Harty & Harty
[2019] FamCA 522
•17 January 2019
FAMILY COURT OF AUSTRALIA
| HARTY & HARTY AND ORS | [2019] FamCA 522 |
| FAMILY LAW – PROPERTY – where it is just and equitable to make orders altering the parties’ interests in property – where the husband and wife were in a relationship for about six years and had no children – where significant disagreement as to contributions during the relationship and contributions of the wife to the husband’s entity – approach to valuation of the husband’s entity considered –where adversarial expert evidence adduced – where experts agree that husbands’ interest can be valued on the basis of its value to the husband – where experts agree on standard of value but disagree on methodology – where wife seeks a Kennon adjustment by reason of allegations of family violence – where Court finds insufficient basis for Kennon adjustment – consideration of the parties’ income earning capacities – where the husband has a greater earning capacity than the wife – final property orders made as to a 57.5/42.5 division in the husband’s favour |
| Evidence Act 1995 (Cth) Family Law Act 1975 (Cth) |
| Harrison & Harrison (1996) FLC 92-682 Kennon & Kennon (1997) 22 Fam LR 1 Stanford & Stanford (2012) 247 CLR 108 Stevens & Stevens (2005) FLC 93-246 S & S (2003) FamCA 905 Robb & Robb (1995) FLC 92-555 |
| APPLICANT: | Ms Harty |
| FIRST RESPONDENT: | Mr Harty |
| SECOND RESPONDENT: | E Pty Ltd Pty Ltd |
| THIRD RESPONDENT: | F Pty Ltd Pty Ltd |
| FOURTH RESPONDENT: | G Pty Ltd Pty Ltd |
| FILE NUMBER: | MLC | 11676 | of | 2015 |
| DATE DELIVERED: | 17 January 2019 |
| PLACE DELIVERED: | Melbourne |
| PLACE HEARD: | Melbourne |
| JUDGMENT OF: | Macmillan J |
| HEARING DATE: | 23-26 July 2018 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr O’Shannessy |
| SOLICITOR FOR THE APPLICANT: | Kenna Teasdale Lawyers |
| COUNSEL FOR THE FIRST RESPONDENT: | Mr Puckey |
| SOLICITOR FOR THE FIRST RESPONDENT: | Andrew Croxford & Associates Pty Ltd |
| COUNSEL FOR THE SECOND RESPONDENT: | Mr Schmidt |
| SOLICITOR FOR THE SECOND RESPONDENT: | Susan Snyder |
| COUNSEL FOR THE THIRD RESPONDENT: | Mr Puckey |
| SOLICITOR FOR THE THIRD RESPONDENT: | Andrew Croxford & Associates Pty Ltd |
| COUNSEL FOR THE FOURTH RESPONDENT: | Mr Schmidt |
| SOLICITOR FOR THE FOURTH RESPONDENT: | Susan Snyder |
IT IS NOTED that publication of this judgment by this Court under the pseudonym Harty & Harty has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
Note: This copy of the Court’s Reasons for Judgment may be subject to review to remedy minor typographical or grammatical errors (r 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to r 17.02 Family Law Rules 2004 (Cth).
| FAMILY COURT OF AUSTRALIA AT MELBOURNE |
FILE NUMBER: MLC 11676 of 2015
| Ms Harty |
Applicant
And
| Mr Harty |
First Respondent
And
| E Pty Ltd |
Second Respondent
And
| F Pty Ltd |
Third Respondent
And
| G Pty Ltd |
Fourth Respondent
REASONS FOR JUDGMENT
Background
The husband and the wife commenced cohabitation in April 2009 and were married in 2010. They separated on 29 May 2015. They have no children together but each have children from previous relationships.
The proceedings were commenced in the Federal Circuit Court of Australia in 2015 and were transferred to this Court in 2016.
Issues In Dispute
Although their relationship was not a lengthy relationship, spanning a period of a little over six years, the parties had very different perceptions of their respective contributions during that relationship and what weight should be placed upon them and the litigation has been protracted and hard fought. It is as submitted by counsel for the wife in his closing address, “tragic litigation” as a result of which the parties’ legal costs will have significantly diminished the property that they will each be left with.
The most significant area of dispute at least in monetary terms, albeit not the only contentious issue, has been the dispute with respect to the value of the husband’s interest in F Pty Ltd. The husband is the sole director and owns all of the shares in F Pty Ltd which holds two of the four ordinary shares in E Pty Ltd Pty Ltd. The other two ordinary shares are held by G Pty Ltd the entity owned and controlled by the husband’s partner Mr K and his wife Ms K. Mr K and the husband are both directors of E Pty Ltd. E Pty Ltd is what is described as a reseller of Brand 1 office equipment.
Up until they each gave their evidence both Mr B, the single expert witness and Mr C, the wife’s adversarial expert witness, albeit they reached different conclusions, adopted the fair market value concept as the standard of value applying the capitalisation of future maintainable earnings as the methodology to determine that value. That remained the position until they were told of the evidence of Dr J, the Chairman and Managing Director of D Pty Ltd (“Brand 1”) as to the likely termination of E Pty Ltd’s agreement with Brand 1 in the event of a sale or the transfer of the husband’s interest in E Pty Ltd to the wife for the purposes of enforcement.
Counsel for the second and fourth respondents put to Dr J the orders the wife sought and asked him about what Brand 1’s position would be likely to be in the event that the wife, based upon the orders she sought, was to take control of F Pty Ltd and accordingly control of F Pty Ltd’s 50 per cent interest in E Pty Ltd. Dr J’s response was as follows:
The actions we would take at that point we would have our internal lawyers have a look at the contracts first but my understanding is that we can terminate any of these agreements with 30 days notice, we would probably do so and then we would invite applications from interested companies to fill that gap that we then had in the market. The new directors of E Pty Ltd may or may not be successful with that so the reason I am telling you about what our actions would be is that we would see that as a fairly major disruption to one of the resellers that we have a contractual relationship with and potentially quite damaging for our future sales through that particular organisation.
Dr J was also asked about D Pty Ltd’s position in the event of F Pty Ltd’s shares being placed on the open market for sale. Dr J said that he could “only make an assumption here, I would say F Pty Ltd without Mr Harty would be, in my opinion, be a worthless structure”. He then said as follows when asked for clarification:
Although we talk in terms of companies like F Pty Ltd, really the reason why companies like F Pty Ltd would be granted any kind of re-sellership or contractual relationship with Brand 1 is because of who works at F Pty Ltd and generally, you know, another dealership or re-sellership, typically who owns it, who is running it, that is really who we are seeking to attract as a reseller of our products, not the company name itself and so therefore if there is a substantial change in the person running the company then we would immediately review the whole situation.
Having been made aware of Dr J’s evidence, the expert’s agreed that F Pty Ltd’s interest in E Pty Ltd had no market value but could be valued on the basis of its “value to owner”, albeit they approached that valuation in different ways and reached different conclusions.
The wife opened her case seeking a 70/30 division in her favour of a net asset pool of $4,080,564.00 excluding superannuation, based upon what she asserted were her significantly greater financial contributions during the marriage, her contribution to the success of E Pty Ltd and the fact that having regard to the principles articulated in Kennon & Kennon (1997) 22 Fam LR 1 (“Kennon”) those contributions needed to be viewed in the context of what she asserted had been substantial family violence perpetrated by the husband and the weight that should be afforded to her contributions in that context. Counsel for the wife submitted that there should also be an adjustment in the wife’s favour based upon the Section 75(2) factors primarily having regard to the disparity in the party’s income. Her proposal was based upon the evidence of her expert witness as to the value of F Pty Ltd’s interest in E Pty Ltd having a value of $2,745,564. At the conclusion of the case, the wife was seeking a 50/50 division of a pool of $3,460,000, based upon Mr C’s valuation of F Pty Ltd having a value to the husband of $2,125,000. Counsel for the wife submitted in the alternative, if the Court preferred Mr B’s valuation of F Pty Ltd of $1,050,000, then based upon a pool of $2,385,000 the wife’s case was that there should be a 60/40 division in her favour. This was based upon contribution based entitlements of 60/40 in the husband’s favour, 10 per cent of the pool in the wife’s favour having regard to the family violence and a further adjustment of 10 per cent for the Section 75(2) factors which said were weighed in her favour.
The husband’s case was that he made a greater financial contribution to the acquisition of the property at H Street, Suburb M in the State of Victoria (“the Suburb M property”), the only asset in the parties’ joint names, and he disputed the wife’s assertions as to her contribution to the success of E Pty Ltd. It was the husband’s case that the business had been in existence since approximately 1995, when he emigrated from the United Kingdom to Australia and the wife’s involvement in the business was as a sales agent for E Pty Ltd, only after the business started selling Brand 1 Office Equipment, and that she was paid a commission on her sales. The husband also disputed that there was any basis for an adjustment pursuant to Section 75(2) factors. The husband put his case on something akin to an asset by asset approach, it being his case that the asset pool was limited to the Suburb M property and the wife’s partial property settlement. The husband put his case on the basis that, notwithstanding the value attributed to F Pty Ltd by Mr B on the basis of its “value to owner”, F Pty Ltd was in reality of no value to the husband beyond its income stream. On this basis the pool of property available for division, including the $280,000 received by the wife by way of partial property settlement, would be $1,335,000.
The husband in his Response to Initiating Application sought orders for the sale of the Suburb M property and that the wife receive 25 per cent of the proceeds of sale. Counsel for the husband submitted in his final address that, when taken with $280,000 the wife has already received by way of partial property settlement, this would be at the outer limits of what the wife could expect to receive. It was his case that in circumstances where the husband had superannuation entitlements of $66,000 at the commencement of the relationship, the parties should each retain their current entitlements. The husband also sought an opportunity to retain the Suburb M property.
In the alternative it was the husband’s case that, if the Court were to attribute a capital value to F Pty Ltd, then there should be a further 5 per cent adjustment of the husband’s contribution based entitlements on the basis of the business being an asset brought to the marriage by the husband.
Evidence
The wife relied on the following documents in support of her case:
·Her Fourth Further Amended Initiating Application filed 19 July 2018;
·Her Trial Affidavit filed 25 May 2018;
·Her Financial Statement filed 25 May 2018;
·Her Affidavit in Reply filed 29 June 2018
·Affidavit of adversarial expert witness, Mr C filed 6 July 2018;
·Affidavit of single expert witness, Mr B filed 16 July 2018
The husband relied on the following documents in support of his case:
·His Amended Response to Initiating Application filed 27 September 2017;
·His Trial Affidavit filed 15 June 2018;
·His Financial Statement filed 15 June 2018;
·Affidavit of single expert witness, Mr B filed 16 July 2018.
Both the husband and the wife tendered documents in support of their respective cases.
The standard of proof is the balance of probabilities and in making findings the court must have regard, albeit is not limited to, the matters in s 140 of the Evidence Act 1995 (Cth) which are the nature of the cause of action, the nature of the subject of the proceedings and the gravity of the matters alleged.
I have read the affidavits filed by the parties and considered the many exhibits in the case. I have also had the benefit of hearing both the husband and the wife giving oral evidence and being cross-examined at length. I have given careful consideration to all of the evidence and the weight that should be afforded to it in reaching my decision. I will refer in more detail to particular aspects of that evidence in the course of these reasons.
There were a number of aspects of the wife’s evidence which caused me to have significant reservations about both her evidence generally and her case. It was my observation that the wife’s evidence, as submitted by counsel for the husband, was at times “opportunistic”, and that she determined what she wanted her case to be and then tailored her evidence to support that case and to achieve the outcome she hoped for, instead of adducing evidence and asking the Court to draw conclusions based upon that evidence. She also had difficulty making concessions even when other evidence was put to her which clearly contradicted her evidence. Those aspects of the wife’s evidence, which I will address in more detail during the course of these reasons when considering the significance of that evidence to the case, include but are not limited to the following matters:
1.The wife’s evidence about selling Brand 2 equipment contrary to the husband’s case that she did not start working for E Pty Ltd until 2011 - 2012 by which time the business was selling Brand 1 office equipment; and
2.Her evidence with respect to her contributions to E Pty Ltd.
Counsel for the husband submitted that this was consistent with the way in which the wife conducted her case generally and by way of examples referred me to being what he described a “wild goose chase” in relation to the valuation of the business, the wife’s insistence that the husband had not met his obligation to provide full and frank disclosure, and what he described as her unrealistic ambit claim based upon an inflated value of F Pty Ltd. In my view there is some force in that submission given the evidence before me.
Even though I am satisfied that the wife was not employed by E Pty Ltd when the husband wrote the letter to P Company about her motor vehicle the fact that he did so is in my view not material to the matters I must determine and does not lead me to conclude that the husband has not generally told the truth in this case. And although there were a number of instances when I am satisfied that his recollection may not have been accurate or he may have overstated his case, he was generally speaking a much more impressive witness than the wife and, in contrast to the wife, more readily able to make concessions when it was appropriate to do so. I was on the whole left with much more confidence in the husband’s evidence and prefer it to the evidence of the wife.
Legal Principles
The parties in this case each seek orders pursuant to s 79 of the Family Law Act 1975 (“the Act”). Section 79(2) of the Act requires the Court to be satisfied that it is just and equitable to make orders, a requirement that is in my view readily satisfied in this case. The parties in this case have been separated since 2015 and yet some three years later they still own property together and still have an ongoing financial relationship making it impossible for them to move on with their separate lives.
Being satisfied that it is just and equitable to make orders adjusting the parties’ interests in property, the Court must make such order as it considers appropriate. Whilst the Court has a broad discretion as the plurality in Stanford & Stanford (2012) 247 CLR 108 at paragraph 40 observed, citing R v Watson; Ex parte Armstrong (1976) 136 CLR 248, it is not an unfettered discretion and must be exercised “in accordance with legal principles, including the principles which the Act itself lays down.” Section 79(4) of the Act provides as follows:
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, 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 the 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.
Section 79(4)(e) of the Act is a reference to the matters in s 75(2) of the Act in so far as they are relevant to the particular case broadly speaking taking into account both the present and anticipated circumstances of the parties.
The first step in this process is to identify the parties legal and equitable interests in property.
What Is The Property
Value of Husband’s Interest in F Pty Ltd
As previously referred to the most significant area of dispute in these proceedings at least in monetary terms, albeit not the only contentious issue, has been the dispute with respect to the valuation of the husband’s interest in F Pty Ltd. Although until a matter of days into the hearing both Mr B, the single expert witness, and the wife’s expert witness, Mr C, valued the husband’s interest in F Pty Ltd on the basis of its fair market value, they ultimately agreed based upon the evidence of Dr J that it had no market value. Having reached this conclusion, both Mr B and Mr C found that the husband’s interest in F Pty Ltd could be valued on a “value to owner” basis. Value to owner is a means of recognising the benefit of ownership of an interest, notwithstanding as in this case that interest has no market value. There are a number of cases where this standard has been applied to a minority interest held by a party in a family company where the benefit to that party is greater than the market value. Other examples include interests in accounting, legal and medical practices, where that party’s interest may not be transferable or realisable. “Value to owner” is a standard of value rather than a methodology and the valuation can be approached in different ways.
Counsel for the wife had prepared an aide memoire based upon the husband’s activity statements for the period 1 July 2017 to 30 April 2018 which he said demonstrated, on a pro rata basis, that F Pty Ltd would receive in excess of $800,000 for the year ending 30 June 2018, which would have the effect of increasing the annual average income figure upon which the experts both based their valuations. However both Mr C and Mr B agreed that using the 2018 figures absent further information would require them to speculate as to whether the amounts received were income which neither of them was prepared to do, in my view correctly so. The Court is similarly not in a position to speculate. I can of course have regard to the husband’s evidence with respect to his income and benefits during 2018 when considering the Section 75(2) factors.
On this basis Mr B and Mr C agreed that the benefit that F Pty Ltd and hence the husband received from E Pty Ltd, averaged over the financial years ending June 2014, 2015, 2016 and 2017, was $425,000. It was also common ground that the husband did not receive any other benefits by virtue of ownership. Mr B and Mr C did not agree upon the figure to be capitalised or the multiple to be applied to that figure.
Mr C’s approach was to capitalise the totality of the agreed benefit available to the husband and apply a capitalisation rate of 5 resulting in what he said was a value to the husband of $2,125,000. Mr B, whilst acknowledging that it was a matter for the Court whether or not any value should be placed upon the husband’s interest in F Pty Ltd in the pool, valued what he said was the benefit to the husband of ownership akin to the concept of “super profits” on that basis deducting $250,000 from the figure of $425,000, which he considered to be a commercial salary and appropriate recognition of the husband’s value to the business based upon Dr J’s evidence. Applying a capitalisation rate of 6 to the balance of $175,000 being the benefit to the husband of ownership as against what he could earn as an employee without the risk of ownership, he arrived at a figure of $1,050,000. It was Mr B’s evidence that this methodology was consistent with recognised valuation practice.
Counsel for the husband submitted that in determining which of the experts’ evidence to accept and rely upon, notwithstanding that the dispute was no longer with respect to which of the experts’ assessment of fair market value should be accepted, the Court should have regard in particular to the basis of Mr C’s engagement and the fact that effectively in each case where there was a disagreement between he and Mr B in relation to that fair market value, he had adopted the upper end of the range, the effect of that being to inflate the value of F Pty Ltd and hence the wife’s claim. A valuation he submitted was, in the circumstances of this case, not credible.
Mr C was at times somewhat defensive however he did agree that there were essentially three elements which accounted for the difference between his and Mr B’s fair market valuations. In summary, their calculation of the future maintainable earnings of the business, the multiple they each applied to capitalise those future maintainable earnings, which accounts for significant part of the difference between them, and the adjustments they made for the surplus assets. He also conceded that in each case where there was such a difference he had adopted the higher figure based, as he said, upon his understanding of the information he had been given and the methodology he applied. He rejected any suggestion that he had acted at the behest of the wife or was not impartial. Whilst I do not believe that Mr C adopted those higher figures at the behest of the wife, I do have some reservations about him having done so and his subsequent valuation based upon those figures given the nature of the business in this case. Counsel for the husband submitted that the valuation relied upon by the wife was never credible as was proven to be so. In my view there were always questions as to the likely marketability of the business on the basis of the nature of that business even before Dr J gave his evidence, and in those circumstances I am satisfied that it is difficult to justify adopting the upper end of what counsel for the husband described as the legitimate range of value.
Mr C did not offer any clear explanation as to why he chose to capitalise the totality of the benefits flowing to F Pty Ltd from E Pty Ltd without any adjustment for a commercial salary for the husband other than to say that those benefits flowing to F Pty Ltd were available to the husband at his discretion irrespective of how they were characterised. In my view there are a number of problems with this approach primarily that it values the totality of those benefits to the husband rather than the benefit he receives by virtue of ownership and does not distinguish between the two concepts.
In contrast, Mr B’s explanation as to the evidence as to why a commercial salary should be deducted in order to determine what benefit ownership provides to the husband above and beyond what he could earn as an employee was much more persuasive. Notwithstanding his concession that he is not a remuneration expert, I prefer Mr B’s methodology and his opinion as to the value of F Pty Ltd in the husband’s hands.
Whilst Counsel for the husband submitted that the Court should prefer the evidence of Mr B, his primary position was that in reality the business has no value beyond its value as a future stream of income and counsel for the husband submitted that it would not be just and equitable to capitalise that income stream and add that notional value to the pool for the purposes of dividing the parties’ property interests any more than it would be to capitalise the wife’s income and add that to the pool. Counsel for the husband also highlighted what he submitted would be the injustice to the husband as a result of adopting this course in circumstances where the Court would, if it accepted Mr C’s evidence, be adding a figure to the pool based upon the husband’s pre-tax income.
As the Full Court confirmed in Harrison & Harrison (1996) FLC 92-682 (“Harrison”) at [83,087], the Court must look at the “reality of the situation”. Her Honour was dealing with the value of the husband’s shares in a family company which he had submitted had no value because they could not be realised. Her Honour held that this would ignore the benefits which accrued to the husband by virtue of his ownership of those shares which included “…the right to receive dividends, which in the past had been substantial, the buffer of a loan account, the provision of a motor car, yacht and trailer, the contribution towards payment of certain household bills and the flexibility of being, if not self-employed, employed by a company in which he is a shareholder and director and whose ethos allows him a degree of autonomy.”
In my view the submission of counsel for the husband does not adequately reflect the “reality of the situation” in this case. Whilst, as submitted by counsel, the husband may not be able to sell or realise his interest in E Pty Ltd, he does receive benefits in addition to what he receives by way of a commercial salary as assessed by Mr B. In my view these are the benefits of ownership and they have a value to the husband. Although I am satisfied, based upon Dr J’s evidence, that there is a significant element of personal goodwill I am also satisfied that the husband has the benefit of the income generated by others employed in the business albeit that the sales that are generated may be a reflection of that personal goodwill. There is no evidence to suggest that the husband does not intend to continue working in the business or that he will not continue to receive these benefits of ownership on an ongoing basis.
In all of the circumstances I am satisfied that the husband’s interest in F Pty Ltd has a value to him as owner and propose to include the business in the pool at $1,050,000.
Asset Pool of the Parties
On this basis, the asset pool being otherwise agreed, the property comprising the pool is as follows:
Jointly owned property
| Property description | Value |
| H Street, Suburb M | $2,000,000 Mortgage Loan (E$870,000) Line of Credit Loan: (E$75,000) Equity: $1,055,000 |
Husband
| Property Description | Value |
| F Pty Ltd | $1,050,000 |
Wife
| Property Description | Value |
| Partial Settlements | $280,000 |
| Z Pty Ltd | NK |
Superannuation
| Description | Owner Husband’s Value Wife’s Value |
| Wife Super Fund 1 | $90,000 |
| Husband Super Fund 2 | $265,000 |
NET ASSET POOL (NON SUPERANNUATION)
$2,385,000
NET ASSET POOL INCLUDING SUPERANNUATION
$2,740,000
Contributions
As previously referred to although this was not a particularly lengthy marriage there were a number of vigorously contested issues with respect to the party’s respective contributions, both financial and non-financial. These included their initial contributions, financial and non-financial contributions made during the marriage, and in particular the wife’s case as to her contributions to the business. It was also the wife’s case that her contributions should be given more weight because of the husband’s violence. The wife’s evidence as to her contributions to the business are relevant in relation to a number of aspects of the case and I propose to address that issue first.
Wife’s Employment In the Business
When did the wife commence working in the business?
It was a point of contention between the parties as to when the wife commenced working in the business and the exact nature of her role in that business; that is, whether her role was limited to that of a commission sales agent or, as she asserted, she played an integral role in the success of the business akin to that of the husband and Mr K.
It is the wife’s case that she commenced work for the E Pty Ltd partnership, as it then was in early 2009, after the parties commenced cohabitation. This was disputed by both the husband and Mr K. The husband deposed that the wife had worked as a commission sales agent between 2012 and January 2016. When challenged about her evidence in cross-examination the wife then relied upon a number of documents which she said supported her case.
The first of those documents was a letter sent by the husband on behalf of E Pty Ltd dated 14 May 2009 which stated:
I confirm that Ms N of R Street Town T Vic is employed full time by this partnership/company as E Pty Ltd Brand 2 Sales Cadet.
Please extend to the above-mentioned employee the P Company Executive Preference Plan benefits offered by P Company Australia and the P Company Network.
The vehicle being purchased will be registered in the name of Z Pty Ltd.
Although the husband acknowledged writing this letter, he said it was a “lie”, and that he had written the letter in order to receive the “fleet discount” which included three years free service.
The second piece of evidence that the wife relied on to support her assertion that she was working for E Pty Ltd in 2009 was her Individual Tax Return from 1 July 2009 to 30 June 2010. The wife’s employers were listed as her own company Z Pty Ltd (“Z Pty Ltd”) and F Pty Ltd, which according to that tax return paid the wife $62,500 with $15,154 of that amount being withheld for tax. It was the husband’s evidence that it was his recollection that he provided the money to her to assist the wife with a tax debt.
There were a number of issues with these two documents. Firstly the wife had not referred to either the letter to P Company or the tax return in her trial affidavit albeit it was her evidence that they had been provided to her solicitor prior to the preparation of her affidavit, however more importantly in my view is that they did not establish the facts they were relied upon by the wife to establish. The letter referred to the wife being employed full time by E Pty Ltd and yet according to the tax return she was employed by F Pty Ltd. The wife did not offer any explanation for why, if she was as stated in that letter employed by E Pty Ltd selling Brand 2 office equipment, her wages of $62,500 would be paid to her by F Pty Ltd and not E Pty Ltd and out of what were in effect the husband’s entitlements. This is also not consistent with fact that during the time it is agreed the wife was selling D Pty Ltd copiers, that was as a commissions sales agent rather than an employee and her commissions were paid by E Pty Ltd. Finally the wife did not produce the tax returns for the financial years ending 2011 and 2012 which, if she was as she said working for E Pty Ltd at this time, arguably would have shown her receiving either a wage or commissions from E Pty Ltd.
The other evidence that the wife relied on to prove that she was working in the husband’s business prior to late 2011-early 2012 is also controversial. These are the “call plans” for the company, which are records in relation to the sale of the equipment (“Call Plan/s”). Although the wife produced four of these Call Plans, three dated and one undated none of them actually refer to the sale of a Brand 2 piece of equipment. In fact, annexed to that document which referred to the Client 3 account, is a signed rental agreement for a Brand 1 product which is dated 15 September 2010, a matter of months after E Pty Ltd started selling Brand 1 instead of Brand 2 products. The husband’s evidence was that, not only was it his signature on that document, he not the wife had negotiated that deal from the beginning. I accept his evidence.
The 26 July 2010 Call Plan was for a piece of equipment allegedly sold to Client 4. The Call Plan refers to the “problem” being a different brand however the next page of the document attaches a Call Plan dated 20 May 2014 which refers to 2013 usage totals. There are also two pages which are headed “Analysis of Operating Expenses” which refers to the Client 4 fleet including existing Brand 1 models and “Expensive Brand 2 devices”.
Significantly at the bottom of the first page of the Call Plan dated 26 July 2010, upon which the wife relies, there are logos for both Brand 1 and E Pty Ltd. The husband’s evidence in response to the documents produced by the wife, and this document in particular, was that it could not have been a document prepared in 2010 as the wife asserted because the E Pty Ltd logo was not added until August 2012 after the document was purportedly written up by the wife. Mr K’s evidence corroborated the husband’s evidence that the E Pty Ltd logo was not in use in 2010. Although the wife said she thought the changes may have occurred before August 2012 she otherwise conceded that changes had been made to the logo at Brand 1’s request. The husband relied upon a chain of emails in August 2012 including one from Brand 1’s National Customer Manager referring to the guidelines for the use of the Brand 1 logo and the requirement that the E Pty Ltd logo also be included on all documents. I also note that the other Call Plans upon which the wife relies, dated August 2010 and July 2011 respectively, are consistent with the evidence of both the husband and Mr K as to the E Pty Ltd logo being added in August 2012. The undated Call Plan, which must have been prepared prior to 15 September 2010, the date on the contract, similarly has only the Brand 1 logo. The wife was unable to offer any explanation as to how or why the E Pty Ltd logo would have been on the Call Plan next to the Brand 1 logo in July 2010. In all of the circumstances I am satisfied on the balance of probabilities that the wife created the 26 July 2010 Call Plan to shore up her case. This has implications with respect to her evidence generally and in relation to her case that she started selling Brand 2 equipment in 2009.
In the course of cross-examination on this issue the wife was also asked to name her significant Brand 2 customers. The wife named Client 1 and the Client 2. Both the husband and Mr K gave evidence that E Pty Ltd could only sell Brand 2 office equipment in its own territory and that, if they received an enquiry from someone outside that territory, they were required to pass that on to the reseller operating in that territory. The husband’s evidence was that Client 1 was not part of E Pty Ltd’s territory and hence the wife would not have sold any Brand 2 products to Client 1. Although the wife acknowledged that there were effectively two resellers operating in the Melbourne metropolitan area, with their respective territories being determined by postcode, she was initially insistent that Client 1 was part of E Pty Ltd’s territory. When it was put to her that a document would be produced listing those postcodes she at first said that she and the husband lived right beside Client 1 at the time and when asked to elaborate on why that would make a difference she then said words to the effect that she was working with the husband as she was only learning and she and the husband would not have been selling to the Client 1 if it had not been in E Pty Ltd’s territory. The wife’s evidence was not persuasive and I accept the husband’s evidence that the Client 1 was not a customer of E Pty Ltd at that time and that the wife was not selling Brand 2 equipment for E Pty Ltd during this period.
The husband relied upon a customer checklist and contract documents with respect to the alleged sale of Brand 2 products to Client 2 in 2009, which recorded the sale of Brand 1 equipment in 2014. It was his evidence that Client 2 was not a customer of E Pty Ltd in 2009 when the wife alleged that she had been selling Brand 2 copiers to Client 2. There is no evidence of any sale to Client 2 during this period alleged by the wife.
Mr K’s evidence was that the wife started selling equipment on commission for E Pty Ltd in late 2011 and he was cross-examined about any records he might have in his possession with respect to corroborating his evidence. In re-examination he said that he had looked at his records and that the first record of a commission paid to the wife by E Pty Ltd was in either August or September 2011. Although nothing turns on whether it was August or September 2011, or as deposed by the husband not until 2012, in circumstances where Mr K had checked the records I accept his evidence.
Having had the benefit of hearing the parties give their evidence and be cross-examined, and having regard to all their evidence, I am satisfied on the balance of probabilities that the wife was not working for E Pty Ltd until in or about August / September 2011. Thereafter, and the evidence in relation to this period is uncontroversial, the wife worked for E Pty Ltd selling Brand 1 equipment and was paid commissions on those sales.
Initial Direct Financial Contributions And the Acquisition Of The Suburb M Property
In all of the circumstances I am satisfied that the husband brought to the relationship his interest in an office equipment reseller business, albeit selling Brand 2 equipment not Brand 1 equipment, and, although I do not have expert evidence as to the value of the business to the husband at the commencement of the relationship, that this is a contribution made by the husband which must be recognised and would be at the very least a springboard for the current valuation of the business. Counsel for the wife did not dispute that this was an initial contribution made by the husband.
It is common ground that at the commencement of the parties’ cohabitation, the husband had an interest in four real properties. They were:
· R Street, Town T;
· U Street, Town V;
· W Street, Town T;
· X Street, Melbourne.
The wife deposed that the husband had resolved his proceedings with his former wife, with the husband retaining these four properties which she said had a total equity of $594,929. Pursuant to the orders made in those proceedings, the husband was required to pay his former wife $230,000 which the wife said he paid in cash withdrawn from F Pty Ltd. This is notwithstanding that she said F Pty Ltd had no value. The wife thereafter deducted that figure of $230,000 from the husband’s equity in the real properties to reach a figure of $364,929 which she said the Court should accept as the value of the property the husband brought to the marriage. The parties agreed that at the commencement of cohabitation the husband had $66,000 in superannuation.
Counsel for the husband submitted that there were issues with respect to both the wife’s evidence as to the husband’s equity in these properties, and her analysis of the husband’s contributions based upon that evidence and generally. In his trial affidavit the husband set out in detail the transaction history of each of the four properties. In cross-examination the wife conceded that her evidence as to the equity the husband had in those properties was not accurate.
I am also satisfied that deducting the $230,000 the husband withdrew from F Pty Ltd and paid his former wife from his equity in the real properties is flawed. If the husband withdrew $230,000 from F Pty Ltd as the wife says, and this is not disputed by the husband, there is in my view no basis for deducting that amount from the value of the husband’s equity in his real properties.
Whilst in many cases parties put their cases on the basis of the equity they have in property at the commencement of the relationship, as submitted by counsel for the husband, in circumstances where within the first 12 months of the relationship the husband sold three of his properties and the wife sold her property at Q Street, Suburb Y (“the Suburb Y property”), and they applied most if not all of the proceeds of those sales to the acquisition of the Suburb M property, an analysis of the proceeds they received upon sale and how they were applied is a fairer and more accurate measure of their respective contributions in the early stages of their relationship.
The husband’s evidence was that although R Street may have been valued for the purposes of the settlement with his former wife at $390,000, he purchased it and sold it for $410,000. He also deposed that it had a mortgage of approximately $400,000 at the time of its sale, and after repayment of that mortgage and sale costs there were no sale proceeds. According to the husband, he and the wife lived in the property until moving to Melbourne in early 2010.
The husband did not dispute that the U Street property was valued at the time of his settlement with his former wife at $265,000. This property was unencumbered and when it was sold in mid-2010 the husband said he received net proceeds of $276,903.53 which he used to reduce the mortgage over the W Street property.
W Street was sold in November 2010 for $810,000. After discharge of the mortgage and payment of sale costs, and having applied the proceeds of sale of U Street to the mortgage, the husband was left with net proceeds of sale of $538,192.
The wife was cross-examined about having focused on the husband’s equity in his various properties with a view to minimising his initial contributions and taking a different approach in relation to her own case, not deducting the $150,000 she owed her mother when deposing to the equity she said he had in the Suburb Y property, albeit later in that affidavit she referred to her mother being repaid. Whilst somewhat symptomatic of the way in which the wife conducted her case, it is not significant for the purposes of my assessment of the parties’ contributions. The wife sold the Suburb Y property in October 2010 for $632,500 and after discharge of the mortgage which was at that time approximately $562,000 was left with net proceeds of approximately $70,000.
It was also the wife’s case that she had her interest in Z Pty Ltd at the commencement of the relationship, which she said had gross sales in the financial year ending 30 June 2008 of $386,412 and $180,496 for the financial year ending 30 June 2009. Although she attributed the decrease in sales to her having started selling different equipment, I have found that she did not start working for E Pty Ltd until August/September 2011. This has a number of implications with respect to this issue. Firstly it means that any decrease in sales was not attributable to the wife having started working for E Pty Ltd. Secondly it follows and I am satisfied that the $62,500 paid to the wife by F Pty Ltd was not commissions owing to her for sales she had made of Brand 2 equipment. The only piece of evidence which might cast some light on the possible value of the wife’s business was her individual tax return which records her receiving income from Z Pty Ltd of $13,700 in the financial year ending 30 June 2010. The wife did not adduce any other evidence which might assist my assessment of its value and I am not satisfied the business had any value at the commencement of the relationship.
In her trial affidavit the wife deposed that she had transferred $60,000 from her account to an account in the husband’s name which was used for the deposit on the Suburb M property. She also deposed that she had transferred $52,000 of the proceeds of sale of the Suburb Y property to the husband’s account in anticipation of the settlement of the purchase of the Suburb M property. It was the wife’s evidence that the husband had drawn down $131,067 on the Suburb Y mortgage, which she said was then applied to the mortgages on their rental properties and otherwise used for everyday living expenses. The husband acknowledged that the wife had contributed $52,000 and that she had transferred $60,000 to a F Pty Ltd account, however it was his case that the $60,000 came from the payment he had made to her out of F Pty Ltd. It became clear in the course of cross-examination and I am satisfied that the $60,000 the wife paid into the F Pty Ltd account, and which was applied to the acquisition of the Suburb M property, was drawn down by the wife from the Suburb Y property mortgage, part of the $131,067 she said the husband had drawn down, and was not part of the $60,000 paid to her by the husband. In circumstances where the Suburb Y property and the mortgage was in the wife’s name and she ultimately conceded that she had drawn down the $60,000 she said she had contributed to the Suburb M purchase, I accept the husband’ evidence that it was the wife who drew down the balance. I do not have sufficient evidence to make findings as to how the balance was otherwise applied.
It is agreed that the parties paid a deposit of $72,000 and provided a cheque for $538,192 at settlement, a total capital contribution of approximately $610,000. Of that amount, I am satisfied that the wife contributed $112,000, $60,000 to the deposit and $52,000 at settlement. The husband paid $12,000 being the balance of the deposit and he applied the proceeds of sale of the W Street property to the balance required at settlement, a figure of approximately $486,000, being a total of $498,000. In circumstances where I am satisfied that the proceeds of sale of the W Street property were more than sufficient to meet this capital contribution, I do not accept the wife’s evidence that the parties had to call on joint savings she said they had earned and paid into the husband’s account between April 2009 and November 2010 to complete the purchase. On this basis I am satisfied, as counsel for the husband submitted, that the husband’s capital contributions to the acquisition of the Suburb M property were approximately $498,000 and represent approximately 82/18 of those contributions in his favour.
Other Financial Contributions
In December 2014 the wife settled a negligence claim against her dentist and received a lump sum payout of $400,000. It is agreed that she paid $230,000 of that compensation to the Suburb M home loan account. It was her evidence that the husband used approximately $130,936 of her compensation to reduce the Viridian Line of Credit, thereafter drawing down on that account, and to pay credit card debts and to repay a personal loan in his name. The wife said that she had used the balance of approximately $39,000 to discharge credit card debts in her name, to repay a personal loan, for dental and medical expenses and for general living expenses. Although there was some dispute with respect to what these funds were used for, counsel for the husband, properly in my view, conceded that these were monies that the wife contributed to the family’s coffers and she should be given credit for her contribution.
Whilst acknowledging the wife’s contribution of $230,000 to the mortgage, it is the husband’s case that the Court should also have regard to the fact that the wife has been in occupation of the Suburb M property since separation, and that until January 2018 the interest only repayments on the mortgage were being paid from the redraw facility on the mortgage. Thereafter the wife paid $1,000 per month of the mortgage repayments and he has paid the balance. It is his case that this must be taken into account when weighing the weight of the wife’s contribution to the mortgage. In my view the fact that the wife has had the benefit of residing in the Suburb M property whereas the husband has had to rent and that the mortgage balance has increased does not alter the fact of her having made that contribution. However it is a matter that the Court can and I propose to take into account when considering the Section 75(2) factors.
In 2014 the husband sold the X Street property purchased by F Pty Ltd for $593,000. The husband deposed that he received net proceeds of sale of $191,085, however he also deposed that he had incurred a capital gains tax liability of approximately $60,000. Although the husband said in cross-examination that he had losses which had been set off against the capital gain, that is not what he said in his affidavit and in circumstances where he did not produce any documents to support this assertion I propose to take into account the CGT liability and deduct the sum of $60,000 making the husband’s contribution approximately $131,000.
Counsel for the husband also submitted that the Court should take into account the $62,500 the husband caused F Pty Ltd to pay to the wife in 2010. I have already found that the wife was not working for E Pty Ltd until August/September 2011 and, for the reasons I have previously discussed with respect to the wife’s evidence, I prefer the husband’s evidence with respect to the money he says he paid to the wife for her benefit. I note however that $15,154 of this amount was withheld on account of tax.
I am satisfied that the wife’s contribution, however applied, was approximately $400,000 as against the husband’s contribution of $131,000 plus the $62,500 to the wife by F Pty Ltd. Leaving aside at this point whether or not a mathematical approach or the analysis adopted by counsel for the husband is correct, based purely on the figures, I do not accept, as counsel for the husband submitted, that these additional contributions are approximately equal or that the wife’s contributions would not alter the weight to be afforded to their respective contributions based upon their contributions to the acquisition of the Suburb M property.
Other Contributions
It was the wife’s case that she was a very successful commission sales agent. However she also said that she had made a significant contribution to the success of E Pty Ltd growing this area of the business from nothing. That is not consistent with her own case that E Pty Ltd is now generating significantly greater income, the husband’s evidence, Mr K’s evidence, or more importantly the evidence of Dr J. Dr J was a thoughtful and compelling witness and I prefer his evidence to that of the wife. Although it was part of the wife’s case that when E Pty Ltd started selling Brand 1 office equipment it was a new business, in that way adding weight to her contributions, having heard the evidence of Dr J I am satisfied that the business was a going concern when the husband and wife commenced their relationship. Notwithstanding whether it was selling Brand 2 equipment or Brand 1 equipment, its success rested primarily on the reputation of the husband and Mr K over many years, rather than any contribution made by the wife as a sales agent, however successful she may have been.
Whilst there was some disagreement as to the degree, it is also common ground that for a significant period of the relationship when the wife was unwell and unable to work the husband took over some of her duties at E Pty Ltd. It is also the husband’s case that the wife would not have earned the level of income she earned but for the opportunity that working for his company provided. I am satisfied that it is the case that the wife was earning significantly less immediately prior to the commencement of the relationship, and that she currently earns significantly less. It appears on this basis that although the wife appears to have been a successful sale agent when in good health there is some force in the husband’s submission. However in my view the fact that it may have been the case that it was the husband who gave her the opportunity to work in the business does not diminish her contributions when she did so. Counsel for the husband also submitted that the husband had earned more than the wife during the marriage. Even if that is correct, as counsel acknowledged, in circumstances where the parties have both contributed to the best of their respective abilities this is not a significant factor. In my view these factors are part of the give and take of a marriage.
Kennon Factors
In the wife’s trial affidavit, she deposed that the husband “was physically, emotionally and psychologically abusive on many occasions during our marriage.” She then set out in some detail what she said were some of the incidents of family violence during the marriage. The first of those examples was an incident on 12 May 2012 followed by incidents on 5 July 2014, 6 July 2014, 20 July 2014, 17 August 2014 and an incident in or around October or November 2014. She also described the husband being verbally abusive during a telephone call in July 2014. As part of her evidence in chief, the wife tendered a number of photographs and a video recording of what she asserts were injuries she said she suffered.
Although counsel for the husband put his version of some of these incidents to the wife in cross-examination the husband did not depose to these matters in his affidavit other than to simply deny the wife’s allegations. Whilst if the husband’s case was that a particular incident did not occur at all it would be difficult in those circumstances to depose to his version of events, his blanket denials were unhelpful.
Counsel for the wife submitted that the husband’s conduct amounted to a course of conduct which had a significant and adverse effect upon the wife’s contributions or made her contributions significantly more arduous which the court is entitled to take into account in assessing the party’s respective contributions and the weight to be afforded to those contributions as referred to by the Full Court in Kennon.
In referring to the relevance of family violence as a factor to be considered, Fogarty and Lindenmayer JJ also said at para 24 as follows:
…
It is essential to bear in mind the relatively narrow band of cases to which these considerations apply. To be relevant, it would be necessary to show that the conduct occurred during the course of the marriage and had a discernible impact upon the contributions of the other party. It is not directed to conduct which does not have that effect and of necessity it does not encompass (as in Ferguson) conduct related to the breakdown of the marriage (basically because it would not have had a sufficient duration for this impact to be relevant to contributions)
(emphasis added)
In Stevens & Stevens (2005) FLC 93-246 the Full Court referring to the Trial Judge’s treatment of the allegations of family violence said as follows:
[65] The term “course of conduct” is a broad one. We do not think that conduct must necessarily be frequent to constitute a course of conduct though a degree of repetition is obviously required.
Counsel for the wife also referred me to the decision of the Full Court (Kay, May and Carter JJ) in S & S (2003) FamCA 905 (“S & S”). At paragraph 46 of that decision their Honours indicated that they “would not want the reference in Kennon to ‘exceptional’…to be understood to mean rare. We do not agree with this qualitative description.” Their Honours also agreed with the Trial Judge that the lack of evidence of the impact of family violence on a party’s contributions is not necessarily fatal to an application made on that basis and at paragraph 45 that there are cases “where it is obvious or a very likely inference from the facts, that certain kinds of violence must have adversely affected a person’s contributions.” The Trial Judge went on to say that the question in that case was whether the material filed on behalf of the wife could be said to fall into that category.
The Full Court also said in S & S at paragraph 47 as follows:
An insufficiency of evidence in the present case leaves the Court with a limited ability to deal with allegations in the context of s79 proceedings. As Kennon has established, it is necessary to provide evidence to establish:
· The incidence of domestic violence
· The effect of domestic violence
· Evidence to enable the court to quantify the effect of that violence upon the parties capacity to “contribute” as defined by section 79(4)
Although I have significant reservations about the wife’s evidence generally, I am, based upon the evidence before me, satisfied that the wife was subjected to family violence as it is defined by the Act, albeit that it may not have been exactly as the wife asserted. However, even if I were to find that all of the alleged incidents of violence had occurred, I would also need to find that there has been both a course of conduct and a connection between that conduct and the wife’s ability to work in the business and/or contribute to the marriage generally.
Counsel for the husband submitted that there was not the requisite connection between the incident in July 2012 and the incidents in 2014 and hence there was no course of conduct. Although counsel for the wife conceded that there must be a course of conduct it was his submission that that course of conduct is to be evaluated from the first incident to the last. If taken to its logical conclusion, this would mean that if there was, for example, a first incident followed by five incidents 15 years later, this would amount to a course of conduct. Counsel for the husband also submitted that even if these latter incidents had occurred they were all within approximately 10 months of the parties’ final separation which distinguished them from the earlier incident.
Even if in this case I were to be satisfied that there has been a course of conduct, I must also be satisfied that that course of conduct impacted upon the wife’s contributions or that it is obvious or a very likely inference based upon the facts that the husband’s conduct must have adversely affected the wife’s contributions. The wife’s evidence at its highest is that she did not attend at E Pty Ltd’s offices often in 2014/2015 because of the husband’s behaviour. There is no other evidence of the impact of the husband’s behaviour upon the wife’s contributions. Whilst S & S makes it clear that the lack of evidence of the impact of the husband’s conduct upon the wife’s contributions is not necessarily fatal to the wife’s application, and it was submitted by counsel for the wife that the Court can infer that the family violence the wife has experienced must have adversely impacted upon the wife’s contributions, in my view that is not consistent with the wife’s evidence in this case. To the contrary, whilst there is little evidence with respect to the impact of the family violence upon the wife’s contributions, she gave detailed evidence as to what she asserted were her significant contributions to the success of E Pty Ltd and put her case on the basis of the weight she said should be afforded to those contributions. This is not consistent with the inference counsel for the wife now submits should be drawn by the Court.
In all of the circumstances I am not satisfied that the evidence supports the wife’s contributions being afforded additional weight on the basis of the principles in Kennon.
Contribution Based Entitlements
Counsel for the husband, whilst conceding that the assessment of contributions is not a mathematical exercise, submitted that on a strict mathematical basis the parties’ capital contributions to the acquisition of the Suburb M property were weighted as to 82/18 in the husband’s favour. He further submitted that the other financial contributions did not significantly alter that ratio. I do not accept that submission. Adopting counsel for the husband’s mathematical approach, having regard to the other capital the parties contributed, their capital contributions whilst still favouring the husband are closer to 60/40 in the husband’ favour.
Counsel for the wife submitted that the Court should adopt a global approach rather than an asset by asset approach. In my view the way in which counsel for the husband puts his case places too much emphasis on the capital contributions the parties made to the Suburb M property, prioritising those contributions over the other contributions they each made during the relationship. That being said I am also mindful that this was a relatively short marriage and have had regard to the property the parties each brought to the marriage including, on the basis of my findings, the husband’s interest in the business.
I accept counsel for the wife’s submission that I should adopt a global rather than a mathematical approach. Having regard to all of the parties contributions, financial, non-financial, direct and indirect, and their contributions during the marriage to the welfare of their family unit, I am satisfied that an allowance of 12.5 per cent should be made in the husband’s favour. This takes into account the parties respective initial contributions and all of the contributions they made during the marriage. This amounts in real terms to an adjustment in his favour of $298,125 and a differential of $596,250.
Adjusting Factors
The wife is now 45 years of age. Although it is not disputed that the she had significant health issues during the marriage, it is not currently her case that she is unable to work because of her health.
The wife deposed to having applied for 23 jobs between separation in May 2015 and February 2016, eventually obtaining employment four days per week as a marketing assistant. The husband denied the wife’s assertion that she would not be able to work in the office equipment industry because the husband had made physical threats if she did so. I cannot make any findings with respect to this issue however I am satisfied that the wife has no tertiary qualifications and now earns significantly less than she did when working for E Pty Ltd and, relevantly for the purposes of the decision I must make, significantly less than the husband.
The husband is 47 years of age and he continues to work in office equipment sales. It is the wife’s case that there is a significant disparity in the parties’ current incomes. In support of her case she relied upon the evidence as to F Pty Ltd’s receipts for the 2018 financial year. Neither Mr B or Mr C considered it appropriate for the purposes of their valuations of F Pty Ltd to rely upon the evidence as to the payments made to F Pty Ltd by E Pty Ltd during the 2018 financial year in circumstances where they could not be satisfied that it was income rather than monies clawed back from loan accounts. However, as counsel for the wife submitted, when the husband was cross examined about these figures he did not suggest that it was not income or that it was not available to him to use at his discretion. Based upon the Activity Statements for the period commencing 1 July 2017 to 30 April 2018 and F Pty Ltd’s CBA account statement for 1 May to 18 May 2018, F Pty Ltd received $750,000 net of GST from E Pty Ltd. Whilst that evidence might not have been sufficient for the expert witnesses, I am satisfied on the balance of probabilities that F Pty Ltd is currently in receipt of significantly more than the $425,000 averaged over the previous four years, as agreed upon by the expert witnesses. Even if the husband was not in receipt of the additional benefits of ownership he would in any event, based upon the evidence of Mr B, be likely to earn significantly more than the wife.
I am also satisfied that, as Mr B reported in his report dated 10 August 2017, the majority of F Pty Ltd’s expenses are either remuneration or benefits paid to the husband at his discretion including the payment of his legal fees. This is significant as submitted by counsel for the wife in circumstances where the pool includes the $280,000 the wife received by way of partial property settlement and she has used that capital she received to pay her legal fees. Contrary to counsel for the husband’s submissions I am satisfied an adjustment in the wife’s favour is warranted.
I have taken into account that the wife has had the benefit of living in the Suburb M property to the exclusion of the husband. This is significant in circumstances where the wife was in receipt of spousal maintenance and was in employment for at least part of that time, the mortgage balance has increased by approximately $210,000, and where I have had regard to the wife’s payment of $230,000 to reduce the mortgage.
The husband and the wife each have superannuation entitlements. The husband’s case is that having regard to the parties’ respective contributions and the Section 75(2) factors, there should be no split of those entitlements. The wife for her part seeks an order which would in effect equalise their respective entitlements. In my view there is some force in counsel for the husband’s submission in circumstances where the husband brought significant superannuation entitlements to the marriage. It is also reasonable to infer in my view that, in circumstances where these parties have been separated for some years, some of their respective entitlements are likely referable to contributions made since separation. I have however had regard to the fact that the husband’s current entitlements are greater than those of the wife and will take that into account pursuant to s75(2) of the Act. .
Counsel for the husband referred me to the decision of Robb & Robb (1995) FLC 92-555 in support of his submission that the Court should have regard to the support the husband provided for the wife’s children of her previous marriage, a contribution he submitted should be weighed in his favour. The husband deposed that he had contributed to the expenses of the wife’s children “...including half of their school fees in the sum of $30,000.” This was the only evidence with respect to the husband’s contributions to the support of the wife’s children. The wife’s response to this evidence was to the effect that all of her commissions were paid into the husband’s Commonwealth Bank account from which the school fees were paid. It is clear from the evidence that the commissions earned by the wife were paid into the party’s joint account as well as the account in the husband’s name from which the school fees were paid. However, even if the husband had paid the school fees out of his own account, in circumstances where the husband conceded in cross examination that he had not paid all of the parties’ expenses there is no way of determining how the parties otherwise arranged their finances. In all of the circumstances I am not satisfied that it is appropriate to make any adjustment in the husband’s favour on this basis.
Although I accept counsel for the husband’s submission that it is not the intention of the Act to socially engineer an outcome so as to achieve equality, in all of the circumstances of this case and in particular having regard to the significant disparity in the parties’ incomes, I am satisfied that justice and equity require that there should be an adjustment in the wife’s favour pursuant to s 75(2) of the Act. I am satisfied that in these circumstances there should be an adjustment in the wife’s favour of 5 per cent which is in real terms $119,250 and represents a differential between the parties positions of $238,500.
This results is an overall division of 57.5/ 42.5 in the husband’s favour. In real terms this s means that the husband is entitled to $178,875 more than the wife and a differential between their entitlements of $357,750. I am satisfied that in all of the circumstances this is a just and equitable adjustment of the party’s property interests.
The Orders and Their Effect
The wife sought orders giving her the opportunity to purchase the husband’s interest in the Suburb M property. Although it may be difficult for her to do so I propose to give her that opportunity. The husband similarly sought orders giving him the opportunity to purchase the wife’s interest in the Suburb M property in the event that she was unable or chose not to do so. I will similarly give him that opportunity. This will be based upon the property having a value of $2 million and the mortgage balance as at the date of the hearing. This is necessary in circumstances where the wife has had the occupation of the property, the husband has been paying interest on the mortgage, and the mortgage balance has been increasing.
Having regard to my conclusion that there should be 57.5/42.5 division in the husband’s favour and in circumstances where the wife has already had the benefit of a partial property settlement of $280,000, she would need to pay the husband $321,375. In the event that the wife does not wish to or cannot retain the property, the husband will need to pay the wife $733,625.
In the event that neither party can or they choose not to retain the Suburb M property, the property is to be sold and there will be a percentage division of the property having regard to the partial property settlement the wife has already received. I also propose to continue the existing orders until either the wife acquires the Suburb M property from the husband or the husband acquires it from the wife, at which time she will be required to vacate the property, or until settlement of the sale of the Suburb M property whichever first occurs.
The Third Parties
On 25 May 2018 the wife filed a Third Further Amended Initiating Application in which she sought the following orders as against E Pty Ltd, F Pty Ltd and G Pty Ltd:
1.Within sixty (60) days, the husband and/or one or more of the 2nd to 4th Respondents pay or cause to be paid to the wife by way of property settlement and/or spousal maintenance the sum of $1,689,817.
2.In the event the husband and/or the 2nd to 4th Respondents fail to make the payment required by Order 1 by the due date, then the husband and the 2nd to 4th respondents so all acts and things and sign all documents as may be necessary and required to sell the business operated by E Pty Ltd Pty Ltd (“the Business Sale”) and the net sale proceeds of the Business Sale be applied as follows:
a)To pay all costs, commissions and expenses of the sale;
b)To pay the sum of $1,689,817 (or such sum as then remains outstanding) together with interest at the rate prescribed by the Family Law Rules 2004;
c)To pay the sum of $2,737,623 to the 4th Respondent;
d)The balance then remaining to be paid to the husband and/or the 3rd Respondent.
3.Contemporaneously with the payment in Order 1 or in the alternative, contemporaneously with settlement of the Business Sale:
a)The husband do all acts and thing and sign all documents as may be necessary and required to transfer to the wife all of his right, title and interest in the property situation at H Street, Suburb M and being the property more particularly described in Certificate of Title Volume … Folio … (“the Suburb M Property”);
b)The wife discharge the Mortgage no. …2C (“Mortgage”) secured against the title to the Suburb M Property and pay out or refinance the liability secured by the Mortgage and in any event indemnify the husband and keep him indemnified in relation to the Mortgage.
4.Pending the husband and wife’s compliance with Orders 1 to 3:
a)The wife have the sole use and occupation of the Suburb M Property;
b)The husband pay or cause to be paid all instalments under the Mortgage as and when they fall due, together with all rates, taxes and insurances levied in relation to the Suburb M Property;
c)The husband continue to pay or cause to be paid to the wife the sum of $1,000 per week by way of spousal maintenance.
E Pty Ltd is owned by F Pty Ltd and G Pty Ltd. F Pty Ltd is owned by the husband, and G Pty Ltd is owned by Mr K and his wife, who each own one of the two shares.
On 19 July 2018 the wife filed a Fourth Further Amended Initiating Application in which she sought orders which would require the husband and/or F Pty Ltd, the third respondent, to pay her the sum of $1,689,817 or such other sum as the Court considered appropriate.
When the wife filed her case outline in anticipation of the hearing she persisted with her application against the third parties including the application for a declaration as to the value of F Pty Ltd’s interest in E Pty Ltd and orders requiring the husband to transfer his interest in F Pty Ltd to the wife and resign as a director, the wife thereafter being at liberty to effect a sale of F Pty Ltd’s interest in E Pty Ltd for the purposes of giving effect to the orders for property settlement sought by the wife. The wife was no longer seeking orders for property settlement against the second and fourth respondents.
On the basis of the evidence of Dr J the wife amended her proposal to allow for the continued operation of the business albeit that she would be in control of it for the purposes of enforcing the orders for property settlement. This remained the wife’s position until the latter stages of the case when, although the wife did not seek orders directed to the second and fourth respondents, she left open the possibility of doing so by way of enforcement.
I am satisfied that the Court does not have the power to make the orders the wife sought for property settlement and maintenance against the second, third and fourth respondents. The application was in those circumstances fundamentally flawed. The declaration as to the value of E Pty Ltd and the orders for enforcement, whilst perhaps not so fundamentally flawed, are problematic and in my view were a symptom of the way in which the wife put her case.
The second and fourth respondents were in all of the circumstances left with little option other than having to participate in the proceedings in order to protect their interests in response to the wife’s case.
Ultimately, having regard to my findings and the orders I propose to make, it is not necessary in my view to make orders involving either E Pty Ltd, F Pty Ltd or G Pty Ltd for the purposes of enforcement. I do however propose to accede to the application of the second and fourth respondents that the orders be framed so as to ensure that any payments that are to be made or the transfer of any property occur after any applications for costs have been determined.
Proposed Orders
The orders I propose to make are as follows subject to any submissions as to form are:
1.That by 4.00pm on (30 days from the date of these orders) the wife advise the husband in writing of her intention to acquire the husband’s interest in the property known as and situate at H Street Suburb M in the State of Victoria and being the property more particularly described in Certificate of Title Volume … Folio … (“the Suburb M property”).
2.In the event that the wife so elects to acquire the Suburb M property on or before (60 days from the date of these orders) or seven days after the Court delivers its judgment with respect to any applications for costs, whichever occurs last, the wife pay to the husband the sum of $321,375 (“the wife’s payment”).
3.Contemporaneously with the payment in paragraph 2 of these orders:
(a) the husband do all acts and things and sign all documents as may be necessary and required to transfer to the wife all of his right, title and interest in the Suburb M property ;
(b) the wife discharge the Mortgage no. …2C (“the Mortgage”) secured against the title to the Suburb M Property and pay out or refinance the liability secured by the Mortgage and in any event indemnify the husband and keep him indemnified in relation to the Mortgage.
4.In the event that the wife does not elect to retain the Suburb M property as provided in paragraph 1 of these orders by 4.00pm on (2 weeks after the date upon which the wife is required to advise the husband of her election pursuant to paragraph 1) the husband advise the wife in writing of his intention to acquire her interest in the Suburb M property.
5.In the event that the husband elects to acquire the wife’s interest in the Suburb M property on or before (45 days from the date of these orders) or seven days after the Court delivers its judgment with respect to any applications for costs, whichever occurs last, the husband pay to the wife the sum of $733,625 (“the husband’s payment”).
6.Contemporaneously with the payment in paragraph 7 of these orders:
(a) the wife do all acts and things and sign all documents as may be necessary and required to transfer to the husband all of her right, title and interest in the Suburb M property ;
(b) the husband discharge the Mortgage secured against the title to the Suburb M Property and pay out or refinance the liability secured by the Mortgage and in any event indemnify the wife and keep her indemnified in relation to the Mortgage.
7. In the event that neither the husband nor the wife elects to acquire the other’s interest in the Suburb M property pursuant to paragraphs 1 and 6 of these orders, the property be forthwith placed on the market for sale by public auction by an agent to be agreed upon by the husband and the wife and in default of agreement by an agent nominated by the President of the Real Estate Institute of Victoria or his or her nominee and upon such terms and at a reserve price to be agreed and in default of agreement as nominated by the appointed agent.
8. The proceeds from the sale of the Suburb M property be applied as follows:
(a)firstly, to pay all costs, commission and expenses of the sale;
(b)secondly, to discharge the mortgage and any other encumbrance affecting the property; and
(c)thirdly, as follows:
(i)57.5 per cent to the husband less the sum of $285,250 to be paid out of the husband’s share to the wife and less any amount he is required to pay to any party pursuant to any order for costs.;
(ii)The balance to the wife less any amount she is required to pay to any party pursuant to any order for costs.
9. Pending settlement of the sale of the Suburb M property the wife have the right to occupy the property save that if the husband elects to acquire the wife’s interest in the property the wife shall vacate the property contemporaneously with the husband’s payment pursuant to paragraph 5 of these orders.
10. Paragraph 3 of the orders made by consent on April 2016 be discharged contemporaneously with the wife’s payment pursuant to paragraph 2 of these orders, the husband’s payment pursuant to paragraph 5 of these orders, or upon settlement of the sale of the Suburb M property whichever first occurs.
11.Unless otherwise specified in these Orders and save for the purposes of enforcing these or any subsequent Orders:
(a) the husband and wife be solely entitled to the exclusion of the other to all other property (including choses-in-action) in their possession as at the date of these Orders, with the chattels situated at the Suburb M Property deemed to be the property of the wife;
(b) monies standing to the credit of the husband or wife in any bank account are to remain the property of the account holder;
(c) the husband and wife each forego any claims they may have to any superannuation benefits belonging to or earned by the other;
(d) insurance policies remain the sole property of the owner named thereon;
(e) the husband and wife be solely liable for and indemnify the other against any liability encumbering any item of property to which they are entitled pursuant to these Orders;
(f) any joint tenancy of the parties in any real or personal estate is hereby expressly severed.
Other
12.On or before 4.00 pm on 31 January 2019 the parties file and serve any written submissions in support of any application for costs arising out of or incidental to the hearing of the application for final property orders pursuant to s 79 of the Family Law Act 1975 (Cth) (“the Act”).
13. On or before 4.00 pm on 14 February 2019 the parties file and serve any reply to any written submissions in support of any application for costs arising out of or incidental to the hearing of the application for final property orders pursuant to s 79 of the Act.
14. The question of costs be determined based upon the parties’ written submissions subject to leave being sought to make oral submissions.
15.All extant applications save and except any application for costs be dismissed and removed from the list of cases awaiting hearing.
I certify that the preceding one hundred and six (106) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Macmillan delivered on 17 January 2019.
Associate:
Date: 17 January 2019
Key Legal Topics
Areas of Law
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Civil Procedure
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Negligence & Tort
Legal Concepts
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Appeal
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Causation
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Damages
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Duty of Care
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Negligence
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Reliance
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