemnify the Wife and keep her indemnified in respect of the [Suburb U] property and the [Suburb W] property and any rental guarantees losses previously provided by either party in that regard.
7.Within 60 days, but not earlier than 28 days, of date of these orders, the Husband do all acts and things and sign all documents necessary, in his capacity as director of the Companies, to cause the transfer to the Wife unencumbered, of the [4WD]; and for the purpose of Order 7 below the:
7.1value of the asset to the wife be $53,600 [Page 43 of Report of Ms CC]; and
7.2value of the liability to the Husband $28,546.
8.Simultaneously with compliance with the last of Orders 1, 3, 5 and 6 above, the Husband pay to the Wife such sum so as to effect an overall 50 per cent division of the nett property pool (accounting for any such addbacks the Court deems fit) by way of final property adjustment.
9.Simultaneously with the payment by the Husband of the sum referred to in Order 8 above, the Wife do all acts and things and sign all documents provided by the Husband (or his nominee), to:
9.1resign from all offices and directorships held by her in the Companies;
9.2transfer to the Husband (or his nominee), her entire right, title, interest and shareholding in the Companies;
9.3transfer all right, title and interest in, and ownership of ,all trademarks and business names associated with any of the Companies (and/or held by [Ms Hariri] and [Ms J] atf the Hariri Trust), including but not limited to [C] and [DD] trademarks and the "[B Pty Ltd]" business name held by [C Pty Ltd]) to the Husband (or his nominee); and
9.4transfer to the Husband (or his nominee) all of her right, title and interest in, and to, all loan accounts held by her in the Companies and/or monies otherwise owed to her by the Companies.
10.Simultaneously with compliance with Order 9 above, the Husband do all acts and things and use his best endeavours to secure the Wife's release (if applicable) from those of the CBA Guarantees and the CBA Bill Facility/Loan to which she is still a party, or if not possible, to then cancel/close such Guarantee/Bill Facility/Loan.
11.Simultaneously with the Wife's compliance with Order 9 above, the Husband indemnify and keep indemnified the Wife against any liability of any nature whatsoever which the Wife may otherwise have at any time arising in any way in respect of the Companies whether:
11.1by reason of the Wife having been an employee, director, officer and/or shareholder of the Companies;
11.2by reason of the Wife having been involved in the business conducted by the Companies;
11.3by reason of the receipt by the Wife of any money from the Companies previously; and/or
11.4by reason of the Wife having given or executed a guarantee of any liabilities of the Companies to any person or corporation including but not limited to the Australian Taxation Office.
12.Simultaneously with the payment by the Husband of the sum referred to in Order 8 above, the Wife do all acts and things and sign all documents provided by the Husband (or his nominee), to transfer the Wife's entire right, title and interest in the Partnerships to the Husband (or his nominee) [including but not limited to any capital and funds in and entitlement to any current account in the Partnerships.]
13.Simultaneously with compliance by the Wife with Order 12 above, the Husband indemnify the Wife and keep her so indemnified against any liability which the Wife may otherwise have in respect of any of the Partnerships.
14.Save as specifically provided for by any Order to the contrary, as against the Husband, the Wife be declared the sole owner of, and the Husband then have no interest in, all other personal property (including choses in action) of whatsoever nature and kind in the possession of the Wife at the date of the making of this Order, including but not limited to the Wife's furniture and effects, any remaining items of the Wife's jewellery, and the funds in the Wife's bank accounts.
15.Save as specifically provided for by any Order comprising this Order to the contrary, as against the Wife, the Husband be the sole owner of, and the Wife then have no interest in, all other personal property (including choses in action) of whatsoever nature and kind in the possession of the Husband at the date of the making of this Order, including but not limited to the Husband's jewellery and effects, and the funds in the Husband's bank accounts.
16.Should the Wife be assessed to pay Capital Gains Tax for the financial years ending 30 June 2013 or 30 June 2014 in reference to the sale of [R Street], then:
16.1the Wife provide a copy of the assessment identifying as much to the Husband within 7 days of receipt of same; and
16.2the Husband facilitate payment of such Capital Gains Tax assessed to the Australian Tax Office within 28 days of receiving any such assessment.
17.The parties each do all acts and things and execute all documents, authorities and writings as are necessary to give effect to all or any of these Orders.
18.Save as specifically provided for by any Order comprising these Orders to the contrary:
18.1the Husband by this Order indemnifies the Wife, and keeps her so indemnified, from and in respect of all actions, claims, suits and demands as may be made against the Wife in relation to all liabilities in the name of the Husband; and
18.2the Wife hereby indemnifies the Husband from and in respect of all actions, claims, suits and demands as may be made against the Husband in relation to all liabilities in the name of the Wife.
19.The Husband be declared, as and between the parties, to have sole right, title and interest in any and all superannuation interests held by the trustee of any superannuation fund in his sole name.
20.The Wife be declared, as and between the parties, to have sole right, title and interest in any and all superannuation interests held by the trustee of any superannuation fund in her sole name.
21.Save as specifically provided for in these Orders to the contrary, each of the Husband and the Wife release the other from all debts owing from one to the other.
22.The Wife pay the Husband's costs of, and incidental to, these proceedings.
The Hearing
The hearing commenced on 22 June 2015 and on 25 June 2015 judgment was reserved.
Short History
The husband was born in 1965. At the time of the hearing he was 49 years of age. The wife was born in 1971. At the time of the hearing she was 43 years of age. The parties married in 1993 and separated on 23 December 2011. They were divorced on 20 June 2013. They have three children who are aged 20, 18 and 10 years.
Credibility and Submissions
It was submitted on behalf of the wife that credit findings are relevant to the determination of the proceedings in respect of the way in which the husband has conducted the business and that the Court should find that he was not a creditworthy witness. I disagree. In my view there are no significant issues that fall to be determined solely or substantially by reference to the uncorroborated testimony of either party. In any event, to my observations the parties endeavoured to give accurate testimony. Of course the parties differ in their characterisation and reflections on past events but those are matters of perception rather than credit.
The chronologies contained in the parties’ affidavits are slightly different. As a general proposition, nothing significant turns on those differences. Where there is a conflict and where the matter was not taken up in cross-examination, I have preferred the evidence of the party most directly involved in that matter.
Background Facts
In 1985 the husband moved to Australia from Lebanon.
On 5 December1993 the parties married and commenced living together in the husband’s mother’s property. At the time the husband was unemployed and the wife worked as an office administrator.
In April 1994 the parties established a business called DD Pty Ltd (“DD Pty Ltd”). The start-up capital for the business came from wedding gifts. The wife worked in the business from July to December 1994.
Mr AA Hariri was born in 1995. He is now 20 years of age.
In May 1995 the wife returned to work in the DD Pty Ltd business for three days each week. The wife worked in the business until shortly before Ms BB was born.
In early 1996 the parties moved to live at Suburb EE where they stayed for one year.
Ms BB Hariri was born in 1996. She is now 18 years of age.
In 1997 the parties moved to FF Street in Sydney CBD so that they lived closer to the DD Pty Ltd business premises. They lived in the CBD until March 2000.
On 19 March 1997, GG Pty Ltd was established (“GG Pty Ltd”).
In March 1998 the wife returned to work in DD Pty Ltd for two to three days per week. In 2000, as she had done previously, she assisted with the administration for the business.
In 2000 the first DD Pty Ltd franchise was established.
In 2000 the parties purchased a property at HH Street, Suburb S (“HH Street”) for $460,000 funded by a loan from the Commonwealth Bank of Australia (“CBA”) and a loan from the husband’s brother, Mr II Hariri “Mr II” of $65,000. The wife deposed that Mr II was repaid the money he loaned the parties during 2001.
In April 2000 the parties and children moved to live at HH Street.
In 2001 the husband, wife and the husband’s brother and sister in law, Mr X and Ms Y Hariri, purchased a property at V Street, Suburb W (“V Street”) for $415,000 funded by a loan from the CBA.
In 2002 when Mr AA and Ms BB were at school, the wife worked five days per week. That continued until 2005 when Z was born.
In 2003 the husband, wife and Mr X and Ms Y Hariri, purchased a property at T Street, Suburb U (“T Street”) for $2,800,000 according to the husband or $2,600,00 according to the wife, funded by a loan from the CBA. Nothing turns on that discrepancy. The property was purchased as tenants in common in equal shares. The rent was utilised to pay the mortgage and any surplus was shared equally between the co-owners.
In August 2003, Mr JJ commenced employment as a senior accounts manager with DD Pty Ltd.
In 2004 the husband, wife and Mr X and Ms Y Hariri purchased a commercial property at Suburb W for $415,000 as tenants in common in equal shares. The rent was utilised to pay the mortgage and any surplus was shared equally.
In either 2004 or February 2006, DD Pty Ltd borrowed $500,000 from the husband’s brother, Mr X in order to purchase a store at KK Mall, Victoria. The husband deposed that the loan was made in February 2006 and involved Mr X and Ms Y Hariri lending the husband and wife $500,000 pursuant to a two year loan. I prefer the evidence of the husband.
On 4 January 2005 Z was born. The wife was a full time home maker and parent from this time until mid-2006.
On 9 June 2005 the parties incorporated DD Pty Ltd to C Pty Ltd (“C Pty Ltd”) with each party holding 50 percent of the shares.
In May 2006 the husband and wife purchased three properties known as 1, 2 and 3 R Street, Suburb S for $1,600,000 funded by their savings and a loan from the CBA in the sum of $1,420,000. The properties were purchased in the name of the wife.
From September 2006 – February 2007 the wife worked in the business for three to four days per week while the employed book keeper was on maternity leave.
In 2006 the wife lodged a development approval application with MM Town Council for the Suburb S property. The council approved the construction of a multistorey home across the three titles. The parties did not proceed with that development.
On 19 March 2007 the C business incorporated two companies in New Zealand, namely I Pty Ltd and H Pty Ltd (“H Pty Ltd”).
On 2 March 2008 C Pty Ltd borrowed $200,000 from a relative of the husband’s family called Mr LL, and his wife. The loan was taken out for three years.
On 2 October 2008 G Pty Ltd Pty Ltd and F Pty Ltd were registered, with the shares held equally by the husband and wife. These entities never traded.
In 2010, HH Street was sold for $1,000,050. The wife deposed that from the proceeds of sale, the husband paid $475,919 to his brother in law, Mr II and retained $81,600 to his savings.
38.On 24 May 2010 D Pty Ltd (“D Pty Ltd”) was registered, with all shares being held by C Pty Ltd.
39.In 2011 the parties registered E Pty Ltd (“E Pty Ltd”).
On 5 October 2011 one of the three lots at R Street, Suburb S was sold for $715,000. The wife deposed that from the proceeds of sale, $300,000 was paid to the husband’s brother, Mr II.
In August 2011 the wife lodged a revised development application with MM Town Council relating to the two remaining blocks at R Street.
The parties separated on 23 December 2011.
43.The husband wrote off a debt owed to C Pty Ltd by H Pty Ltd in the amount of $527,467.35.
The wife commenced these proceedings on 13 September 2012.
On 3 December 2012 Watts J made interim financial orders including that the husband pay the wife interim spouse maintenance in the form of $1,060 per week and other costs. He ordered that the husband pay Z’s private school fees.
On 21 July 2013 a divorce order was made by the Federal Magistrates Court.
The husband deposed that on 15 April 2014 [Mr OO], as trustee for [PP Trust] loaned $460,000 to [C Pty Ltd]. He said that on 5 June 2014, a further loan of $200,000 was made to [C Pty Ltd] from [PP Trust].
In January 2015 Z commenced Year five at NN School.
On 13 February 2015 final orders were made with respect to the parenting arrangements for the children. The orders provide for Z to live with the wife and spend time with the husband including each alternate weekend from Friday afternoon to Monday morning, overnight each Wednesday and for half of the school holidays.
The parties individually gave guarantees in relation to borrowings by the husband brother and sister in law, Mr X and Ms Y Hariri.
The Approach In Proceedings Under Section 79
In the context of these proceedings s 79 of the Family Law Act1975 (“the Act”) relevantly provides:
FAMILY LAW ACT 1975 - SECTION 79
Alteration of property interests
(1)In property settlement proceedings, the court may make such order as it considers appropriate:
(a) in the case of proceedings with respect to the property of the parties to the marriage or either of them - altering the interests of the parties to the marriage in the property; or
….
including:
(c)an order for a settlement of property in substitution for any interest in the property; and
(d) an order requiring:
(i)either or both of the parties to the marriage; …
….
to make, for the benefit of either or both of the parties to the marriage or a child of the marriage, such settlement or transfer of property as the court determines.
….
(2) The court shall not make an order under this section unless it is satisfied that, in all the circumstances, it is just and equitable to make the order.
(4) In considering what order (if any) should be made under this section in property settlement proceedings, the court shall take into account:
(a) the financial contribution made directly or indirectly by or on behalf of a party to the marriage or a child of the marriage to the acquisition, conservation or improvement of any of the property of the parties to the marriage or either of them, or otherwise in relation to any of that last-mentioned property, whether or not that last-mentioned property has, since the making of the contribution, ceased to be the property of the parties to the marriage or either of them; and
(b) the contribution (other than a financial contribution) made directly or indirectly by or on behalf of a party to the marriage or a child of the marriage to the acquisition, conservation or improvement of any of the property of the parties to the marriage or either of them, or otherwise in relation to any of that last-mentioned property, whether or not that last-mentioned property has, since the making of the contribution, ceased to be the property of the parties to the marriage or either of them; and
(c) the contribution made by a party to the marriage to the welfare of the family constituted by the parties to the marriage and any children of the marriage, including any contribution made in the capacity of homemaker or parent; and
(d) the effect of any proposed order upon the earning capacity of either party to the marriage; and
(e) the matters referred to in subsection 75(2) so far as they are relevant; and
(f) any other order made under this Act affecting a party to the marriage or a child of the marriage; and
(g) any child support under the Child Support (Assessment) Act 1989 that a party to the marriage has provided, is to provide, or might be liable to provide in the future, for a child of the marriage.
The application of s 79 has been the subject of extensive judicial interpretation and comment. In Hickey & Hickey & Attorney-General for the Commonwealth of Australia (2003) FLC 93-143the Full Court said:
39.The case law reveals that there is a preferred approach to the determination of an application brought pursuant to the provisions of s.79. That approach involves four inter-related steps. Firstly, the Court should make findings as to the identity and value of the property, liabilities and financial resources of the parties at the date of the hearing. Secondly, the Court should identify and assess the contributions of the parties within the meaning of ss.79(4)(a), (b) and (c) and determine the contribution based entitlements of the parties expressed as a percentage of the net value of the property of the parties. Thirdly, the Court should identify and assess the relevant matters referred to in ss.79(4)(d), (e), (f) and (g), (“the other factors”) including, because of s.79(4)(e), the matters referred to in s.75(2) so far as they are relevant and determine the adjustment (if any) that should be made to the contribution based entitlements of the parties established at step two. Fourthly, the Court should consider the effect of those findings and determination and resolve what order is just and equitable in all the circumstances of the case: Lee Steere and Lee Steere (1985) FLC 91-626; Ferraro and Ferraro (1993) FLC 92-335; Davut and Raif (1994) FLC 92-503; Prpic and Prpic (1995) FLC 92-574; Clauson and Clauson (1995) FLC 92-595; Townsend and Townsend (1995) FLC 92-569; Biltoft and Biltoft (1995) FLC 92-614; McLay and McLay (1996) FLC 92-667; JEJ and DDF (2001) FLC 93-075 and Phillips and Phillips (2002) FLC 93-104.
In Hickey the Court was not asked to address the preliminary aspect of the requirement created by s 79(2), as to whether any order should be made. Similarly, the proceedings before me do not involve any controversy about that issue. As was observed in Stanford v Stanford (2012) 87 ALJR 74; 293 ALR 70 that preliminary, just and equitable requirement is often readily satisfied. Here, after a long marriage, the parties’ relationship has broken down and they live apart. Both parties have invoked s 79. I note the exhortation in s 81 to as far as practicable, “make such orders as will finally determine the financial relationships between the parties to the marriage and avoid further proceedings between them”. It is just and equitable that the parties have relief under s 79.
I turn to the task of identifying just and equitable orders that will alter the interests of the parties in property. There is no mention of steps or stages in s 79, let alone of the sequence set out in a) – d) below. Despite the guidance in Hickey, the Full Court has regularly noted that the “three-step” or “four-step” approach merely illuminates the path to the ultimate result.[3] I will employ that illumination.
[3] Norman & Norman [2010] FamCAFC 66 at [60]; Bevan & Bevan [2013] FamCAFC 116.
I will address the following matters:
a)Make findings as to the identity and value of the property, liabilities and financial resources of the parties at the date of the hearing;
b)Identify and assess the contributions of the parties within the meaning of ss 79(4)(a), (b) and (c) and determine the contribution based entitlements of the parties expressed as a percentage of the net value of the property of the parties;
c)Identify and assess the relevant matters referred to in ss 79(4)(d), (e), (f) and (g), (“the other factors”) including, because of s 79(4)(e), the matters referred to in s 75(2) so far as they are relevant and determine the adjustment (if any) that should be made to the contribution based entitlements of the parties; and
d)Consider the effect of those findings and determinations and resolve what order is just and equitable in all the circumstances of the case.
The property of the parties
In determining what order is appropriate, it is necessary to make a finding as to the property of the parties. That involves identifying assets, liabilities and financial resources and their values.
Albeit belatedly, a joint balance sheet was settled on the last day of the trial. Even then, learned counsel for the husband said during final submissions that he had omitted from the balance sheet, reference to the husband’s claim that the parties owe his brother $63,000 for lost rent on the Suburb U property. I have included that claim as item 17a. The agreed balance sheet is set out below[4].
[4] Exhibit 17
Assets
Owner Description Wife’s value Husband’s value 1 W R Street, Suburb S $918,500 $918,500 2 W R Street, Suburb S $1,001,000 $1,001,000 3 J C Group $1,742,944 $1,742,944 4 J 50 per cent interest in Suburb W property $0 $0 5 J 50 per cent interest in Suburb U property $0 $0 6 H Loan account with C Pty Ltd $68,821 $0 7 W Loan account with C Pty Ltd $152,461 $0 Total assets $3,883,726.00 $3,662,444.00
Addbacks
Owner Description Wife’s value Husband’s value 8 H Legal fees paid from company $205,000 NA 9 H Written off QQ PTY LTD debt $527,000 NA Total $732,000.00 NA
Superannuation
Owner Description Wife’s value Husband’s value 10 W AMP super $30,190 $35,000 11 H AMP super $30,076 $30,076 Total super $60,266.00 $65,076.00
Joint Liabilities
Owner Description Wife’s value Husband’s value 12 J CBA mortgages relating to Suburb S $1,122,800 $1,122,800 13 W CGT on sale of 2 R Street 0 0 14 W Land tax on Suburb S properties $14,000 $14,000 15 W CGT on sale of 1 R Street $8,000 0 16 H Loan Account Balance NA $171,202 17 W Loan Account Balance NA $94,559 17a Lost Rent 0 $63,000 Total joint liabilities $1,144,800.00 $1,465,561.00
Post Separation Individual Liabilities
Owner Description Wife’s value Husband’s value 18 W Loan from family members $198,000 NA 19 W HECS debt $1,100 $1,100 20 W Income tax liability $23,095 $23,095 21 W Credit card $23,385 $23,385 22 H Credit card $30,336 $30,336 23 H Car loan $18,000 $18,000 Total $293,916.00 $95,916.00
Financial Resources 24 W Funds in McDonnell Milne Toltz trust $90,000 $90,000 25 H Funds in Barkus Doolan trust $52,612 $52,612 Total $142,612.00 $142,612.00
As to the issues about the balance sheet:
Assets
Items 6 and 7 – Loan accounts in C Pty Ltd
It is convenient to discuss these items together with the liabilities claimed at items 16 and 17
As is set out at item 3, the agreed value of the parties’ combined interests in the C Pty Ltd Group of companies is $1,742,944. That agreement is based on the opinion of the single expert forensic accountant, Ms CC. She provided a report dated 23 August 2013[5] and an updated report dated 15 June 2015[6]. In addition to those reports, Ms CC gave evidence under cross-examination.
[5] Exhibit 4
[6] Exhibit 5
It is argued for the wife that in addition to the agreed value of the business, the balance sheet should also include the positive loan account balances (items 6 and 7) that existed as at the valuation date – 30 June 2014. At that date the husband was owed $68,821 and the wife, $152,461, a total of $221,282. It is argued for the husband that in lieu of the positive loan balances at items 6 and 7, the balance sheet should reflect the current negative balances of the parties’ loan accounts claimed at items 16 & 17. It is claimed that the husband owes the business $171,202 and the wife owes $94,599, a total of $265,761.
It is apparent from paragraph 5.3 of the updated report that the value of the parties’ interests were calculated on the basis that the Group owed $221,282 to the parties by way of their loan accounts[7]. For that reason, the expert advised at paragraph 5.3 of the updating report that the loan account balances shown as liabilities of the Group should also be shown as assets of the respective parties in the property settlement balance sheet.
[7] see annexure B4 to the report at page 46 of exhibit 5
It follows from the discussion above that if I was to adopt the course proposed on behalf of the husband, that would require a consequential adjustment to the valuation evidence before the Court. I have no record of this issue being put to Ms CC in cross-examination nor of her giving evidence about the impact on her valuation opinion of the change asserted in the parties’ loan accounts.
In simple terms, if no other changes were required, replacing a company liability of $221,282 with an asset of $265,761 would cause an improvement for the Group of a total of $487,043 and a reduction in the private financial positions of the parties by that same amount. However, that is not a calculation I am permitted to make. What other changes have occurred in the financial circumstances of the Group between 30 June 2014 and the date on which it is asserted that the parties’ loan account balances were the figures claimed at items 16 and 17? For example, was there a change in the figures going to the calculation of the value of goodwill? It may be that if these propositions were put to the expert, she would have been able to further update her report and confirm or provide a recast valuation.
As was submitted on behalf of the wife, another problem with the proposed approach is that the current loan account balances could be affected by later action by the company, including for example the declaration of dividends which could discharge part or all of the negative loan balances.
There was an opportunity to address this matter prior to or during the trial and it was not done. I will adopt the figures at items 3, 6 and 7 and not 16 and 17 for the purposes of reflecting the value of the business in the balance sheet.
Subject to an issue about the wife’s car, a transfer of the business to the husband will leave him with the benefit of items 3, 6 and 7. On the face of it, no significant mischief can be done by adopting that approach. If the husband retains the business and the benefit of the parties’ loan accounts he will be in the same position as he would have been if the valuation was recast by reference to items 16 and 17 and he retained responsibility for the parties’ debts to the Group.
Finally, the parties agree that the ultimate orders should provide for the 4WD motor vehicle owned by the Group and used by the wife, to be retained by her and otherwise for the Group to be retained by the husband. The 4WD has an agreed value of $53,600. When it comes to the effect of the orders, the parties agree that means that the wife will retain the motor vehicle at $53,600 and the husband will retain the benefit of the loan accounts at items 6 and 7 together with the Group at $1,689,344 ($1,742,944 - $53,600).
Add-backs
In some cases, an allowance is made in the balance sheet drawn up for the purposes of s 79 proceedings, for assets that no longer exist. See In the Marriage of Omacini (2005) 33 Fam LR 134 at paragraph 30 and following.
As I understand the current state of the authorities on this issue, there are no circumstances whereby add-backs must be included, nor are add-backs proscribed in all situations. However, they have been authoritatively found to be “the exception rather than the rule…” Cerini & Cerini [1998] FamCA 143.
Item 8 Legal fees
The wife seeks to add back the amount the husband has paid in legal fees through his loan account, being item 8 of the balance sheet. The wife argued that she has not had the same resource available to meet her legal fees. It would be double counting to include against the husband legal fees paid from the company and yet to ignore the fact that his loan balance with the company has changed by nearly $240,000. This figure will not be added back to the pool.
Item 9 C Pty Ltd debt written off
C Pty Ltd wrote off a debt in the order of $527,000 owed to its NZ equivalent, H Pty Ltd by QQ Pty Ltd (“QQ Pty Ltd”). QQ Pty Ltd is a company owned by the husband’s sisters and their husbands. The wife seeks that the amount of $527,000 is added back into the balance sheet.
The husband explained in cross-examination that the debt was made up of franchise fees and other payments owed in respect of the New Zealand franchises owned by QQ Pty Ltd. The husband said that it was agreed between him and his sisters and that they would not lose their investments in the New Zealand franchises. I understood the husband to say that he had a similar agreement with any member of his family who invested in C Pty Ltd or a C franchise. I further understood that those agreements were not included in the relevant franchise agreements or in any other written agreement. In other words, I understand that, superimposed on the terms of any formal agreement between the husband and any member of his family in respect of C Pty Ltd, is a guarantee by the husband that the family member will not lose his or her investment. The husband said that his sisters and their husbands initially invested about $700,000 in the New Zealand operations and ultimately invested a total of over $900,000. The husband gave evidence that the QQ Pty Ltd franchises were not successful and that his sisters’ investment was repaid in part by the sale of some franchises. From an initial 17 franchises, QQ Pty Ltd now only has five. The final repayment of $50,000 was made recently to the husband’s sisters.
The husband noted that the write off amounted to only $31,000 per franchise and gave evidence to the effect that such a write off was neither unique nor remarkable. He said by way of example, that C Pty Ltd had written off $80,000 in relation to an unrelated franchisee. He said that on no occasion had C Pty Ltd revoked a franchise agreement based on a failure to pay a franchise fee. He said that C Pty Ltd had never acted on the provision in the standard franchise agreements that would allow it to take over a franchise in default of payment of the franchise fee. The husband explained that the cost of revoking a franchise agreement was greater than the potential benefits to the revenue of C Pty Ltd in supporting the franchisee to return to profitable trading. In other words it was the evidence of the husband, who is the sole director of all of the corporate entities making up the group and the co-founder and owner of the business, that the approach to the non payment of the franchise fee, taken with QQ Pty Ltd was the ordinary business approach for C Pty Ltd.
The husband was not challenged about his evidence.
The wife claimed that because the write off was not authorised by her, it should be treated as an add back against the husband.
In 2010 the wife suggested to the husband that they forgive the debt. The wife was asked about that in cross-examination and said that she wanted that done because the parties were then together and the debt was causing problems between them and members of the husband’s family. The wife learned that the husband had written off the debt from reading his November 2012 affidavit. It cannot be said that she acquiesced to the write off. In an affidavit dated 3 December 2012 she complained that the husband had written the debt off, without informing her and without her agreement.
The husband was again asked about this issue later in his cross-examination and said that although the $527,000 debt had been written off in the company accounts, it had not been forgiven. However, he said that he doubted that the debt would ever be repaid. He said that the five remaining QQ Pty Ltd franchises were not profitable and that his sisters and their husbands owed more on the franchises than they are worth. It is possible that one or more might become profitable and there may be some repayment in the future.
In a perfect world the husband would have informed the wife and sought her approval to the step of writing off a debt owed to the group by members of his family. Given the breakdown of the parties’ marriage he was in a position of a conflict of interest and should have not relied on her suggestion made in 2010 or the fact that the write off was undertaken in the usual course of business. On the other hand, one can understand why the husband acted as he did. In 2010 the wife told him that the debt should be forgiven, not just written off and as to having discussions about the issue after separation, the parties do not enjoy ready communication or a good relationship.
On balance, the debt should not be added back to the balance sheet as an asset in the husband’s hands. Add-backs are the exception rather than the rule. There is no evidence to suggest that the debt is recoverable or that it will later become recoverable. There is no evidence to contradict the husband’s evidence that the decision to write the debt off was imprudent or outside the normal course of business. In any event I do not follow the logic of adding back to the balance sheet, the debt written off. If anything the add-back would be to the company accounts and the question would then arise as to the impact of that step on the value of the business.
I will not read back into the balance sheet as an asset in the hands of the husband, a debt owed by his sisters and their husband, in the sum of $527,000 or in any other amount.
Superannuation
Item 10:Wife’s AMP Super
$30,190 was the only figure in evidence for the value of the wife’s superannuation. Counsel for the husband submitted that further contributions will have been made in respect of the wife’s superannuation. That may be so but it is not for the Court to speculate about the resultant value. The figure on the balance sheet will remain as disclosed by the wife.
Liabilities
Item 13:CGT on sale of 2 R Street
I do not intend to order the sale of this property.
Item 14:Land tax on Suburb S properties
Pursuant to the Land Tax Legal Notice tendered by the wife, the amount owing as at 19 March 2015 is $14,261.52.[8]
Item 15:CGT on sale of 1 R Street
[8] Exhibit 10.
The wife received a Notice of Amended Assessment by reference to a capital gains obligation in respect of the sale of 1 R Street on 21 January 2014. Pursuant to this notice, there is a debt owing of $8,069.46.[9]
[9] Exhibit 9
The husband argues that the amended assessment is incorrect. It is not for the Court or the husband to challenge an Australian Taxation Office assessment. The figure will be included in the balance sheet at $8,096.46.
Item 16 and 17: Loan account balance
As discussed above, items 16 and 17 will not be included in the balance sheet.
Item 17a:Lost rent from Suburb U and Suburb W Properties
In 2001 the parties bought V Street, Suburb W with the husband’s brother and sister in law, Mr X and Ms Y Hariri. In 2003 the parties bought 1 & 2 T Street, Suburb U with Mr X Hariri and his wife. Both properties were positively geared and the surplus income was equally distributed between the owners. In 2006 Mr X Hariri lent the parties $500,000 to fund the purchase of an existing C Pty Ltd franchise at KK Mall in Victoria. A partnership was established to run the franchise, A Hariri and M Hariri trading as Q Pty Ltd. Mr X and Ms Y Hariri formally had an interest in the partnership but in fact that was simply done to secure their loan which was repayable at 15 percent interest. Mr X Hariri demanded repayment of the loan in 2010 and it was agreed that Mr X Hariri and his wife would take the parties’ interest in the Suburb U and Suburb W properties to settle the debt. It is the husband’s case that the parties’ equity in the properties was less than the value of the debt and that he subsequently paid his brother $27,857 to make up the shortfall. The transfers of those interests have not yet occurred.
The parties also agreed to contribute in the event that Mr X Hariri and his wife incurred a loss as a result of a rental shortfall on the Suburb U property. The parties agreed to pay one half of one year’s loss in that event.
The husband deposed that he owes his brother Mr X $63,000 in lost rent. He said in his affidavit that the loss was suffered when the bank occupying the Suburb U property did not renew its lease. He said that it took approximately 12 months to locate a new tenant at a substantially lower rent than the previous tenant.[10] The wife agrees that there was an amount of lost rent. The husband gave oral evidence about what his brother Mr X had told him. The dispute between the parties is as to the amount owed.
[10] Paragraph 99 of the husband’s affidavit.
There was an issue about Mr X not producing documents that support the existence of the debt. The parties led me to believe that Mr X has not said anything about the debt. Mr X did not give evidence about this issue and was not required for cross-examination.
I am inclined to allow this amount as a joint liability. The husband gave evidence that was not challenged. Although she does not agree with the quantum, the wife concedes that the debt exists. It would have been helpful to have proper records of the debt but on balance I will accept the husband’s evidence on this issue.
Post separation individual liabilities
Item 18:Loan from family members
The wife says she owes $198,000 plus interest to family members. She said the moneys were advanced to her to pay for legal and accounting fees relating to the case and are intended to be paid back out of any property settlement she is owed.[11] There is no evidence to suggest that the character of the advances was other than a loan, for example by way of gift.
[11] Paragraph 55(p) of the wife’s affidavit.
The husband submitted that the amount loaned to the wife does not add up. There is no reason to doubt the wife’s evidence.
I find that the assets are:
Assets
Owner Description Value 1 W 2 R Street, Suburb S $918,500 2 W R Street, Suburb S $1,001,000 3 J C Pty Ltd Group (agreed valuation minus the value of the 4WD) $1,689,344 4 W 4WD $53,600 5 H Loan account with C Pty Ltd $68,821 6 W Loan account with C Pty Ltd $152,461 Total assets $3,883,726.00
Superannuation
Owner Description Wife’s value 7 W AMP super $30,190 8 H AMP super $30,076 Total super $60,266.00
Joint Liabilities
Owner Description Wife’s value 9 J CBA mortgages relating to Suburb S $1,122,800.00 10 W Land tax on Suburb S properties $14,261.52 11 W CGT on sale of 1 R Street $8,069.46 17a J Lost Rent owed to Mr X Hariri $63,000.00 Total joint liabilities $1,208,130.98
Net assets
Therefore the net assets of the parties have a value of $2,735,861.02 ($3,883,726.00 + $60,266.00 - $1,208,130.98). In addition, the parties have other liabilities and financial resources:
Post Separation Individual Liabilities
Owner Description Wife’s value 12 W Loan from family members $198,000 13 W HECS debt $1,100 14 W Income tax liability $23,095 15 W Credit card $23,385 16 H Credit card $30,336 17 H Car loan $18,000 Total $293,916.00
Financial Resources 18 W Funds in McDonnell Milne Toltz trust $90,000 19 H Funds in Barkus Doolan trust $52,612 Total $142,612.00
Contributions
The obligations placed on the Court by s 79 call for an assessment of the respective contributions by and on behalf of the husband and wife. The manner of assessing contributions has been the subject of previous decisions. The contributions of a parent and homemaker are to be assessed, not in any merely token way, but in terms of their true worth to the building up of the assets.[12] There are said to be risks in taking an overly technical approach to the assessment of the respective contributions of the husband and wife in that the Court can become involved in questions of the quality of contributions which go far beyond the real world expectations of husband and wife.
[12] In the Marriage of Shewring (1987) l2 Fam LR 139.
As to whether the Court should apply the considerations in s 79(4) to the assets globally or asset by asset, the authorities have it the latter approach is preferred, in appropriate circumstances either approach is permissible and sometimes the asset by asset approach is best. See In the Marriage of Lenehan (1987) FLC 91-814; In the Marriage of Norbis (1986) FLC 91-712; In the Marriage of Zyk (1995) FLC 92-644.
Here the superannuation interests are of similar value and no splitting orders are sought. I will deal with the contributions globally.
It is argued on behalf of the husband that his contributions exceeded those of the wife to the effect that his were 55 per cent compared to 45 percent by and on behalf of the wife. The wife contends that the contributions were equal. I accept in each case that the parties’ contentions should be seen in the context of their arguments about the pool of assets. The range of dispute has the parties making similar contributions with the possibility that the husband’s contributions were slightly greater than those of the wife.
Section 79(4)(a) Contributions
Financial contributions to property, both direct and indirect were made by each of the husband and wife.
The husband asserts that at the commencement of the relationship he had savings of the order of $70,000. The wife disputes that contention, saying that she does not recall being told of savings at the time. However, the wife acknowledged that the husband paid for the engagement party, wedding reception, honeymoon and for bedroom furniture. There is no independent evidence of the level of the husband’s savings but the wife’s concessions and the husband’s unchallenged evidence allows a finding that he had savings in the order of $70,000 at the commencement of the marriage.
Each of the parties had paid employment during the marriage. From the time the parties married until April 1994 the wife was employed on a full-time basis with a company called HOSCO where she undertook administrative duties. After this the wife commenced working at DD Pty Ltd. During the marriage the wife worked on and off in the business. She said she assisted with the book keeping and accounting as well as other miscellaneous roles in the business. She says that she worked in between being at home with the children, both from home and the office.
The husband worked in the business full time throughout the marriage. He spent long hours at work and the wife deposed that he was away from home in the evenings and weekends. He also worked interstate.
Members of the husband’s family lent the parties money throughout the marriage. The husband frequently borrowed from his family in the course of business and for private purposes.
It is not asserted that those borrowings represented contributions on behalf of the husband. The husband does not contend that those borrowings were other than on commercial terms, including the payment of interest.
The husband also submits that in relation to his financial dealings with members of his family, there was no departure from normal business practices, and investments from family were enforced like normal business loans. The husband’s characterisation of his business dealings with members of his family is inaccurate. For example, in addition to the formal franchise agreements, the husband struck a collateral agreement with members of his family who invested in the business, to the effect that he would ensure that they did not lose their investment. There is no suggestion that all franchisees had that guarantee.
Since separation, the husband has continued to work full time in the business. He has paid mortgage repayments on the R Street properties, private health insurance for the family, the running costs of the wife’s 4WD, child support and spouse maintenance.
Since 2 January 2014 the wife has been working in a newsagency for 20 hours per week. She works longer hours during school holidays.
The initial financial contributions of the husband exceeded those of the wife. The parties worked together on building the C Pty Ltd business with the husband taking the major role. There was considerable mingling of the finances of the parties and members of the husband’s family but it is impossible to say whether any contributions made through the husband had a positive effect. Nevertheless, it is likely that the financial contributions made by and on behalf of the husband exceeded those made by and on behalf of the wife.
Section 79(4)(b) Contributions
This provision deals with direct and indirect non-financial contributions other than those made in the form of parent and homemaker contributions.
There is no significant evidence of contributions of this type.
At the beginning of the parties’ marriage they lived rent free with the husband’s mother for two years. The husband deposed that his mother undertook most of the home making duties while the husband and wife lived with her.
The husband says that he assisted with the renovations of HH Street, Suburb S. He said that he assisted in demolishing walls, ripping up floors and removing rubbish. At one stage he was hospitalised as a result of something done during those renovations.
For about six weeks in the early 2000s, the family lived with two of the husband’s sisters during the renovations to 21 R Street, Suburb S.
Not to underrate the wife’s contributions, the evidence supports a finding that the husband’s indirect non-financial contributions exceeded those of the wife.
Section 79(4)(c) Contributions
This provision deals with contributions to the family including contributions in the form of homemaker contributions and contributions to children of the marriage.
The wife’s parenting and homemaker contributions exceeded those of the husband. As mentioned above, the wife says that the husband was often away from home, making her homemaker contributions more onerous. The wife deposed that that she did all of the day to day cooking for the family, drove the children to and from school, sporting, music, tutoring, parties etc, attended canteen duty at school, attended parent teacher nights and other school events, helped the children with homework and assignments and took the children to medical appointments. The wife took time off paid employment for each of her pregnancies and she worked part time in the periods between the births of the children.
In addition to working long hours, the husband continued his university studies while the children were young, completing a degree in late 1999. The wife said the husband would study on weekends and at night.
The husband argues that he made very significant contributions as parent and homemaker. He said that he played an active role in caring for the children when he was at home and during weekends. He also deposed that he took time off from work when each of the children were born. During cross-examination the wife conceded that the husband helped with the children when he was available. When cross-examined the wife said that she did not recall the detail of the husband’s parent and homemaker efforts but she made the general concession referred to above.
The parties employed a cleaner for three to four years and had the assistance of a gardener and ironer during the marriage. That must have reduced the workload for the parents associated with those tasks.
Although assistance was provided with the children by members of the extended families. There is no scope in s 79(4)(c) for contributions to the family to be made on behalf of a party. Those matters can be recognised under s 75(2)(o).
There is no suggestion that either of the parties diverted their efforts from a focus on the family, including, on building a prosperous future for the family. The parties’ arrangement prioritised the wife giving time to the children and the household. The husband was heavily engaged in building a successful business and that involved working long hours, travel and study. It follows that the contributions of the wife to the family substantially exceeded those of the husband.
Conclusion on Contribution
The wife contends that the parties’ contributions were equal. The husband argues that his contributions exceeded those by and on behalf of the wife.
Although no presumption is available, it is not uncommon that a finding is made of equality of contributions over the course of a marriage of substantial duration. The arguments in the husband’s case rely particularly on the savings he held at the commencement of the marriage; the accommodation provided to the parties by the husband’s parents for the first two years of the marriage, and the husband’s contribution to the business and importantly, when he was available, his efforts as parent and homemaker.
The husband made the greater financial contribution and not to trivialise the wife’s contributions, he was consistently the main actor in the business. The husband also made a greater direct non financial contribution. Notwithstanding that the wife also made a valuable financial contribution, she made a significantly greater contribution as parent and home maker.
The overall task under s 79 is not a mathematical one and therefore it is neither necessary nor possible to make a precise calculation as to the proportions in which the parties contributed. Contributions were made over the 18 years of the parties’ cohabitation and have continued since then. I am satisfied that the contributions of the parties overall, were equal.
The other matters in Section 79
Once contributions have been assessed, the other factors in s 79(4) need to be considered. They are:
Section 79(4)(d)
Pursuant to s 79(4)(d) I am required to take into account the effect of any proposed orders on the earning capacities of the husband and wife.
Each of the parties seeks a division of assets whereby the husband will retain the only income producing asset. Ms CC found that the business has a future maintainable earnings capacity of approximately $600,000 per annum.
On either proposal, the wife will receive a property settlement made up of at least one piece of real estate and a cash payment. The wife will presumably apply some of her funds to residential accommodation.
This factor advantages the husband.
Section 79(4)(e) - Section 75(2) factors
The relevant matters in s 75(2) would seem to be paragraphs (a), (b), (c), and (o).
(a)the age and state of health of each of the husband and wife;
The parties are of a similar age. There is no significant evidence about their health.
(b) the income, property and financial resources of each of the parties and the physical and mental capacity of each of them for appropriate gainful employment;
The wife’s income according to her financial statement sworn on 19 May 2015 is $1,592 per week, made up of $442 from salary from working part time, $67 in child support and $1,083 in maintenance. The wife currently works at RR Pty Ltd for approximately 20 hours per week. It was put to the wife that she could work additional hours each week, however she gave evidence that she could not as she still wants to be available for Z who is currently 10 years’ old.
The wife holds an Associate Diploma of Accounting. The wife also completed a Diploma of Interpreting in 2014 and has successfully obtained accreditation as an interpreter. It was put to her that she could commence work in this field, earning significantly more than she currently earns. The wife responded to the effect that the hours of work do not suit her as they are not consistent and may interrupt the time she would be caring for Z. She gave evidence that she does not want to take up this line of work until Z is at least 12 years of age.
The wife spends $3,192 per week which includes $32 in tax, $660 in mortgage repayments, $465 on Visa card payments and $2,035 on other expenses. The wife says she also spends $745 per week on living expenses for the three children.
The evidence about the wife’s assets and liabilities is set out earlier in these reasons.
The husband’s income according to his financial statement sworn on 19 May 2015 is $634 per week made up of a motor vehicle benefit of $550 and a mobile phone benefit of $84. He says that he does not draw an income or salary from C Pty Ltd, however he receives $6,000 a week from the business from which he meets his expenses. He said the source of the $6,000 had been from C Pty Ltd in the form of dividends and the repayment of loan accounts.
The husband spends $6,608 per week which includes $2,370 on mortgage payments, $350 on rates, $72 on private health insurance, $132 on Ms BB’s car and $1,200 in maintenance and child support payments and $2,484 on other expenses.
It must be remembered that the individual liabilities listed at items at 18 – 23 of the balance sheet go forward with the parties. Of the $293,916.00 in post separation liabilities, $245,580 of the amount is attributable to the wife.
The husband’s financial circumstances are confusing but, I am satisfied that they are beneficially intermingled with those of his siblings and their partners. As mentioned above, by way of significant example, the husband says that any amount necessary to pay out the wife can be met from a guaranteed source of funds available from his brother Mr X, of up to $1,700,000 and the offer of a greater sum if needed. There is no suggestion on the evidence of the husband that he is able to service his current level of debt, let alone further borrowings to pay out the wife.
The evidence about the husband’s assets and liabilities is addressed above. As to the future there is no evidence to suggest that the wife’s earning capacity will increase dramatically. The husband’s earning capacity is many times greater than that of the wife. Whatever the wife does about increasing her hours of work or taking up work as an interpreter or translator, that situation is likely to continue.
Finally, unlike the wife, the husband will continue to enjoy the benefits of having a corporate vehicle whereby his income can be earned in the most tax effective manner.
This factor strongly favours an adjustment to the wife.
(c) whether either party has the care or control of a child of the marriage who has not attained the age of 18 years;
The parenting orders made with the parties’ consent provide for Z to primarily live with the wife and spend time with the husband including each alternate weekend from Friday afternoon to Monday morning, overnight each Wednesday and for half of the school holidays. Z is 10 years of age. The wife gave evidence that she is not inclined to increase her hours of work until Z is 12 years of age or thereabouts.
That said, once these proceedings are resolved, the husband will have a substantial child support liability and based on his very generous approach in the past, I would expect that generosity to continue.
This factor strongly favours an adjustment to the wife.
(e)the responsibilities of either party to support any other person;
I have set out above, what there is of the evidence in relation to the parties’ expenses. The parties’ adult children, Mr AA and Ms BB also live with the wife. The parties each bear some financial responsibility for them.
This factor favours an adjustment to the wife.
(f) subject to subsection (3), the eligibility of either party for a pension, allowance or benefit under:
(i)any law of the Commonwealth, of a State or Territory or of another country; or
(ii) any superannuation fund or scheme, whether the fund or scheme was established, or operates, within or outside Australia, and the rate of any such pension, allowance or benefit being paid to either party;
The wife receives an income tested child care benefit. Each of the parties has superannuation interests.
(g) where the parties have separated or the marriage has been dissolved, a standard of living that in all the circumstances is reasonable;
There is not much detail about the parties’ standard of living during the marriage. The income generating capacity of the business, the value of the parties assets, the fact they contemplated a $2,800,000 private residential development on the Ms SS site, suggest that the parties anticipated a comfortable lifestyle in the future. The parties together or individually enjoyed regular domestic and overseas travel. In the case of the husband, that has continued after separation in the form of holidays with one or more of the children.
(h) the extent to which the payment of maintenance to the party whose maintenance is under consideration would increase the earning capacity of that party by enabling that party to undertake a course of education or training or to establish himself or herself in a business or otherwise to obtain an adequate income;
There is no application for ongoing maintenance and neither of the parties gave evidence about future training, education or setting up a new business.
(ha) the effect of any proposed order on the ability of a creditor of a party to recover the creditor’s debt, so far as that effect is relevant;
The orders proposed by both parties, but particularly those sought by the husband seem to call for substantial further forbearance from the CBA and from Mr X Hariri. The CBA debt is secured and Mr X Hariri has notice of these proceedings and I gather, notice of the husband’s proposals. In those circumstances the range of proposals does not give rise to concern for the creditors.
(j) the extent to which the party whose maintenance is under consideration has contributed to the income, earning capacity, property and financial resources of the other party;
There is no application for ongoing maintenance. I am satisfied, however, that by the roles she played as parent and homemaker, and in the business, the wife contributed to the husband’s future earning capacity. This factor favours an adjustment to the wife.
(k) the duration of the marriage and the extent to which it has affected the earning capacity of the party whose maintenance is under consideration;
Both parties engaged in study during the marriage but over the course of the marriage, the husband’s earning capacity was improved to a greater extent than that of the wife. Otherwise, nothing comes to attention here.
This factor favours an adjustment to the wife.
(l)the need to protect a party who wishes to continue that party's role as a parent;
I have referred to the wife’s preference not to increase her working hours at this stage and until Z is older. This factor favours an adjustment to the wife.
(m) if either party is cohabiting with another person — the financial circumstances relating to the cohabitation;
The husband’s Financial Statement reveals that he is not living with any other income earners. Within the wife’s household, the parties’ son, Mr AA earns $400 per week. According to the wife’s Financial Statement, she does not benefit from any expenditure made by Mr AA but of her expenses of $3,192 per week, about $745 per week is paid for the benefit of the parties’ three children.
This factor favours an adjustment to the wife.
(na) any child support under the Child Support (Assessment) Act 1989 that a party to the marriage has provided, is to provide, or might be liable to provide in the future, for a child of the marriage; and
The husband has paid child support in the amount of $68.00 per week. However, child support is based on the financial circumstances of the payee and the liable parents. Departure applications require reference to, among other things, the income, property, financial resources and earning capacity of each parent. I would expect that the husband’s child support liability to substantially increase.
(o) any fact or circumstance which, in the opinion of the court, the justice of the case requires to be taken into account;
Debt owed by the Group to Mr II
It is argued for the wife that relevant to any adjustment under this provision is the husband’s conduct in relation to a debt said to have been owed by the Group to the husband’s brother in law, Mr II who is married to the husband’s sister, Ms SS. The debt has been paid out although I understand that it continues to be reflected in the Group’s accounts because a new debt was raised to discharge it. In February 2015, a lump sum of $660,000 was paid to was paid to Mr II. It is not entirely clear where those funds were sourced. At paragraphs 231 and 232 the husband deals with two loans he obtained from the wife of the C Pty Ltd accountant, through the family trust of the accountant and his wife (the “PP Trust”). One loan was for $460,000 and that sum was advanced in April 2014. A second loan was for $200,000 and it was advanced in June 2014. The husband deposed that: “The monies were used to enable the business to continue to increase the network size and provide funding to the business.” If the husband intended that evidence to relate only to the second advance, there is no evidence that the first advance of $460,000 was paid to Mr II. Despite that evidence, I understood that it was the husband’s case that some or all of the PP Trust advances were used to repay Mr II.
It is the evidence of the husband that he had discussions with his sister Ms SS and Mr II in or about the end of 2006. At one stage Mr II agreed to invest over $1,944,000 in the business. The husband says that in fact a total of only $955,000 was invested. It was originally planned that the investment would be in the C Pty Ltd business and in a particular store but ultimately the advance was just treated as a loan at 15 percent interest. The husband deposed that a total of $912,000 has been repaid in lump sums and that further periodic payments were made. Confusingly, the debt appears in the company accounts for 2010 and 2011 at $200,000. The husband contends that as at February 2015, when it was paid out, the debt stood at $660,000. It is impossible to reconcile that evidence. At 15 percent per annum, if the debt stood at $200,000 on 20 June 2011, it could not total $660,000 in 2015. During his cross-examination, the husband said something to the effect that he could not explain the calculations. He made no effort to remedy that situation in reply.
It is not submitted on behalf of the wife that $660,000 is not owing to the JIL Trust. It is not argued that the value of the business is other than the agreed value. The submission is that the adjustment to be made in the wife’s favour should recognise the conduct of the husband in apparently overpaying his brother in law.
The evidence about this issue is puzzling but it is not for the Court to find a satisfactory explanation. The husband was on notice about this issue and in circumstances where he controls the business and he did not seek the wife’s approval in making the payment in February 2015, it fell to him to explain what happened. He could not. I find that the husband overpaid Mr II by a substantial sum. This favours a substantial adjustment to the wife.
Child minding on behalf of the parties
The parties conceded that the husband’s mother and sisters looked after the children from time to time. This favours an adjustment to the husband.
Section 79(4)(f)
Beyond those referred to above, there are no relevant orders made under the Act.
Section 79(4)(g)
I have referred to what I know of the child support position
Conclusion
Albeit based on their individual cases about the pool of assets and about the apportionment of contributions, each of the parties contends that there should be an adjustment in favour of the wife from the contribution based entitlements of the parties. The wife seeks a 15 percent adjustment and the husband argues that it should be 5 percent.
The most important matters arising from the remaining elements of s 79, which include the s 75(2) factors referred to above are:
·The husband will go forward with the C Pty Ltd business, which is an asset which produces a very substantial income;
·On any view the husband’s income earning capacity is substantially greater than that of the wife;
·The husband’s financial circumstances are confusing but, I am satisfied that they are beneficially intermingled with those of his siblings and their partners. The husband has a substantial financial resource in the form of uncritical finance from his family;
·Under the agreed orders, a greater share of the remaining parenting load for Z will fall to the wife. The orders provide for Z to live with the wife and spend time with the husband including each alternate weekend from Friday afternoon to Monday morning, overnight each Wednesday and for half of the school holidays. Z is 10 years of age and although the requirement for close personal supervision will continue to diminish, she is far from independent; and
·Through formal study and experience, the marriage saw the earning capacity of both parties increase, but the greater increase accrued to the husband; and
·On the evidence I have found that the husband overpaid his brother in law, Mr II, after separation and without notice to the wife, let alone her consent.
In the case of Clauson and Clauson (1995) FLC 92-595; 18 Fam LR 693 the Full Court of this Court indicated trial judges need to consider the value of the adjustment in real terms. The Full Court said at FLC page 81,911 as follows:
There is, we think, at times a tendency to assess s 75(2) factors in percentage terms without considering its real impact, and we think there is legitimacy in the views expressed in more recent times that the Court has tended to operate in this area within artificially delineated boundaries. That is, it appears almost to be inevitable that the s 75(2) factors will be assessed in a range between 10 per cent and 20 per cent. A number of cases will justify an assessment outside those parameters and in any event it is the real impact in money terms which is ultimately the critical issue.
In my view an allowance of 5 percent is not adequate to address the impact of the non contribution elements of s 79(4) on the outcome warranted by reference to contributions alone. In the context of this case a 5 percent adjustment would cause a disparity between the parties of the order of $273,586. Such an amount would not adequately recognise the impact of paragraphs s 79(4)(d) and (e) as they apply to the parties’ circumstances. In my view the appropriate allowance is 10 percent, which on the above balance sheet will make a difference between the parties of $547,172.21. This figure is significant, but is appropriate in the circumstances.
Just and Equitable
The net assets have a value of $2,735,861.02 of which $60,266.00 is in the form of superannuation and $2,675,595.02 is in the form of non superannuation assets.
The parties have agreed that the wife will retain the 4WD motor vehicle she currently drives. It has an agreed value of $53,600. Logically, the husband will retain C Pty Ltd, the loan account debts and the debt to his brother.
The fate of numbers 1 and 2 R Street, Suburb S
The parties each seek that the wife retain number 2 R Street, Suburb S. The wife seeks to retain both 2 and 1 R Street. The husband seeks the transfer of 1 R Street to him.
In relation to this issue, the husband has a reason for wanting to retain one block of land, whereas the wife said that she had no plans for the blocks and was unsure what she would do with them. For many years the husband planned to build a home on the R Street land. The parties could not afford the cost of a very substantial development on the property in 2007 and the plan was deferred. Ultimately plans were drawn up for the construction of a house on number 1 R Street, with the associated tennis court to be built on number 2. Now the husband would like to retain number 1 R Street. The orders sought by the husband contemplate that the wife would retain number 2 but on the basis of the only evidence before the Court, correspondence with the CBA in April 2015, that is not a proposal put to or agreed to by the Bank.
I raised a concern during the trial about the parties owning adjoining properties, given the demonstrated paucity of their relationship and their lack of ability to cooperate or communicate. However, as was submitted on behalf of the husband, the properties are blocks of land and not houses and the wife has expressed no intention to construct a residence on either or both properties. Indeed, the husband was not challenged about his evidence to the effect that prior to separation, the wife pressed the husband to sell both blocks.
I will make orders in terms of the husband’s proposed orders 1-3, being that the wife retains 2 R Street and that she transfer 1 R Street to the husband. That proposal has the advantage of not immediately generating costs of sale, such as agent’s commission, legal costs nor, as far as I have been advised, capital gains tax. It will also satisfy both parties’ desire to retain at least one block. If one of them decides to sell, the other would be free to purchase the block in question. Finally, in the event that the agreed value is inaccurate, the order I propose is more likely to ensure that the parties will fairly share in the benefit or loss caused by the difference between that agreed value and realisable value of the blocks.
Both parties seek orders to the effect that the husband refinance the R Street properties or otherwise make arrangements to release the wife from any debt associated with or secured by those properties. In the event that the husband is not able to make those arrangements, as the wife seeks, they may have to be sold.
If the assets are divided in the proportions 40 per cent to the husband and 60 per cent to the wife then the husband will have about $1,094,344.41 and the wife will have about $1,641,516.61.
Of the pool of assets identified by me, the wife will have the following assets and debts:
Description
Value
2 R Street Suburb S
$918,500
4WD motor vehicle
$53,600
AMP Super
$30,190
Land tax on Suburb S properties
-$14,261.52
CGT on sale of 1 R Street
-$8,069.46
Total
$979,959.02
In order to bring her to 60 per cent of the net assets she would need to receive a payment of $661,557.59 ($1,641,516.61 - $979,959.02). I will round that payment up to $661,560.
That would leave the husband with 40 per cent of the available assets being:
Description
Value
1 R Street Suburb S
$1,001,000
C Pty Ltd Group
$1,689,344
Loan account with C Pty Ltd (H)
$68,821
Loan account with C Pty Ltd (W)
$152,461
AMP Super
$30,076
CBA Mortgage Relating to Suburb S
-$1,122,800
Lost rent
-$63,000
Payment to the wife for property settlement
-$661,560
Total
$1,094,342.00
Form of Orders
There are significant problems in identifying effective orders for property settlement in this case. That arises, not least because, if the parties are to avoid what could be the disastrous cost of selling the business and or their real estate, the orders will depend very much on the cooperation of persons who are not parties to the proceedings and who therefore, cannot be compelled to provide that cooperation. In particular, the orders necessarily depend on the cooperation of the CBA and Dr Mr X Hariri.
Because of those concerns, I canvassed with the parties an approach whereby, rather than making final orders at the time reasons for judgment are published, I would propose draft orders and give the parties an opportunity to have input into the wording of the final version. There was some support for that approach. I therefore propose the draft orders at Annexure 1. They are largely in line with the wording in the husband’s proposed orders.
Before final orders are entered, I invite the parties to review them and make any submissions as to the framing of the orders. If I do not I receive notice that either party wants to make further submissions on the wording of the orders within 14 days of the date of this judgment, the orders proposed in Annexure 1 will be formally pronounced.
Conclusion under Section 79
This was a marriage that spanned 18 years and very significant contributions were made by each of the parties. They acquired substantial assets and provided a secure life for themselves and their three children. The parties shared the work of the marriage in different ways but overall their contributions were equal. An adjustment of 10 per cent in favour of the wife is justified by reference to the non contribution elements of s 79(4). In my view, the proposed orders will achieve a just and equitable division of their property.
I certify that the preceding 187 (one hundred and eighty seven) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Loughnan delivered on 27 July 2015
Associate:
Date: 27 July 2015
Annexure 1
THE COURT NOTES:
A.The following definitions for the purposes of these Orders:
A.1."23 R Street" means the property situate and known as 2 R Street, Suburb S, being the whole of the land contained in Folio Identifier … of which the Wife is the sole registered proprietor;
A.2."R Street" means the property situate and known as 1 R Street, Suburb S, being the whole of the land contained in Folio Identifier … of which the Wife is the sole registered proprietor;
A.3."the Act" means the Family Law Act 1975;
A.4."the CBA Guarantees" means the various guarantees provided by Commonwealth Bank in relation to C Pty Ltd P/L, no's…., …, …, …, …, …, …, …, …, …, …, …, …, …, …, …, …, …, …, …, …, …, …, …, …, …, …, …, …, …, …, …, …, …, …, and …;
A.5."the CBA Bill Facility/loan" means the facility/better business loan facility granted to C Pty Ltd P/L by Commonwealth Bank, account no. …;
A.6."the child" means Z, born in 2005;
A.7."children" means Mr AA Hariri born in 1995, Ms BB Hariri born in 1996 and Z Hariri born in 2005;
A.8."F Pty Ltd" means the company known as F Pty Ltd Pty Ltd, ACN of which the Husband is the sole director;
A.9."the Companies" means C Pty Ltd, D Pty Ltd Fund, E Pty Ltd, F Pty Ltd, G Pty Ltd, I Pty Ltd and H Pty Ltd;
A.10."the Suburb W mortgage" means the loan secured under registered mortgage number … with the Commonwealth Bank of Australia secured upon the title to the Suburb W property;
A.11."the Suburb W property" means the property situated at and known as V Street, Suburb W, being the whole of the land contained in Folio Identifier … of which the parties are joint tenants as to ½ share and Mr X Hariri and Ms Y Hariri are joint tenants as to ½ share, as tenants in common;
A.12."G Pty Ltd" means the company known as G Pty Ltd Pty Ltd, ACN … of which the Husband is the sole director;
A.13.“C Pty Ltd” means the company known as C Pty Ltd, ACN … of which the Husband is sole director and of which the parties each hold 1 of the 2 issued ordinary shares;
A.14.“H Ltd NZ” means the company known as H Pty Ltd Limited, registered in New Zealand;
A.15."D Pty Ltd Fund" means the company known as D Pty Ltd Fund Pty Ltd, ACN 143836391 of which the Husband is the sole director and C Pty Ltd holds the 10 issued ordinary shares;
A.16."I Pty Ltd" means the company known as I Pty Ltd, registered in New Zealand;
A.17."E Pty Ltd" means the company known as E Pty Ltd Pty Ltd, ACN … of which the Husband is the sole direction and C Pty Ltd holds the 10 issued ordinary shares;
A.18."the Suburb U mortgage" means the loan secured under registered mortgage number … with the Commonwealth Bank of Australia secured upon the title to the Suburb U property;
A.19."the Suburb U property" means the property situated at and known as T Street, Suburb U, being the whole of the land contained in Folio Identifier … of which the parties are joint tenants as to ½ share and Mr X Hariri and Ms Y Hariri are joint tenants as to ½ share as tenants in common;
A.20."the Suburb S mortgage" means the loan secured under registered mortgage number … with the Commonwealth Bank of Australia secured upon the title to the Suburb S properties;
A.21."the Suburb S properties" means the properties situated at and known as 1 and 2 R Street, Suburb S, being the whole of the land contained in Folio Identifiers … and … of which the Wife is the sole registered proprietor;
A.22.“the Partnerships” means Ms J, Mr Hariri & Ms Hariri T/A C Pty Ltd, Mr L & Ms M Hariri and Mr N & Ms O Tuben T/A P Pty Ltd and Mr Hariri & Ms Hariri T/A Q Pty Ltd;
A.23."parties" means the Husband and the Wife; and
A.24."the 4WD" means the 4WD motor vehicle, registration number … registered in the name of C Pty Ltd.
THE COURT ORDERS THAT:
Property Settlement
Within 60 days, but not earlier than 28 days, of the making of these Orders the Husband do all acts and things and use his best endeavours to cause the Wife's release from any and all security against 2 R Street (including the Suburb S Mortgage), [including paying all monies (or causing all monies to be paid) to facilitate such release] and if not able to do so, to discharge such security (including the Suburb S Mortgage) within that same time frame.
Simultaneously with compliance with Order 1 above:
2.1pursuant to Section 78 of the Act, the Wife be declared the owner of all right, title and interest in 23 R Street; and
2.2the Wife indemnify the Husband and keep him so indemnified from all actions, claims, suits, demands, taxes (including Capital Gains Taxes), and liabilities in respect of/pertaining to 2 R Street.
Simultaneously with compliance by the Husband with Order 1 above, the:
3.1Husband do all acts and things and use his best endeavours to cause the release of any and all security to which the Wife is a party (if any and including the Suburb S Mortgage if applicable) and/or as is required to facilitate the transfer of R Street to the Husband (or his nominee) pursuant to these Orders;
3.2Husband and Wife do all acts and things to transfer the Wife's entire right, title and interest in R Street to the Husband (or his nominee), at the Husband's cost; and
3.3Husband indemnify the Wife and keep her so indemnified from all actions, claims, suits, demands, taxes (including Capital Gains Taxes), and liabilities in respect of/pertaining to R Street.
Unless the parties otherwise agree in writing, pending compliance with:
4.1Order 1 above, the parties each be restrained from doing any act or thing that has its intention or effect, the increase of the liabilities secured against 23 R Street;
4.2Order 3.2 above, the parties each be restrained from doing any act or thing that has its intention or effect, the increase of the liabilities secured against R Street; and
4.3Orders 1, 2 & 3 above, the parties each be restrained from doing any act or thing that has the effect of increasing of the Suburb S Mortgage.
Simultaneously with compliance with Order 2 or Order 3 above, whichever is the later:
5.1the Wife do all acts and things and sign all documents necessary to transfer to Mr X Hariri and Ms Y Hariri (or his/her nominee), the Wife's entire right, title and interest in the Suburb U property and the Suburb W property; and
5.2the Husband do all acts and things and sign all documents necessary to transfer to Mr X Hariri and Ms Y Hariri (or his/her nominee), the Husband's entire right, title and interest in the Suburb U property and the Suburb W property.
Simultaneously with compliance with Order 5.1 above:
6.1the Wife sign any documents provided to her by the Husband to facilitate a release and/or discharge for the Wife of her obligations under the Suburb U mortgage and the Suburb W mortgage, and the Husband thereafter indemnify the Wife and keep her so indemnified in respect of any such mortgage; and
6.2the Husband indemnify the Wife and keep her indemnified in respect of the Suburb U property and the Suburb W property and any rental loss guarantees previously provided by either party in that regard.
Within 60 days, but not earlier than 28 days, of date of these orders, the Husband do all acts and things and sign all documents necessary, in his capacity as director of the Companies, to cause the transfer to the Wife unencumbered, of the 4WD.
Simultaneously with compliance with the last of Orders 1, 3, 5 and 6 above, the Husband pay the sum of $661,560 to the Wife by way of final property adjustment.
Simultaneously with the payment by the Husband of the sum referred to in Order 8 above, the Wife do all acts and things and sign all documents provided by the Husband (or his nominee), to:
9.1resign from all offices and directorships held by her in the Companies;
9.2transfer to the Husband (or his nominee), her entire right, title, interest and shareholding in the Companies;
9.3transfer all right, title and interest in, and ownership of ,all trademarks and business names associated with any of the Companies (and/or held by Ms Hariri and Ms J atf the Hariri Trust), including but not limited to C Pty Ltd and DD Pty Ltd trademarks and the "B Pty Ltd" business name held by C Pty Ltd) to the Husband (or his nominee); and
9.4transfer to the Husband (or his nominee) all of her right, title and interest in, and to, all loan accounts held by her in the Companies and/or monies otherwise owed to her by the Companies.
Simultaneously with compliance with Order 9 above, the Husband do all acts and things and use his best endeavours to secure the Wife's release (if applicable) from those of the CBA Guarantees and the CBA Bill Facility/Loan to which she is still a party, or if not possible, to then cancel/discharge such Guarantee/Bill Facility/Loan.
Simultaneously with the Wife's compliance with Order 9 above, the Husband indemnify and keep indemnified the Wife against any liability of any nature whatsoever which the Wife may otherwise have at any time arising in any way in respect of the Companies whether:
11.1by reason of the Wife having been an employee, director, officer and/or shareholder of the Companies;
11.2by reason of the Wife having been involved in the business conducted by the Companies;
11.3by reason of the receipt by the Wife of any money from the Companies previously; and/or
11.4by reason of the Wife having given or executed a guarantee of any liabilities of the Companies to any person or corporation including but not limited to the Australian Taxation Office.
Simultaneously with the payment by the Husband of the sum referred to in Order 8 above, the Wife do all acts and things and sign all documents provided by the Husband (or his nominee), to transfer the Wife's entire right, title and interest in the Partnerships to the Husband (or his nominee) [including but not limited to any capital and funds in and entitlement to any current account in the Partnerships.]
Simultaneously with compliance by the Wife with Order 12 above, the Husband indemnify the Wife and keep her so indemnified against any liability which the Wife may otherwise have in respect of any of the Partnerships.
Save as specifically provided for herein by any Order to the contrary, as against the Husband, the Wife be declared the sole owner of, and the Husband then have no interest in, all other personal property (including choses in action) of whatsoever nature and kind in the possession of the Wife at the date of the making of this Order, including but not limited to the Wife's furniture and effects, any remaining items of the Wife's jewellery, and the funds in the Wife's bank accounts.
Save as specifically provided for herein by any Order to the contrary, as against the Wife, the Husband be the sole owner of, and the Wife then have no interest in, all other personal property (including choses in action) of whatsoever nature and kind in the possession of the Husband at the date of the making of this Order, including but not limited to the Husband's jewellery and effects, and the funds in the Husband's bank accounts.
Save as specifically provided for by any Order comprising these Orders to the contrary:
16.1the Husband by this Order indemnifies the Wife, and keeps her so indemnified, from and in respect of all actions, claims, suits and demands as may be made against the Wife in relation to all liabilities in the name of the Husband; and
16.2the Wife hereby indemnifies the Husband from and in respect of all actions, claims, suits and demands as may be made against the Husband in relation to all liabilities in the name of the Wife.
The Husband be declared, as and between the parties, to have sole right, title and interest in any and all superannuation interests held by the trustee of any superannuation fund in his sole name.
The Wife be declared, as and between the parties, to have sole right, title and interest in any and all superannuation interests held by the trustee of any superannuation fund in her sole name.
Save as specifically provided for in these Orders to the contrary, each of the Husband and the Wife release the other from all debts owing from one to the other.
The parties each do all acts and things and execute all documents, authorities and writings as are necessary to give effect to all or any of these Orders.
Key Legal Topics
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Civil Procedure
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Appeal
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