HAWKINS & HAWKINS
[2016] FamCA 440
•3 June 2016
FAMILY COURT OF AUSTRALIA
| HAWKINS & HAWKINS | [2016] FamCA 440 |
| FAMILY LAW – PROPERTY SETTLEMENT – Twelve year marriage and no children – husband made substantial initial capital contribution – Where 10 years elapsed between parties’ final separation and trial whilst wife pursued Supreme Court litigation of what were ultimately found to be “baseless” claims – Where wife unilaterally acted to obtain substantial funds secured against the former matrimonial home to fund litigation – Where wife spent $634,000 on Supreme Court litigation and caused the husband to spend $235,000 – Wife solely responsible for economic consequences of Supreme Court litigation – Where 10 years post-separation period and events to be considered – Assessment of contributions in 12 year marriage and 10 years post-separation – Notional add backs – Post-separation liabilities excluded from notional pool considered in determining adjustment – 60/40 apportionment in husband’s favour for contribution – Section 75(2) factors and adjustment – Just and equitable orders FAMILY LAW – SPOUSAL MAINTENANCE – Lump sum spousal maintenance | |
| Blair Ors & Perpetual Trustee Co Ltd v Curran (Adam’s Will) (193) 62 CLR 464 | |
| Family Law Act 1975 (Cth) | |
Corporations Act 2001 (Cth)
| Evidence Act 1995 (Cth) |
| APPLICANT: | Mr Hawkins |
| RESPONDENT: | Ms Hawkins |
| FILE NUMBER: | BRC | 6561 | of | 2007 |
| DATE DELIVERED: | 3 June 2016 |
| PLACE DELIVERED: | Brisbane |
| PLACE HEARD: | Brisbane |
| JUDGMENT OF: | Kent J |
| HEARING DATE: | 14 and 15 March 2016 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr Selfridge |
| SOLICITOR FOR THE APPLICANT: | Wrightway Legal |
| COUNSEL FOR THE RESPONDENT: | Mr Trout |
| SOLICITOR FOR THE RESPONDENT: | DuxRoe |
Orders
IT IS ORDERED:
Property Settlement
The husband shall retain absolutely as the sole legal and beneficial owner to the exclusion of the wife all of the right, title and interest of either party in and to:
(a) E Pty Ltd in its own capacity and as trustee of the Hawkins Family Trust;
(b) the Hawkins Family Trust;
(c) any interest either in a personal capacity or via E Pty Ltd as trustee of the Hawkins Family Trust in each of:
(i)the P business conducted by F Unit Trust;
(ii)F Unit Trust;
(iii)W Pty Ltd in its own capacity and as trustee of F Unit Trust;
(iv)G Unit Trust;
(v) X Pty Ltd in its own capacity and as trustee of G Unit Trust.
That the wife transfer to the husband all of her shareholding in W Pty Ltd with the husband to forward to the wife a form of transfer for such shareholding which the wife shall forthwith, upon receipt, sign and return to the husband.
That the husband retain absolutely as the sole legal and beneficial owner to the exclusion of the wife any credit loan account balance or any other benefit standing to the wife’s credit in any of the entities referred to in paragraph 1 of these orders and the husband indemnify the wife and keep her indemnified in respect of any debit loan account or any other liability of the wife to any of the entities referred to in paragraph 1 of these orders PROVIDED ALWAYS that such indemnity does not include or extend to any liability of the wife of and incidental to orders made by the Supreme Court of Queensland in respect of the proceedings vide file number ….
In the event that the husband via E Pty Ltd as trustee of the Hawkins Family Trust effects a sale of the units held in F Unit Trust and G Unit Trust so as to achieve net sale proceeds (after taxation and realisation costs referrable to such sale) in an amount in excess of $366,595 (“the excess amount”) the husband shall within fourteen (14) days of settlement of such sale, cause the wife to be paid an amount equal to 45 per cent of the excess amount.
The husband shall assume sole responsibility for the joint liability of the parties with respect to the debt owing by the parties to the Y Bank of Country J and the husband shall indemnify the wife, and keep her indemnified, with respect to that liability.
The husband shall receive and be entitled absolutely to the entitlement of the parties or either of them, and the wife relinquishes to the husband, all of the parties’ right, title and interest in and to:
(a)the security deposit held by the Supreme Court of Queensland on account of the parties or either of them in relation to the Supreme Court proceedings vide file number … or of the appeal proceedings relevant to those proceedings; and
(b) the remaining proceeds of sale of the property known as B Street held in the trust account of the solicitors for the husband;
and each party shall do all acts and things reasonably required, including by signing any documents, to give effect to this order.
Pursuant to s 90MT(1)(b) of the Family Law Act 1975 (Cth) whenever a splittable payment becomes payable in respect of the interest held by the wife in The Hawkins Superannuation Fund, the husband shall be entitled to 100 per cent of the splittable payment and there shall be a corresponding reduction to the entitlement the wife would have received in The Hawkins Superannuation Fund but for this order. This order binds the trustees of The Hawkins Superannuation Fund and any subsequent trustee of The Hawkins Superannuation Fund or a successor fund.
It is declared that as a consequence of these property settlement orders the wife’s liability to pay the husband his assessed costs of the Supreme Court proceedings vide file number … pursuant to orders made by the Supreme Court of Queensland is reduced from $202,742.66 to the amount of $131,874.66.
The husband shall retain absolutely as the sole legal and beneficial owner to the exclusion of the wife all rights, title and interest in and to:
(a) The Hawkins Superannuation Fund;
(b) the Mr Hawkins Superannuation Fund;
(c) all other assets or financial resources including, but not limited to, bank accounts, motor vehicles, and furniture and chattels presently in the name, or possession or control of the husband;
except as is otherwise expressly provided for in these orders.
The wife shall retain absolutely as the sole legal and beneficial owner to the exclusion of the husband all rights, title and interest in and to:
(a) the Ms Hawkins Superannuation Fund;
(b) her business supplying toner and cartridges;
(c) all other assets or financial resources including, but not limited to, bank accounts, motor vehicles, and furniture and chattels presently in the name, or possession or control of the wife;
except as is otherwise expressly provided for in these orders.
Save and except as is otherwise expressly provided in these orders, each party respectively shall be solely responsible for any liability currently in the sole name of that party or for which that party is solely liable and each party shall indemnify the other and keep the other indemnified in respect of any such liability.
Each party shall do all acts and things reasonably required including by the signing of any documents necessary to give effect to these orders, within seven (7) days of being requested to do so by the other party.
Should either party fail to do all things and sign all documents within seven (7) days of request by the other party to do so then pursuant to s 106A of the Family Law Act 1975 (Cth) a Registrar of the Family Court of Australia, Brisbane, is appointed to sign or execute any document in the name of the party in default and to do all such acts and things necessary to give validity and operation to the said orders.
Spousal Maintenance
Pursuant to ss 74, 77A and 80 of the Family Law Act 1975 (Cth) it is ordered that $52,000 of the remaining sum of $131,874.66 owing by the wife to the husband (as referred to in paragraph 8 of these orders) be settled upon the wife as and by way of lump sum spousal maintenance. This is an order to which s 77A applies and $52,000 is specified as the value attributable to the provision of maintenance for the wife for the purposes of s 77A(1)(b).
All extant applications be otherwise dismissed and removed from the list of cases awaiting finalisation.
NOTATION:
As a consequence of these property settlement orders and the order for spousal maintenance, the amount owing by the wife to the husband pursuant to orders made by the Supreme Court of Queensland in proceedings file number …, is reduced from $202,742.66 to a total of $79,874.66.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Hawkins & Hawkins 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 BRISBANE |
FILE NUMBER: BRC 6561 of 2007
| Mr Hawkins |
Applicant
And
| Ms Hawkins |
Respondent
REASONS FOR JUDGMENT
Whilst the divorce of these parties was pronounced as long ago as 25 September 2007, it is convenient to refer to them in these Reasons as “the husband” and “the wife” respectively.
The husband initiated these property settlement proceedings[1] in the then Federal Magistrates Court as long ago as 2007. However, a remarkable and complicating feature of this case is that the final trial of these proceedings, for reasons which will shortly be discussed, did not occur until almost 10 years later, on 14 and 15 March 2016.
[1] Pursuant to s 79 of the Family Law Act 1975 (Cth) (“the Act”).
The parties commenced cohabitation in 1994 and married in 1994. They finally separated in July 2006. There are no children of the marriage.
The wife has two children from a previous relationship who were aged about 10 years and 9 years respectively when the parties commenced cohabitation. The wife’s children were part of the parties’ household and were supported by the parties, without support from their father, from the commencement of the parties’ cohabitation in 1994 and for the following 10 years until those children became independent in about 2004.
It will be appreciated that the almost 10 year post-separation period to trial approximates the period of about 12 years or so that the parties cohabitated. That is the period of post-separation contributions which fall for consideration under s 79.
The principal reason for the remarkable delay between the parties’ final separation in July 2006 and the final trial of these proceedings almost 10 years later, is that in 2007 the wife commenced proceedings in the Supreme Court of Queensland against nine defendants, including the husband, concerning the business enterprise known and referred to as W Pty Ltd (“W”) in which the parties, with others, were involved during the marriage. These property settlement proceedings were stayed pending the outcome of the wife’s claims in her Supreme Court proceedings.
The gravamen of the wife’s claims in her Supreme Court proceedings was that restructuring of the entities associated with the operation and ownership of the W business enterprise was collaborated in by the husband and the other individuals involved (other than the wife) as a collusion against the wife’s interests. Those other individuals were Mr and Ms Q and Mr R and entities associated with those individuals were also involved.
The wife sought an extensive array of relief under s 233 of the Corporations Act 2001 (Cth) (“Corporations Act”) in her Supreme Court proceedings. This included orders that numerous restructure transactions be declared of no force or effect or, alternatively, that they be set aside and that an order be made that the other individuals/entities involved namely Mr R, Z Pty Ltd (“Z”), Mr and Mrs Q and the husband purchase the wife’s shares in W at a market value assessed on the basis that the transactions she was seeking to impugn had not been entered into or given any effect. The wife also sought an order that W be wound up under s 233 or any one of paragraphs (e), (f) or (k) of s 461(1) of the Corporations Act.
The litigation in the Supreme Court was protracted to say the least. It will be seen that the wife was found to have substantially contributed to that by the manner in which she conducted that litigation. The trial of the Supreme Court proceedings did not take place until many years after their commencement and occurred over some 10 days in August 2012 with judgment being delivered by Dalton J in 2012 (“the primary judgment”).
The wife was wholly unsuccessful in her Supreme Court litigation. Testament to the wife’s singular lack of success and the wholly unmeritorious claims the wife advanced in her Supreme Court litigation, is that the trial judge Dalton J made an order on 18 March 2013 that the wife pay the costs of all nine defendants, for the entire proceedings, on an indemnity basis delivered in 2013) (“the costs judgment”).
An appeal pursued by the wife was dismissed by the Queensland Court of Appeal in 2013. An order was made by the Court of Appeal for the wife to pay the costs of all of the respondents of the appeal.
Aside from the extraordinary delay in these proceedings being able to be finalised consequent upon the wife’s pursuit of what were ultimately found to be baseless claims in her Supreme Court proceedings, those proceedings consumed an extraordinary amount of costs and caused other substantial losses to the parties, as will be discussed.
Central issues
The wife raises as an issue assignation, as between the parties, of responsibility for the economic consequences of her Supreme Court proceedings. The husband contends that the wife is solely responsible for these consequences.
On the wife’s evidence she expended approximately $634,000 in legal costs in pursuing her Supreme Court litigation. The husband, as a defendant in those proceedings, expended $235,000 in legal costs in successfully defending them. The wife has a liability to pay the costs of the husband and the other defendants in those proceedings pursuant to orders made by the Supreme Court and the Court of Appeal of that Court. The wife contends that she has an agreement with the other successful defendants to settle their claims for ordered costs at a figure of $135,000. It can thus be seen that the husband’s and wife’s expenditure on costs (including the wife’s liability to pay $135,000 to the other parties) of the wife’s misconceived and ill-fated proceedings totals approximately $1,004,000. As will be seen, that total exceeds, by a significant margin, the value of the now existing property interests of the parties combined.
In order to fund, in part, her Supreme Court litigation the wife, post-separation and on 20 April 2007, without the husband’s knowledge or consent, obtained a bank loan from the Commonwealth Bank of Australia (“CBA”) for $700,000 on interest-only terms secured by mortgage upon the former matrimonial home at B Street, Suburb C, a property conveniently referred to as “B Street”. The title to B Street had been registered in the sole name of the wife when the parties acquired it in 2000. At the time of obtaining this loan the total level of debt secured upon B Street was about $85,000 so that this borrowing by the wife substantially increased the borrowing upon, and commensurately substantially decreased the parties’ equity in, B Street. The husband contends that the wife should be held accountable for that loss of capital.
In circumstances including the wife’s steadfast resistance to orders the husband sought at the interlocutory stages of these proceedings for sale of B Street, so as to eliminate the continuing substantial interest burden in respect of the debt (accruing at more than $4,000 per month), the husband seeks that the wife also be held accountable for the additional interest burden over the 8.5 year period from when the loan was first obtained in April 2007 until October 2015 when settlement of the sale of B Street occurred pursuant to interlocutory orders of this Court. At the time of settlement of the sale of B Street in October 2015 about $770,000 in accumulated secured debt (including the wife’s CBA credit card debt of about $33,000 linked to the mortgage) had to be repaid from the gross sale proceeds of $850,000 to the CBA.
Thus the husband contends for the notional adding back to the “pool” of assets considered for adjustment of both the legal fees consumed by the wife’s Supreme Court litigation reflected in the loan funds secured upon the former matrimonial home to fund them; together with the additional interest incurred on the secured loan over the period from when the loan was first obtained until it was repaid in October 2015.
For her part the wife contends, as will be further discussed, that there are reasons for not attributing the losses referrable to her Supreme Court litigation solely to the wife. Indeed, she seeks to have notionally added back to the “pool” for adjustment the funds ($235,000) the husband withdrew from his superannuation fund to meet his legal costs in defending himself (successfully) from the wife’s claims in the Supreme Court proceedings. The wife goes so far as to contend that it was the husband’s conduct which “forced” her to litigate her Supreme Court claims.
At an early stage of the wife’s Supreme Court litigation interlocutory injunctive orders were made including an order that the husband and wife each receive one half of the payments from the W business payable to the Hawkins Family Trust. That order ceased to operate when Dalton J rendered final judgment in those proceedings on 11 December 2012 and thus the wife then ceased to receive such payments.
The wife seeks to have brought into account a notional half-share of distributions made from W since 11 December 2012, less the amount of interim spousal maintenance she has been paid since an interim spouse maintenance order was made in December 2014. That approach is disputed by the husband.
In circumstances where the husband continued to occupy B Street
post-separation until January 2015, the wife seeks to ascribe a notional rental value to that benefit to the husband and to have the resulting notional lump sum so calculated brought to account. That claim is also disputed by the husband.
The parties are also in dispute as to the extent of any capital disparity between them at the outset of their cohabitation with the husband claiming, and the wife disputing, a substantial disparity in the value of initial capital he introduced as compared with the wife. Associated disputes concern the use made of any initial capital introduced.
The parties are also in dispute as to the extent to which the wife contributed to the earnings and/or business income derived by the husband in the period from about 1994 until 2000 during which the parties, with the wife’s children, lived in North America. Moreover, the wife disputes the extent to which the husband claims to have supported her children during the relationship.
Unsurprisingly given the number and extent of disputed issues between them, there is a vast gulf between the final property settlement orders each party respectively contends for as the just and equitable property adjustment orders to be made.
Broadly, the husband seeks to sell the interest held by his trust, the Hawkins Family Trust, in the W business. He seeks to retain those sale proceeds together with all his other available assets and to have assigned to him what seems to be the only remaining asset of substance the wife has, namely her member benefit in The Hawkins Superannuation Fund. He seeks to maintain also the debt owing to him by the wife for ordered costs of $202,000 from the Supreme Court proceedings. The husband arrives at this result by reference to a number of notional add backs along the lines already foreshadowed.
Broadly, for her part, the wife seeks to have the interest in the W enterprise retained and for orders to be made that see the wife holding direct ownership and/or control of 50 per cent of the interest presently held by the Hawkins Family Trust in that enterprise or orders to ensure that she receives 50 per cent of distributions currently made to the Hawkins Family Trust. The wife otherwise seeks orders to secure to her 50 per cent of the “pool” of assets for which she contends, a pool including the notional add backs she contends for.
The economic consequences for the parties of the wife’s Supreme Court proceedings, in conjunction with the time that has elapsed since the parties’ final separation and events occurring in that period, present significant questions pertaining to the just and equitable requirement in s 79(2) of the Act. Specifically, a question arises as to whether the Court can be satisfied that, in all the circumstances, it is just and equitable to now make orders altering the existing interests of the parties in property. A related question is what orders can be considered “appropriate” within the meaning of s 79 and as effecting justice and equity between the parties?
In the unusual circumstances of this case it is not without some hesitation that I have concluded that, having regard to the existing property interests of the parties (discussed below), the just and equitable requirement in s 79(2) is fulfilled.[2] The parties’ final separation was voluntary and brought an end to the common use of property and the range of assumptions implicit when the parties’ marriage was intact.[3] Both parties seek property settlement orders.
[2] Stanford v Stanford (2012) FLC 93-518 (“Stanford”).
[3] Stanford [at 42] (supra).
What are the existing legal and equitable interests of the parties in property?
Mr AA, chartered accountant and member of the firm S Accountants, was engaged by the parties as a single expert to provide a report valuing the interests of the parties in the W business enterprise and associated entities, identified and described by Mr AA in his report as “the Hawkins Group”. Within his valuation exercise Mr AA assessed the parties’ interests in superannuation including in self-managed funds “The Hawkins Superannuation Fund”, and the “Mr Hawkins Superannuation Fund”.
Mr AA prepared an extensive and comprehensive report dated 27 August 2015 which is annexed to his affidavit filed on 3 September 2015. Mr AA also gave oral evidence at trial under cross-examination by counsel for each party respectively.
The curriculum vitae of Mr AA is annexed to his affidavit and I accept that Mr AA’s opinions as contained in his written report and as expressed in his oral evidence were expert opinions within the meaning of s 78 of the Evidence Act 1995 (Cth). Neither party suggested otherwise. Moreover, I accept the accuracy of Mr AA’s expressed opinions and his rationale for those opinions and I therefore accept generally the evidence of Mr AA.
It appeared from the cross-examination of Mr AA by counsel for the wife that the wife would ultimately contend that Mr AA’s assessment of the value of the interest in the W business enterprise held by the Hawkins Family Trust, a trust solely controlled by the husband, should not be accepted. Such a challenge had been foreshadowed by the wife in documents filed in her case for the trial including the wife’s balance sheet which was admitted at the outset of the trial as Exhibit 1. In that document the value the wife ascribed to the husband’s interest via his trust in the “W business” was $1,560,000. The wife maintained that position during her cross-examination at trial.
However, after Mr AA had given evidence and by the stage of final submissions at trial no such challenge was pursued. Counsel for each party addressed their respective final submissions to Exhibit 9, described as a jointly compiled table of assets, liabilities and notional add backs containing the contentions of each party. Common to both parties was the adoption, based upon Mr AA’s assessment, of the value of $366,595 for what is described in that document as the “F interest”.
As also appears from Exhibit 1, there was a foreshadowed contention by the wife that aside from his interest in W (held by the trust he controls), the husband had interests in several businesses described as “[BB] and multi-level marketing businesses” with a value ascribed by the wife of $500,000. Similarly, it can be seen from Mr AA’s report that the wife pursued similar contentions with Mr AA which she sought to have Mr AA investigate. Likewise, the wife maintained that position during her cross-examination at trial and part of the cross-examination of the husband by counsel for the wife was directed to eliciting evidence to support the contention.
In the end, however, this came to nought. It can be seen from Exhibit 9 that by the final submissions stage of the trial the wife was no longer pursuing any contention that the husband held or holds some undisclosed business interests of value.
At page 42 of his report Mr AA details the value of the member benefit of each party in The Hawkins Superannuation Fund. That records the husband’s member benefit at $250,552 whilst the wife’s member benefit is $120,239. These balances are based on the balance sheet for The Hawkins Superannuation Fund as at 30 June 2014. Exhibit 9 reflects the total of member benefits held by both parties in this fund of $380,000. The main asset of the fund is real property.
In final submissions counsel for each party respectively appeared not to understand that each party has an allocated member benefit in the self-managed superannuation fund referred to (indeed counsel for the husband initially submitted that the wife had no superannuation). It ultimately was accepted that each party has a member benefit and that the additional $10,000 approximately reflected in the total in Exhibit 9 (as compared with the amounts in Mr AA’s report) should be ascribed to the husband’s member benefit.
That is, the wife’s member benefit in this fund can be taken at the figure of $120,239 with the balance to total $380,000 reflecting the husband’s benefit. That gives a figure of $259,761 as a value of the husband’s member benefit. That ultimately seemed to be the agreed approach by both counsel despite their apparent lack of understanding of ascribed superannuation member benefits in accordance with the legislation regulating superannuation.
At page 43 of his report Mr AA deals with the Mr Hawkins Superannuation Fund, a fund established by the husband post-separation being a self-managed superannuation fund in which the husband is the only member.
In final submissions both parties agreed that the actual member benefit retained by the husband in that fund was, as at trial in the amount of $7,494 but there were contentions, discussed later in these Reasons, as to notional add backs to that figure.
As is reflected in Exhibit 9 the items and values for several items of property were agreed as between the parties as at the final submissions stage of the trial.
Based upon the assessment of Mr AA which I accept and with reference to Exhibit 9 (leaving aside notional add backs contended for), I record the following findings with respect to the existing legal and equitable interests of each party in property.
Husband
(a) Assets (including superannuation)
1. W Group interest (held via the Hawkins Family Trust)
$366,595
2. Member benefit in the Mr Hawkins Superannuation Fund
$7,494
3. Member benefit in The Hawkins Superannuation Fund
$259,761
4. Member benefit in Australian Super
$22,000
5. Motor vehicle
$15,000
6. Furniture
$5,305
7. CBA Account
$27,000
8. Wrightway Legal trust account balance (half share)
$1,616
9. Supreme Court costs order
$202,000
10. Half share of security amount held by Supreme Court
$350
Gross Assets
$907,121
(a) Liabilities
Half share of Y Bank of Country J debt
($19,500)
Total Net Assets
$867,621
Wife
(a) Assets (including superannuation)
1. Member benefit in The Hawkins Superannuation Fund
$120,239
2. Member benefit in Ms Hawkins Superannuation Fund
$295
3. Motor vehicle
$15,000
4. Furniture
$3,345
5. Wrightway Legal trust account balance (half share)
$1616
6. Half share of security amount held by Supreme Court
$350
Gross Assets
$140,845
(b) Liabilities
1. Half share of Y Bank of Country J debt
($19,500)
2. Supreme Court ordered costs – husband
($202,000)
3. Supreme Court ordered costs – other parties
($135,000)
4. Credit card debts
($246,722)
5. Debt on motor vehicle
($15,500)
Total Liabilities
($618,722)
Excess of Liabilities over Assets
($477,877)
It will readily be appreciated that on the wife’s current position, with an excess of approximately $480,000 in liabilities over the value of her assets, the wife is effectively insolvent. Taking into account the current level of her modest after tax weekly earnings income of about $400 the wife does not have the capacity to discharge her substantial accrued liabilities from her own current resources.
In this respect, whilst the wife has a liability to pay the husband’s assessed costs of the Supreme Court litigation in the sum of about $202,000; and the husband has that debt owing to him as an asset, it is obviously contingent upon the wife having the capacity to actually pay the debt or for enforcement to be levied. Obviously enough, if that asset is illusory because the wife will not ever have the capacity to pay it, the husband’s net assets reduce to a total value of $687,238.
It will also be appreciated that the wife’s net deficit position of approximately ($480,000) equates to 54 per cent of the husband’s net assets including the $202,000. In other words, the wife would have to retain all of her own assets plus receive an adjustment in her favour equating to 54 per cent of the husband’s net assets (including the $202,000 debt) just to reach a “break even” or net nil asset position; leaving the husband with 46 per cent of what he currently has, or the equivalent of only about $410,000.
Viewed from another perspective, if the post-separation period and events and notional add backs are ignored for the moment for the purposes of this illustration, if the parties’ respective financial positions are combined then between them they currently hold net assets worth only about $410,000 in total.
In a fundamental respect, and relevant to the consideration of what is just and equitable and appropriate within the meaning of s 79 of the Act, is the extent to which (if any) adjustments ought be made to the husband’s existing property interests in favour of the wife effectively in order for her to attempt to meet some of her accrued liabilities.
Conversely, on the husband’s approach, whether it is just and equitable, and appropriate to adjust the wife’s only asset of any substantial value, her $120,000 (approximately) member benefit in The Hawkins Superannuation Fund in his favour.
These questions will be returned to after considering relevant events both in the pre and post-separation periods and the associated events and effects surrounding the wife’s Supreme Court litigation.
It should be observed that as is reflected in the above findings both parties agreed, ultimately, on the value to be taken for the husband’s interest held via his trust in the W business enterprise at $366,595.
In his affidavit filed on 8 March 2016 shortly before the trial, the husband deposed to his negotiations with Mr R, a director and owner of W relating to the potential sale by the husband to Mr R of his interest in W. Annexed to that affidavit is a copy of a draft “Shares Buy-Sell Agreement” reflecting a price for the relevant interest of $400,000. Obviously the agreement is unsigned and Mr R did not provide direct evidence including evidence as to his capacity to complete any such purchase. Moreover, as is reflected in the expert report of Mr AA and is recounted in the primary judgment of Dalton J, there are certain complexities governing the interests held by relevant parties in W and the capacity of those parties to effect a purchase or sale without triggering what are effectively pre-emptive rights in favour of others.
It is well settled that an offer to purchase usually cannot be accepted as reliable evidence of value[4] and in Blake & Blake [2007] FamCA 10 the Full Court cited with approval the cautions that apply in the analysis by Guest J in Weatherall v Weatherall & Ors[5] as to when offers may be considered as evidence of value.
[4] See for example McDonald v The Deputy Federal Commissioner of Land Tax for New South Wales (1915) 20 CLR 231; Goold v Commonwealth of Australia & Anors; Rootsey v Commonwealth of Australia & Anor (1993) 114 ALR 135.
[5](2006) FLC 93-261.
Ultimately, in light of the approach taken by both counsel in final submissions as to the assessed value to be taken into account at $366,595 for this interest, and my acceptance of Mr AA’s evidence, that is the figure that I have adopted for the purposes of this assessment.
In the course of cross-examination of Mr AA and in circumstances of the husband’s desire to sell the interest in W and the evidence concerning a potential purchaser in Mr R, the Court directed enquiries to Mr AA as to any potential taxation or realisation costs attending any such sale (whilst Annexure 7 to Mr AA’s report details realisation and taxation costs of a notional liquidation of underlying entities that is not addressed specifically to a sale of the interest). Mr AA then confirmed that whilst he was not in a position to undertake the calculation whilst in the witness box he could, if provided with the relevant information, prepare a calculation of any applicable taxation or realisation costs in relation to that prospective sale. It was left to the parties to obtain Mr AA’s calculation and to subsequently submit it as an exhibit or agreed position as to any consequent taxation or realisation costs to be brought into account in respect of such sale. No such document was subsequently submitted by the parties or either of them, and I therefore proceed on the footing that there are no relevant realisation or taxation imposts to be brought into account, or at least none which either party suggest needs to be taken into account.
Finally in relation to the above listing of property interests, the funds held in the husband’s solicitors’ trust account are the residue of the sale proceeds of B Street.
Credit assessment
The degree of dispute between the parties on a range of fundamental factual issues makes it necessary, in resolving those issues, to assess the credit of each party.
Counsel for the wife contended that the husband’s failure to disclose his member benefit in Australian Super was a basis for an adverse credit finding against the husband.
Whilst it is true that the husband did not disclose this interest until presented with documents for trial by the wife I assess that, on the husband’s evidence and presentation, this was an entirely accidental omission on his part in circumstances where the last and modest contribution the husband made to that fund was many years ago. I am satisfied that the husband simply overlooked the fact that he had historically acquired that member benefit from historical contributions made to that fund the last of which was made years ago. It is fair to say that the husband is not a person who presents as a “detail” person. In short, I reject the proposition that this is a basis for making any adverse credit finding against the husband.
Counsel for the wife also mounted an attack on the credibility of the husband by reference to the husband’s evidence that he did not fully understand the restructure that took place with respect to W.
This attack ignores the specific findings made by Dalton J in the primary judgment[6] discussed in further detail later in these Reasons together with the issue estoppel arising from the primary judgment and the costs judgment. That judgment contains a detailed exposition, as will be discussed, of the events surrounding the restructure and specific findings concerning each relevant party’s state of knowledge, including that of the husband. This attack is also contrary to my assessment of the husband’s evidence on this topic before me. I am comfortably satisfied that the husband relied upon the independent expert lawyers and accountants engaged by W to perform the restructuring that occurred over a lengthy period and that the husband did not concern himself to acquire full knowledge of the full detail and the legal consequences of that restructure.
[6] See for example, Dalton J’s finding at [76] of the primary judgment.
An associated attack on the husband’s credit was to the effect that it was the husband’s conduct that placed the wife in the position that she was “forced to litigate” her claims in the Supreme Court litigation. That likewise completely ignores the specific findings made by Dalton J recorded in the primary judgment and the costs judgment following upon the 10 days of trial that took place in the Supreme Court in which those issues were dealt with.
The fact is that the husband, upon separation, voluntarily agreed that each of the husband and the wife would receive half each of the distributions being received from the W business enterprise made to E Pty Ltd as trustee of the Hawkins Family Trust, until the financial affairs of the parties were settled consequent upon their separation. The contention that the husband “gave the wife no comfort” in the face of the restructuring of the W enterprise, to the extent that this is advanced as an attack on the husband’s credit, ignores the factual reality of what was occurring with respect to distributions, and is rejected.
More will be discussed later in these Reasons concerning issue estoppel arising from the judgments of Dalton J, but that aspect aside, the wife’s unilateral conduct in increasing the borrowings on the security of the former matrimonial home from $85,000 to $700,000, without the knowledge or consent of the husband, in the circumstances and for the purposes that was done, is readily characterised as dishonest conduct on the part of the wife which fundamentally damages her credit.
That is compounded by the wife’s attempts in her evidence in these proceedings to legitimise her conduct or to characterise it as being a necessary consequence of the husband’s provocation. Those contentions are based upon the very same factual foundations as were considered and rejected by Dalton J as outlined in the detailed Reasons given by Dalton J in the primary judgment and the costs judgment. In my view it fundamentally damages the wife’s credibility that she would again, in these proceedings, advance such assertions which have no sufficient substance in fact to ground them.
The wife repeated in her evidence in these proceedings a proposition she advanced to Dalton J in her Supreme Court proceedings that was considered and rejected by Dalton J: namely that the decline in profitability of the W business enterprise post-2006 was “manipulated”. That is, the wife effectively advances allegations of fraud against the relevant parties including the husband. She established, in my judgment, absolutely no basis for advancing such propositions in these proceedings and her credit is consequently damaged by so doing. The report of Mr AA identifies and summarises the reasons for the decline.
Similarly, the wife advanced what were, in my judgment, baseless assertions that somehow the husband had historically received, or was receiving, some form or part distributions from the W business enterprise via offshore entities which he had not disclosed in these proceedings.
A particularly stark example of the wife’s capacity to cast adverse aspersions the husband’s way, was her contention during her cross-examination before me that the total of $235,000 in withdrawals made by the husband from his superannuation fund and paid to his solicitors was not actually in respect of the legal costs incurred by the husband in defending himself in the Supreme Court litigation; rather it was, as the wife put it, monies “parked” in his solicitors’ trust account i.e. actually being held for the husband’s benefit. Of course, that aspersion carries with it the corollary that the husband’s solicitor, an officer of the Court, is a complicit party to a fraud being perpetrated upon the Court.
That aspersion is rejected. In circumstances where the wife has spent at least $634,000 in unsuccessfully prosecuting her Supreme Court litigation against nine respondents, including the husband, it is, to say the least, incredible that the wife would mount such a challenge to the husband (the only defendant legally represented at the 10 day Supreme Court trial) incurring costs of $235,000 in successfully defending the wife’s claims in those proceedings.
The wife’s capacity in these respects to make serious allegations of fraud without any rational foundation impacts adversely on the credibility of her evidence.
Further, in my judgment the wife prevaricated and obfuscated when questioned on many topics under cross-examination. Prime examples of that are the answers she gave when questioned about the husband’s initial capital contribution; the level of his earnings during the relationship; and his support of her children during the relationship. It seemed that the wife had a resolute determination to unfairly minimise the husband’s efforts and to resist making any concessions favourable to the husband.
In her efforts in her affidavit evidence to minimise the significance of the husband’s initial capital contribution, the wife purports to provide a complete financial history up until the parties returned to Australia from North America in 2000 concluding that topic (at paragraph 13) with the assertion that the parties had only $250,000 at that time with about $100,000 in credit card debts.
It was only in cross-examination that the wife acknowledged that at the outset of the relationship the husband paid for the wife her then accumulated debts of $16,000, and it was only in cross-examination that the wife acknowledged that substantial funds were yielded from the sale of the business enterprise the husband had established in Country J.
In contrast to the wife, the husband readily made appropriate concessions as to the wife’s role during the relationship and readily spoke in positive terms of her contributions in various respects.
Whilst the husband gave the appearance at times, understandably, of a person fatigued by the litigation with his former wife in both the protracted Supreme Court litigation and these proceedings, I assess that overall the husband was doing his best to provide accurate, truthful and balanced evidence.
Regrettably I do not have any such confidence as regards the wife’s evidence either via her affidavit evidence or in her oral evidence at trial.
In his affidavit evidence the husband refers to the wife’s approach throughout the interlocutory stages of these proceedings to resist orders being made for sale of B Street. The fact that I case managed this case from about early 2014 gives me a particular familiarity with the wife’s approach in this respect.[7] As referred to in the husband’s affidavit evidence, at one point the wife’s resistance included her purportedly entering into a 10 year tenancy agreement with an entity associated with Mr D, the person with whom the wife pursued a relationship upon the separation of these parties. It was only when the Court foreshadowed the setting aside of that transaction that the wife resiled from that misconceived attempt to forestall orders for sale of B Street. Her conduct in that respect likewise does her no credit.
[7]Hawkins & Hawkins [2014] FamCA 1065; Hawkins & Hawkins (No 2) [2014] FamCA 1128; Hawkins & Hawkins [2015] FamCA 284; Hawkins & Hawkins (No 2) [2015] FamCA 735; Hawkins & Hawkins (No 3) [2015] FamCA 760; and Hawkins & Hawkins (No 4) [2015] FamCA 835.
As I have confidence in the husband’s evidence and his credibility as a witness and do not have any such confidence in the wife or her evidence, I generally prefer the evidence of the husband over that of the wife where they differ, except as otherwise expressly stated.
What are the relevant circumstances and events informing the issues in these proceedings?
(a) Initial capital disparity
As already noted the parties commenced cohabitation in 1994, married in 1994, and finally separated in July 2006. Their divorce was pronounced on 25 September 2007.
The husband was aged about 45 years and the wife about 30 years when they commenced cohabitation in 1994.
In his affidavit for trial (filed 15 December 2015) the husband contends that as at the commencement of cohabitation he had accumulated assets worth approximately $1 million. He sets out in that affidavit the factual foundation for that contention by reference primarily to the history of property transactions and other transactions he had engaged in.
I accept that the husband had substantial capital at the outset, but the imprecision in his evidence referred to does not in my judgment support a confident finding that he had as much as $1 million in net assets.
I accept the husband’s evidence that with the September 1994 purchase of the home at CC Town the husband had then accumulated four real properties in which he had equity of about $600,000. I also accept the husband’s evidence that his accumulated capital/savings allowed him to apply $75,000 for a deposit to purchase a property in North America; $100,000 for property renovations; $50,000 for the purchase of motor vehicles; and $15,000 for the purchase of furniture and whitegoods.
Whilst the imprecision referred to precludes a precise finding, on the evidence which I accept I find that it is more probable than not that at or soon after the commencement of cohabitation/marriage the husband had a net asset worth in the order of about $800,000 using the figures just referred to.
In comparison the wife acknowledged in cross-examination that at the outset of the relationship she had accumulated debts of $16,000 which were paid by the husband. Whilst the wife advances propositions to the effect that her then small business was viable, those propositions are not corroborated and would appear inconsistent with the business simply ceasing, rather than being sold, when the parties left Australia for North America in late 1994.
It follows, in my judgment, that there was a substantial initial capital disparity in the husband’s favour. The reality is that at the outset the husband solely possessed the only capital available and from the outset the wife and her children were accommodated in a property owned by the husband.
The wife contends that a combination of imprudent investments, including property transactions entered into thereafter, had the overall effect that whatever was the existing asset position of the husband at the outset was soon lost, and that the husband was solely responsible for that state of affairs.
The husband acknowledges in his evidence the loss of some capital. For example, by his account which I accept, a property at Suburb DD which he had purchased in August 1994 for $410,000 was sold in February 1996 for $310,000. In early 1994 the husband spent about $50,000 on architect fees to build a home on a property at Suburb EE but did not proceed with that. The husband acknowledges the loss of about $100,000 (the renovation costs) on the sale of the property in North America when it was sold. The husband provides evidence of the purchase price, construction and demolition costs in respect of duplexes he constructed on a property at Suburb FF totalling $635,000 and he refers to total sale proceeds of both duplexes of $585,000. His CC Town property was purchased in September 1994 for $103,000 and was later sold for $85,000 on vendor finance terms not ultimately fully paid until 2000. Thus on the husband’s own evidence, which I accept, the husband must have sustained some capital losses but I do not accept the wife’s contentions that all of the husband’s initial capital was effectively lost; nor that the husband is to be treated as solely responsible for losses sustained during their relationship. There is ample authority for the proposition that losses sustained during the currency of a marriage/relationship are generally to be treated as being equally shared unless there exists a proper basis for attributing losses to only one party.[8] Moreover, throughout the period referred to the husband was earning substantial income in his employment.
[8] See, for example Browne v Green (1999) FLC 92-873.
That noted, it is not only the value of initial capital contributed that is relevant but the use made of that capital.[9] Capital losses are relevant to any argument that capital initially contributed is a foundation for further wealth accumulation, or is to find direct reflection in the entitlement the contributing party ultimately receives by way of property settlement.
[9] Pierce & Pierce (1999) FLC 92-844.
(b) Events during the relationship
At the commencement of cohabitation the husband was working as the managing director of H Pty Ltd (“H”), a marketing company. The husband had been engaged in marketing since about 1981. He had worked with a number of companies including Company GG before becoming managing director of H.
I accept the husband’s evidence that he earned a substantial income of about $30,000 per month from that employment.
At the outset the wife had a small business. However the wife relinquished this business shortly after the parties’ marriage and remaining stock of her business was sold through the husband’s marketing firm H. It can reasonably be inferred that with only accumulated debts, the wife’s earnings were vastly inferior to the earnings derived by the husband.
Towards the end of 1994 the husband was appointed chief executive officer for H for North America, which involved the relocation of the parties and the wife’s children to North America. I accept the husband’s evidence that he continued to earn income at a commensurate level with his Australian position.
Between late 1994 until early 2000 the parties and the wife’s children remained in North America with the husband working for a number of companies, before establishing his own marketing company “HH” in Country J in about 1998. I accept that the husband relied upon his accumulated capital to support himself, the wife and her children over the period during which he established this venture.
Visa restrictions prevented the wife or her children from engaging in employment in Country J. That noted, the husband acknowledges that the wife assisted him in other ways in both his employment whilst working for external employers, such as providing hospitality to business associates, and with respect to administrative assistance to him in establishing the company “HH”. He refers to the wife spending one day per week in the administration of “HH” and I accept his evidence in preference to that of the wife who ascribes to herself a far greater role in the business activities.
From mid-1995 until early 2000 the family lived in Country J where the husband was initially engaged in working for another marketing company. As an example of the level of earnings he derived, the husband specifically deposes to earning $990,000 Country J dollars, or the equivalent of AUD $1.1 million, in the 1997 year, and it can be accepted that the husband derived such levels of earnings whilst he was employed in North America.
During the period whilst the family lived in North America the parties bought and sold several homes. The husband estimates that the net retained proceeds of these transactions ultimately was about $200,000 when the parties returned to Australia in 2000, and I accept his evidence in this respect. In addition, “HH” was sold for $400,000 and the husband also brought a boat to Australia sold shortly afterwards for $50,000.
The parties returned to Australia in 2000. They purchased and subsequently sold a property at K Street, Suburb L, M Region. On returning to Australia both parties were employed by a North American firm known as “N Pty Ltd” to assist in that firm’s establishment of their Australian business. The husband received $400,000 from the sale of his Country J business which was used to reduce the mortgage initially obtained to purchase the K Street property.
Towards the end of 2002 the K Street home was sold. It was then that the property at B Street was purchased for approximately $750,000.
I accept the husband’s evidence that only a modest loan obtained from the CBA was required to fund this purchase given the funds already held. B Street was purchased in the sole name of the wife.
The parties lived in the B Street home until their separation in July 2006.
The husband says, and I accept, that at the time of separation there was only about $80,000 owing on the mortgage over that property to the CBA.
W business – E Pty Ltd
As noted, when the parties returned to Australia in 2000 they both secured work with an American firm called “N Pty Ltd” in assisting that firm in establishing its Australian operations.
In about 2002 the parties established their own marketing business marketing products via their company O Pty Ltd (“O”). This company later changed its name to E Pty Ltd (“E”). Both parties can be taken to have made equal contributions to the establishment, and pursuit, of this business enterprise.
In 2003 O/E had been purchasing from the manufacturing company P Pty Ltd (“P”), a company then owned and controlled by Mr and Ms Q and Mr R.
The parties together with the Qs and Mr R resolved to combine their respective business interests and efforts and together they formed a new company, W Pty Ltd.
W acquired the respective assets and businesses of each of O/E and P to put that plan into effect.
Each of the Qs; Mr R and the husband and wife (jointly) assumed a one-third interest in W although as regards the parties, the wife was the named shareholder. Mr Q was the named shareholder on behalf of the Qs and Mr R held his shareholding via a company he owned or controlled.
It also seems that whatever were the actual directorships/shareholdings established, all five individuals involved were employed by W and participated in the organisation of W and all three family interests or groups (Hawkins, Q and R) each had equal one-third beneficial ownership of W.
The wife initially had an administrative/financial management role within W whilst the husband directed himself to marketing, given his experience in that field.
W proved to be a very successful business in a short timeframe. Over a period in 2005/2006 W underwent substantial restructuring over a lengthy period to address, primarily, taxation issues and asset protection based upon expert accounting and legal advice received.
The restructure involved W selling its assets to a new company the same individuals owned and controlled via trusts, X Pty Ltd (“X”); and to then commence paying licence fees to X to use those assets to continue manufacturing and marketing products, as it had been doing. Thus whilst W remained the trading entity for the business, it no longer held any assets of substance. Conversely, X did not trade but held the assets.
In essence such a restructure transferred the trading profits of W to X via the ongoing payment of licence fees by W to X.
The asset protection benefit was that the trading entity, W, no longer held any assets of substance.
The taxation advantage was that X was structured to be the trustee of a unit trust. Each of the Qs; Mr R and the Hawkins held one-third of the units in that unit trust via their respective trustee company of a family discretionary trust. In the case of these parties, the unit holder is E Pty Ltd as trustee of the Hawkins Family Trust, a family discretionary trust controlled by the husband.
The restructure provided taxation advantages to the five individuals involved, as compared to the previous structure.
The wife ceased her active involvement in the business of W, in terms of working within the business on a day-to-day basis, sometime between about late 2005 and no later than July 2006, when she separated from the husband. It appears that it was in about mid-to late 2006 that the restructure referred to was finalised, even though it had commenced well before that in 2005.
For his part, the husband seems to have parted company with the Qs and Mr R and W, in terms of his continuing active involvement in working within W/X in late 2006, and he resigned as a director.
Distributions from W/X
At an early interim stage of the wife’s Supreme Court proceedings (on 5 June 2007) an interim order was made in those proceedings requiring, in effect, that E’s proportion of distributions received from W/X (then in an amount of approximately $30,000 gross per month) be paid to the husband and wife in equal proportions.
There had in fact since separation been a pre-existing agreement between the parties prior to that order being made that each party would receive half of the monthly payment received into E’s bank account and that had been put into effect.
In terms of distributions, the wife in fact received one-half of the distributions made to E from the W business until the final orders were made in the Supreme Court, more than five years later, in December 2012.
The wife thus received approximately $15,000 per month in 2007; and $10,000 to $12,000 per month in ensuing years; gradually reducing to the $8,000 she received for the month of December 2012 (when the Supreme Court made final orders); and she has not received any distribution since those orders were made.
I accept the husband’s evidence (as reflected in Mr AA’s report) that the payments received by E substantially reduced over time from the $30,000 per month in 2007 to an average of about $13,600 per month in 2014 to the level of about $12,000 per month as at trial. These are gross (before tax) figures.
The husband is, at age 67, now retired and his sole source of income is the monthly distribution referred to. As already noted the husband seeks to sell his interest in W held via his trust.
B Street mortgage
As noted, the parties occupied the B Street property, owned in the name of the wife, as at the time of their separation. The husband continued to occupy that property upon the parties’ separation. I accept the husband’s evidence that as at separation the mortgage debt on the B Street property stood at a debit balance of only about $80,000.
As referred to, on or about 20 April 2007 the wife, without any reference to the husband and thus without his knowledge or consent, negotiated a new loan secured by mortgage on the B Street property in the amount of $700,000, and the wife received the proceeds of that loan after payment of the then existing liabilities on B Street.
A striking feature of the wife’s presentation of her case throughout these proceedings is that whilst she urges scrutiny of the husband’s conduct and his use of funds over the 10 year post-separation period to trial; she seems to have a curious capacity to dismiss or minimise her own conduct in respect of this unilateral conduct on her part.
One obvious effect of the wife’s conduct is that interest on an additional mortgage loan of about $620,000 (being the difference between the $700,000 loan and what was then owing) was incurred over a period of more than eight years, from April 2007 until October 2015 when settlement of the sale of B Street occurred. For illustrative purposes only, if an average interest rate of, say, 7 per cent is applied then interest alone on that difference over 8.5 years exceeds $350,000.
The interest burden aside, there are issues as between the parties as to how much of the $700,000 loan the wife initially obtained was spent by her entirely for her own use, without any benefit to the husband, mainly on legal costs for her ill-fated and misconceived Supreme Court proceedings. That aspect is addressed separately later in these Reasons.
On 29 May 2007, after discovering the wife’s unilateral conduct, the husband filed an urgent application in the then Federal Magistrates Court to injunct the wife’s access to the loan funds. That application was heard by a then Federal Magistrate on 5 June 2007 at which time interim orders were made pursuant to minutes of consent. Order 4 of those orders provided for the wife to pay the mortgage over the B Street property, which was on interest only terms.
In accordance with the order of 5 June 2007 the wife paid the mortgage payments (interest only) on the B Street property mortgage. Of course these were in a very significantly increased amount because of the debt incurred by the wife unilaterally; and the wife had the capacity to make the payments from the loan funds she had obtained; as well as from the share of substantial distributions from E she was then receiving, as earlier discussed.
As will be further discussed, the wife continued to meet these mortgage payments until she ceased paying them in mid-2013. Whilst the wife seemingly sought to emphasise in these proceedings that her meeting the mortgage payments on B Street over that period was a matter of her conserving marital property; the fact is that the mortgage debt of $700,000 was created by the wife’s unilateral conduct; and she met the payments from the sources referred to.
As at mid-2013 the wife ceased making payments on the basis that she did not have the funds to do so, having spent $634,000 on legal costs for her Supreme Court proceedings. On the first return date of an interim application on 24 March 2014, the parties agreed to an interim order that order 4 of the orders of the Federal Magistrates Court referred to dated 5 June 2007 be discharged. A notation appears on the orders of 24 March 2014 to the effect that pending further order, the husband pay the monthly mortgage payments for the B Street property.
It was acknowledged by the wife’s counsel in final submissions that at least since 2012 (the primary judgment of Dalton J was delivered in December 2012) the husband was agitating for the sale of B Street so as to discharge the mortgage debt and to bring an end to the interest burden of $4,200 per month.
The wife steadfastly opposed the sale of B Street, even when the husband sought interim orders for sale in these proceedings, on the contention that she sought to retain the property, even if with substantial debt and thus minimal equity, as part of her property settlement.
In that context it was on 9 December 2014 that interim orders were made for, inter alia, the husband to vacate the B Street property by 10 January 2015 (and be responsible for mortgage payments up until that date) and for the wife to assume sole occupancy of B Street conditional upon her continuing to meet mortgage payments thereafter. Provision was made in those orders for sale of B Street in the event that the wife failed to maintain mortgage payments.
The wife sought to tenant B Street and it was in that context, as the husband refers to, that the wife purported to enter into a 10 year lease of B Street with an entity associated with Mr D. That was an obvious attempt by the wife, I find, to render B Street a difficult sale proposition in circumstances where she well knew orders for sale, in the event the mortgage repayments were not made, had been made.
Rental of $700 per week obtained by the wife was directed to mortgage repayments but that left a shortfall of about $1,400 per month. That is, the monthly mortgage payments for interest only were $4,200 and the monthly rental received was $2,800. I accept the husband’s evidence that even then the wife was obstructive as to the necessary processes for listing B Street for sale pursuant to the orders that had been made. It is a matter of record that even when the husband was able to obtain the offer from the ultimate purchaser (a nearby neighbour) the wife was opposed to entering into that conditional contract.[10]
[10] Hawkins & Hawkins (No 2) [2015] FamCA 735.
In the event, I accept the evidence of the husband that he funded, namely via the Mr Hawkins Superannuation Fund, expenses totalling $25,531.75 to effect repairs and improvements to B Street to facilitate the sale.
B Street was sold at a price of $850,000 and settlement of that sale occurred on 16 October 2015. By negotiating the sale with a neighbour the husband avoided the burden of real estate sales commission on the sale. The settlement statement at Annexure “W” to the husband’s affidavit (filed 15 December 2015) confirms that from the sale proceeds the CBA was paid $736,977.35 in respect of the mortgage debt and a further $33,407.06 to discharge the wife’s credit card debt with the CBA. There was thus a balance of $76,233.41.
By orders made on 20 November 2015 each party received $36,500 of these proceeds to fund their respective legal costs in these proceedings, leaving the remaining balance earlier referred to in the Wrightway Legal trust account.
In summary, in respect of meeting interest payments on the loan of $700,000 taken by the wife on 20 April 2007, the wife met interest payments between then and 30 June 2013 of $294,426.11 (Exhibit 6) from a combination of:
a)her share of distributions from W received until Dalton J delivered judgment in December 2012;
b)credit card debt;
c)some payments from the loan capital.
As already noted, the wife partly paid interest payments between January 2015 and the following months from rental income received from B Street.
For his part, apart from meeting rates and other outgoings on B Street during his occupation of the property, the husband was responsible for interest payments from mid-2013 (pursuant to orders) until January 2015 when he vacated the property. These he met from the distributions he received from W or funds accumulated by him from that source. In addition, as earlier referred to, the husband paid about $25,500 largely from his accumulated funds in the Mr Hawkins Superannuation Fund to effect repairs and improvements to B Street to ready it for sale. As to that aspect, having regard to the nature of work undertaken as referred to in the husband’s evidence, I reject the wife’s contention that the husband should be treated as being solely responsible for that expense or for that need for repairs and maintenance.
Exhibit 6 in the proceedings is correspondence from the CBA confirming that total repayments (interest only) on the loan between 20 April 2007 until 30 June 2013 amount to $294,426.11.
Exhibit 10 in the proceedings is the husband’s calculation of total interest incurred of $420,000 from May 2007 until the contract for the sale of B Street was entered into. The wife did not dispute that calculation in any substantial way with her counsel referring in final submissions to a difference of only perhaps $10,000 or so.
I interpolate here that Annexure “II” to the husband’s affidavit filed 15 December 2015 is a CBA home loan statement for the previous loan for the period 1 January 2007 to 28 May 2007. It discloses the then prevailing interest rate of 7.470 per cent per annum and that monthly payments of $2,000 were being paid so that in four months from January to April 2007 (inclusive) the capital amount of the loan reduced from $57,354.46 to $50,714.02.
The point to be made about that is that at that rate of repayment the existing loan was destined to be fully repaid within about two years or so from May 2007. In other words, but for the wife’s conduct in increasing the borrowings to $700,000 in April 2007, it is more probable than not that B Street would have been clear of debt when sold for $850,000, rather than $770,000 in debt having to be paid from the proceeds of its sale. Of course the very substantial interest burden in the meantime referred to would also have been avoided.
This in my view illustrates that the notion that by maintaining interest payments in respect of the mortgage from the time of the additional borrowing the wife was conserving the property of the parties is illusory. It is more aptly described as damage control in respect of a situation created unilaterally by the wife.
Wife’s use of the $700,000 loan
It is not in issue that from the loan funds of $700,000 obtained by the wife on 20 April 2007 the existing debt on the existing mortgage was paid out in the amount of $50,911.23.
It is also not in issue that a Viridian Line of Credit in a debit amount of $35,273.77 was also paid out. What is in issue is whether that was a joint liability. Whilst the husband provides affidavit evidence advancing propositions to the effect that the wife caused that debit balance to accrue
post-separation, either by drawings for her own purposes or by using that source to make loan repayments for the existing mortgage on B Street, this was not a topic explored by counsel for the husband in his
cross-examination of the wife. In those circumstances it seems to me appropriate to conclude that this item was more probable than not a joint liability. Obviously, if that debit balance accrued by reason of mortgage repayments it was a joint liability.
Thus it was that on 20 April 2007 the wife received into her personal CBA account the balance of loan funds of $613,815.
Attached as Annexure “CRH11” to the wife’s trial affidavit filed 25 January 2016 is an earlier affidavit of the wife setting out the wife’s own accounting for the use she made of these funds.
Whilst in final submissions counsel for the husband challenged the wife’s claimed payment of taxation in respect of the 2006 financial year (when the parties were together) in the amount of $35,395.15, again this was not a topic addressed with the wife by counsel for the husband during her
cross-examination. I am prepared to accept the wife’s evidence in this respect that the applicable taxation was for the 2006 year and thus can be treated as a joint liability.
The further payment of tax in the amount of $3,636 is in a different category because on the wife’s own account this was taxation payable by her daughter. It is not demonstrated on the evidence to my satisfaction that this amount is appropriately treated as a joint liability of these parties.
It is not in issue that, by order, the husband received $60,000 of these funds and $19,004.89 was also used to fund the S Accountants report.
Apart from the initial funds received, I accept the husband’s evidence, based upon trust account statements, that the invested portion of the loan advanced attracted total interest of $25,719.22 also subsequently expended by the wife.
Whilst in his final submissions counsel for the wife contended that a total of $500,000 “rounded down” could be taken as having been used by the wife solely to fund her Supreme Court litigation, I find, by reference to the foregoing, that the correct figure is, rounded down, $525,000. That represents 75 per cent of the total initial loan of $700,000 referrable to the proportion of total interest paid on the loan.
Of course, as already noted, a total of about $770,000 in debt had to be repaid to the CBA from the B Street sale proceeds comprised of the mortgage balance of $736,977.35 and the wife’s credit card debt with the CBA of $33,407.06.
Superannuation
It was at about the same time as W was established in 2003 that the parties established the self-managed superannuation fund styled The Hawkins Superannuation Fund.
Both parties thereafter made contributions to that fund.
In early 2006 The Hawkins Superannuation Fund used its accumulated funds to purchase a property at Suburb T for $365,000 plus stamp duty of $11,250.
Upon the parties’ separation in June 2006 neither party made further contributions to The Hawkins Superannuation Fund. Its income thereafter comprised any net rental received for the Suburb T property owned by the fund.
The husband confirms in his affidavit filed on 30 June 2014 (paragraph 9) that he removed $55,000 from the bank account of The Hawkins Superannuation Fund. He asserts he did so out of fear that as a signatory to the bank account the wife could remove those funds.
The husband used approximately $25,000 of those funds to pay the costs assessor retained to prepare an assessment of the husband’s costs of the Supreme Court proceedings, the subject of the order against the wife earlier referred to.
In my judgment the husband’s use of the $55,000 withdrawn was a premature distribution of capital to himself within the sense described in Townsend and Townsend (1995) FLC 92-569 (“Townsend”) and is appropriately treated as a notional add back item.
The husband deposes that, despite demand, the wife has not paid his costs, assessed in the amount of $202,742.66. That assessed amount includes the costs of obtaining the assessment referred to funded in the manner referred to.
In February 2008 the husband created another self-managed superannuation fund styled the Mr Hawkins Superannuation Fund. He used the share of income he received post-separation via E/W to make further contributions to that fund.
It is not in issue that by conserving part of his distributions from W in this way over the period referred to by making contributions to the Mr Hawkins Superannuation Fund the husband had, by December 2012, accumulated $200,000 in that fund. That is in a period the wife was also receiving the same level of distributions as the husband. However, she accumulated nothing. Rather, apart from funding her lifestyle, the wife funded the additional legal fees for her Supreme Court litigation totalling $634,000.
The husband deposes to withdrawing approximately $235,000 from the Mr Hawkins Superannuation Fund to fund his legal expenses of the wife’s Supreme Court proceedings.
I have already referred to the withdrawals the husband made from the Mr Hawkins Superannuation Fund to fund the repairs and improvements to the B Street property to ready it for sale.
I reject the wife’s contention that there ought be added back to a “pool” considered for adjustment as a notional asset the $235,000 the husband withdrew from the Mr Hawkins Superannuation Fund. That is because, first, it was obviously reasonable for the husband to defend himself from the wife’s misconceived claims in the Supreme Court litigation and it was the wife’s conduct in pursuing that litigation that produced that need. Second, the primary source of the funds was not capital existing as at the time of the parties’ separation but rather was income received by the husband
post-separation. As noted, the wife was receiving the same level of income from the same source. There is thus no proper basis for notionally adding back these sums against the husband. In fact, it is extraordinary, in circumstances where the wife caused the need for the husband to expend legal fees, that such an argument would be mounted.
Should the wife bear sole responsibility for the relevant consequences of her Supreme Court litigation?
There is no doubt that Dalton J rendered final judgments in the Supreme Court litigation and that the issues of fact and law her Honour decided, as expounded in her Honour’s Reasons for Judgment in the primary judgment and the costs judgment, were legally indispensable to those decisions. An issue estoppel binding upon the parties in respect of those issues was thus created.[11]
[11] See Blair & Ors & Perpetual Trustee Co Ltd v Curran (Adam’s Will) (193) 62 CLR 464 at 531 per Dixon J; Jackson v Goldsmith (1950) 81 CLR 446 at 466 per Fullagar J (dissenting); Queensland Trustees Limited & Ors v Commissioner of Stamp Duties (Q.) (1956) 96 CLR 131; Ramsay v Pigram (1968) 118 CLR 271 at 276 per Barwick CJ; Port of Melbourne Authority v Anshun Proprietary Limited (Anshun Case) (1981) 147 CLR 589 at 597 per Gibbs CJ, Mason and Aickin JJ; Egri & Anors v DRG Australia Ltd (1988) 19 NSWLR 600; Kuligowski v Metrobus (2004) 220 CLR 363 per Gleeson CJ, McHugh, Gummow, Kirby, Hayne, Callinan and Heydon JJ (citing Carl Zeiss Stiftung v Rayner & Keeler Ltd. & Ors (No 2) [1967] 1AC 853 at 962).
In the lead up to this trial, by reference to affidavits and lists of documents filed by the wife, when she was representing herself, it appeared that some attempt might be made by the wife to re-litigate in this trial issues of fact determined by Dalton J.
However, on 6 October 2015 I confirmed with counsel then appearing for the wife (when the trial was adjourned to, inter alia, afford the wife a further opportunity to file revised affidavit material for the trial), that no dispute was raised on the part of the wife to the conclusion that the final judgments of Dalton J created an issue estoppel with respect to any issue of fact or law determined by Dalton J, as a necessary part of her Honour’s determinations in the principal proceedings and in the costs determination.
Notwithstanding this, the wife (then self-represented) filed an affidavit on 25 January 2016 re-agitating issues, and in final submissions counsel who appeared for the wife at trial, submitted that the wife ought not be found to be responsible for the financial losses to the parties occasioned by her Supreme Court litigation. The thrust of those submissions was, first, that the husband had acted in concert with the other parties involved in the W business enterprise, in removing from the wife control or interest in the W business structure at or after the time of the parties’ separation. Second, it was submitted that the wife, only upon discovering in February 2007 her loss of control or interest, then acted upon “competent legal advice” in pursuing her Supreme Court litigation. Further, it was contended that the wife was “forced to litigate” her Supreme Court claims because the husband did not act to restore the wife to a position of direct control or ownership of W.
In my judgment these submissions confront insurmountable hurdles. First, there is no evidence before me to demonstrate that at all times, or indeed at any time, over the more than approximately six years that the wife pursued her litigation in the Supreme Court, she did so pursuant to competent legal advice which was based upon accurate and complete instructions. It will be seen that Dalton J made strong adverse credit findings about the wife. It is to be remembered that these property settlement proceedings were stayed to allow the wife to pursue her Supreme Court claims. It was at all times open to the wife to pursue relief pursuant to the Act in this jurisdiction in lieu of the claims she prosecuted in the Supreme Court proceedings.
Second, and more fundamentally, these submissions ignore the findings made by Dalton J as recorded in her Honour’s primary judgment (following a 10 day trial) together with her Honour’s findings recorded in the costs judgment delivered in 2013. These determinations are conclusive given also that the Court of Appeal of the Supreme Court dismissed the wife’s appeal.
(c) Loss re: interest payments
By reference to Exhibit 6, between 20 April 2007 and 30 June 2013 total loan repayments (interest only) on the mortgage on B Street amounted to $294,426.11. By reference to Exhibit 10 and allowing for the additional two months to settlement of the sale when repayment was made, interest for the period July 2013 to settlement can be reliably estimated at $117,600. The combined total is $412,026.11. Approximately $310,000 of that total (75 per cent) correlates with the 75 per cent ($525,000) of the initial loan of $700,000 which I have concluded that the wife had for her own exclusive use.
The wife met the $294,000 sum (Exhibit 6) in the period she paid interest pursuant to Court orders from her W distributions, until mid-2013. This puts the wife’s payments overall in their proper perspective. That is, the proportion of total interest paid referrable to the wife’s borrowing/litigation exceeds the total proportion of interest the wife paid. Her payments made no reduction in the capital amount of the loan.
As already referred to, for the reasons already discussed, but for the wife’s conduct it is more probable than not that the full amount of the proceeds of sale of B Street ($850,000) would have been available for consideration in property settlement between the parties, rather than a notional added back sum of $525,000. In the result, $770,000 of those proceeds has been lost in repaying debts.
(d) Notional “pool” considered for adjustment
For the reasons already discussed, and for the further reasons outlined below, I adopt the following items and values for consideration, including notional items to be added back, in considering any adjustments to be made to the parties’ existing property interests.
Item
Value
ASSETS
1. W Group interest
$366,595
2. Husband’s member benefit – the Mr Hawkins Superannuation Fund
$7,494
3. Husband’s member benefit – The Hawkins Superannuation Fund
$259,761
4. Husband’s member benefit – Australian Super
$22,000
5. Wife’s member benefit – The Hawkins Superannuation Fund
$120,239
6. Husband’s CBA account
$27,000
7. Wrightway Legal trust account
$3,233
8. Supreme Court security amount
$700
9. Notional add backs:
(a) Mortgage funds used by wife for her own benefit
$525,000
(b) Husband’s legal fees (including $60,000 from the mortgage)
$80,852
(c) Wife’s legal fees (inclusive of $36,500 from sale proceeds)
$106,000
(d) Wife advance payment (order 14 September 2015)
$30,000
(e) Husband’s advance payment (order 14 September 2015)
$25,000
(f) Husband’s advance payment from sale proceeds
$36,500
(g) Funds withdrawn by husband from The Hawkins Superannuation Fund
$55,000
SUBTOTAL
$1,665,374
LIABILITIES
Y Bank of Country J debt
($39,000)
TOTAL
$1,626,374
The differences between the above schedule and, respectively, Exhibit 9 and the lists appearing at [43] and [44] of these Reasons are self-evident.
Those differences are largely already explained in the foregoing Reasons.
It can be seen that for the reasons already expressed the $525,000 of the mortgage borrowings the wife had to her own use has been added back as a notional asset. An important point to note about that amount is that $525,000 in present dollar terms is being added back for $525,000 in capital withdrawn and used in 2007. I was not provided with any actuarial evidence but I regard it as a matter of common knowledge[13] that rates of inflation and cost of living increases over the period since 2007 dictate the conclusion that in present (2016) dollar terms a significantly higher amount than $525,000 would equate to the worth of $525,000 in 2007. Likewise with respect to the $55,000 amount used by the husband which he withdrew in 2006. Absent precise evidence about this it can only be factored into the discussion below concerning s 75(2) matters and s 75(2)(o) in particular.
[13] Within the meaning of s 144 of the Evidence Act 1995 (Cth).
In his final submissions counsel for the wife confirmed that a total of $106,000 has been expended by the wife upon her legal fees for these proceedings but that this total included the $36,500 the wife received from the B Street sale proceeds. No issue was taken with that by the husband. It is on that basis that this amount is included in the above schedule, and not the $36,500 as a separate amount.
Both counsel contended that it was appropriate that each party’s legal costs of these proceedings be notionally added back to the pool considered for adjustment and I am satisfied that it is consistent with authority to do so in the circumstances of this case.[14]
[14] Chorn & Hopkins (2004) FLC 93-204.
As Exhibit 9 reflects, both parties contended for the notional adding back of ordered payments each received from capital at the interlocutory stages of these proceedings and those items appear in the above schedule. I accept that those payments are appropriately characterised as partial property settlement.
Counsel for the wife acknowledged in his final submissions, appropriately in my view, that the husband should not assume or be assigned any share in the wife’s liabilities for:
a)ordered costs of the Supreme Court proceedings (the “Q Legal Debt” of $135,000 and the “Mr Hawkins Legal Debt” of about $202,000);
b)the wife’s post-separation accumulated credit card debts;
c)the debt upon the wife’s motor vehicle.
Each of these items have thus been excluded to prevent distortion, not because of any finding that they do not exist. That is, for example, I have excluded from consideration both the liability the wife has on her motor vehicle ($15,500) and the stated value of that vehicle itself ($15,000). Likewise I have excluded the husband’s motor vehicle on the basis that it is a post-separation item.
In my judgment, given the lengthy post-separation period, items such as motor vehicles and furniture are appropriately excluded from the adjustment assessment on the basis that in the case of each party these probably derive from post-separation income. The exception to this approach, already referred to, is inclusion of the husband’s CBA account; and his Mr Hawkins Superannuation Fund balance. The wife’s modest interest in her own separate superannuation fund has been excluded.
Obviously, the approximately $202,000 costs order in the husband’s favour has been excluded from the schedule to avoid the distortion of reducing the husband’s entitlement when a percentage is applied. The wife’s liability for this amount is not overlooked but she bears sole responsibility for it.
It can be seen from the above adopted notional pool of items, the husband and the wife respectively each currently hold or can be taken to have received the benefit of, the following items:
Item
Value
Husband
1. W Group interest
$366,595
2. Husband’s member benefit in the Mr Hawkins Superannuation Fund
$7,494
3. Husband’s member benefit in The Hawkins Superannuation Fund
$259,761
4. Husband’s member benefit in Australian Super
$22,000
5. Husband’s CBA account
$27,000
6. Notional half of Wrightway Legal trust account
$1,616.50
7. Notional half in Supreme Court security amount
$350
8. Husband’s legal fees (including $60,000 from the mortgage)
$80,852
9. Husband’s advance payment (order 14 September 2015)
$25,000
10. Husband’s advance payment from sale proceeds
$36,500
11. Funds withdrawn from The Hawkins Superannuation Fund bank account
$55,000
SUBTOTAL
$882,168.50
Less half share – Y Bank of Country J debt
($19,500)
TOTAL
$862,668.50
Wife
1. Wife’s member benefit – The Hawkins Superannuation Fund
$120,239
2. Notional half of Wrightway Legal trust account
$1,616.50
3. Notional half in Supreme Court security amount
$350
4. Mortgage funds used by wife for her own benefit
$525,000
5. Wife’s legal fees (inclusive of $36,500 sale proceeds)
$106,000
6. Wife advance payment (order 14 September 2015)
$30,000
SUBTOTAL
$783,205.50
Less half share – Y Bank of Country J debt
($19,500)
TOTAL
$763,705.50
COMBINED TOTAL
$1,626,374.00
Thus with respect to this notional pool of assets the husband’s proportion constitutes about 53 per cent and the wife’s proportion, about 47 per cent.
Assessment of contributions – s 79(4)(a), (b) and (c)
Given the lengthy post-separation period, I have considered whether an
asset-by-asset approach, rather than a global approach, would be more appropriate to the circumstances of this case.[15]
[15] See Norbis & Norbis (1986) FLC 91-712.
However, as the main assets to be considered were acquired pre-separation and the parties’ financial arrangements remained so intertwined post-separation, mainly driven by the Supreme Court litigation, I have resolved that a global approach should be taken to the notional pool from which minor
post-separation acquired items, such as motor vehicles, have already been excluded. The major items excluded, for reasons already discussed, are the wife’s post-separation acquired liabilities for which she is solely responsible.
At one level the formulation of the notional pool, in terms of what has been included and what has been excluded, applies the same theory as an asset-by-asset approach. That is, that a liability of the wife is excluded on the basis that she is solely responsible for it.
In adopting otherwise the global approach to the items referred to above, I note that each party contended for a global approach being taken to the respective pools of assets they each contended for, which included notional add backs.
Much of the foregoing discussion in these Reasons resonates with one or more of subparagraphs (a), (b) and/or (c) of s 79(4) and that discussion need not be repeated.
In summary, in respect of the husband, aside from the mutual society and support each party provided the other, his relevant contributions from the outset of the relationship until the parties’ separation comprised:
·his substantial initial capital contribution including as it did the provision of a home for the wife and her children;
·his high employment earnings in Australia and then North America which were the sole source of financial support of the wife and her two children for about the first six years of the relationship;
·his establishment, with the wife’s assistance, of the business/company “HH” in Country J;
·his role in working for “N Pty Ltd” and then in establishing the parties’ marketing business via O/E and then his role in the establishment and pursuit of the W business.
It must be observed of the husband that it was his experience in marketing that enabled each of the business enterprises in that field to be established. The W business enterprise was particularly successful in a very short period of time from its establishment in 2003. It must be recognised that the husband’s accumulated skills and experience in marketing was a key ingredient in the parties being able to pursue that opportunity.
In respect of the wife, aside from the mutual society and support each party provided the other, her relevant contributions from the commencement of the relationship up until separation can be summarised as:
·the support she provided to the husband in his North America employment including the hosting of social functions;
·her role in assisting the husband to establish and operate “HH” over several years in Country J;
·her role in working for “N Pty Ltd” and then in the parties’ marketing business via O/E and in turn her role in the establishment and pursuit of the W business on essentially on equal footing with the husband.
I do not overlook that the wife undertook a homemaking role during the relationship but, particularly in the early years of the relationship, it can be understood that the wife’s homemaking and parenting role was directed to her own children. Whilst the husband no doubt benefited from the homemaking the wife provided, his earnings from employment were the sole source of financial support not only for the wife, but for her two children from her previous relationship. In turn, his support of the wife and her children was not only financial.
As earlier noted, the wife ceased her active involvement in W, in terms of work performed, in 2006 and contemporaneously more or less with the parties’ separation. Dalton J makes reference in her primary Reasons to the tasks of financial administration of W performed by the wife, which soon enjoyed great financial success, as becoming beyond the wife’s abilities. Likewise, the husband ceased active day-to-day involvement in W soon after the parties’ separation.
In the post-separation period, I have already made reference to each party’s receipt of the substantial distributions that continued to be received from W in the period from separation in July 2006 until Dalton J’s primary Reasons/judgment was delivered in December 2012.
Whilst each party can be taken to have been at liberty to spend their respective post-separation incomes as each of them chose to do (in the case of the wife a substantial part of it on her Supreme Court litigation), the fact is that the Supreme Court litigation caused the husband to expend $235,000 of his post-separation income in defending himself in that litigation.
Whilst authorities eschew the notion of “negative” contribution,[16] in the holistic assessment of contributions for the entire relevant period from the outset of cohabitation until trial, it puts the wife’s contributions overall in proper perspective to have regard to the economic consequences of her
post-separation Supreme Court litigation as earlier discussed.
[16] See, for example, JS and GP (2006) Fam LR 88 (citing Antmann and Antmann (1980) FLC 90-908); Kennon v Kennon (1997) FLC 92-757 and Spiteri and Spiteri (2005) FLC 93-214.
Whilst the husband’s post-December 2012 receipt of distributions from W; and his continued occupation of B Street are relevant factors, there are some balancing considerations as have already been discussed in addressing those topics.
In my judgment notwithstanding those factors, the husband’s substantial initial capital contribution in a 12 year marriage which produced no children; and his sole financial support of the wife (and her children in the early years); and comparison of post-separation conduct of each party respectively, results in particular distinguishing factors in the husband’s contributions when compared to those of the wife.
In my judgment an apportionment of 60 per cent/40 per cent in favour of the husband of the notional pool of assets considered is the appropriate reflection of the contribution-based entitlement of each party.
Relevant s 75(2) matters – s 79(4)(e)
The 20 per cent disparity produced by a 60 per cent/40 per cent apportionment of the notional pool of items considered for adjustment equates to $325,274.80.
Regard must be had to the fact that the notional pool of items considered for adjustment includes a substantial component of notional assets which no longer exist. Indeed in excess of $850,000 in total of the overall total value of $1,626,374 comprises notional assets no longer in existence, the major item of which is the $525,000 in mortgage funds used by the wife for her own benefit. I have earlier made reference to the difference between $525,000 in 2007 values to present values.
Whilst superannuation may be treated as property for the purposes of s 79, that does not mean that a superannuation interest necessarily has the same characteristics as a liquid asset. At age 67 and retired, the husband can access his superannuation whereas at age 53 years and still working, the wife cannot access hers.
Further, it must be recognised that the notional pool does not, for reasons already discussed, include the costs order of approximately $202,000 in the husband’s favour which is a liability of the wife; nor does it include the wife’s other substantial post-separation acquired liabilities.
An important factor relevant to s 75(2)(o) is that without orders it would seem unrealistic to conclude that the husband is ever likely to be paid by the wife the Supreme Court costs ordered in his favour. I am satisfied that the husband actually spent $235,000 in costs and even receipt of the approximately $202,000 ordered would not represent full recovery. The point is that without orders now it would seem unlikely that the wife will pay the husband this liability from her own (non-existent) resources.
The written submissions filed on behalf of the wife on 14 March 2016 foreshadow, unsurprisingly given the wife’s overall financial position, her bankruptcy if she does not secure from these proceedings one-half of the ongoing W distributions on the footing that such interest is retained, rather than it being sold. As that will not be the outcome of these proceedings, and the wife may declare bankruptcy (or a creditor may petition for it), this adds to the prospect of the husband not receiving recompense for the loss to him of spending $235,000 of post-separation income in successfully defending the wife’s Supreme Court proceedings, absent orders. Bankruptcy also adds to the prospect that the wife’s other liabilities will never in fact be paid.
I have earlier referred to the unquantifiable losses caused to the W business by the wife’s pursuit of her Supreme Court litigation as a matter relevant to s 75(2)(o). However, as I have already dealt with that in dealing with the topics of notional rental benefit to the husband of his occupation of B Street; and his receipt of distributions post-December 2012 under the rubric of contribution assessment, it is important not to double-count the same factor.
A s 75(2)(o) factor operating in the husband’s favour is the financial and other support that he provided to the wife’s children during the relationship.[17] As already noted, the wife’s children were aged about 10 years and 9 years respectively when the parties commenced cohabitation in 1994, and those children were reliant upon the parties for their financial support for about 10 years of the 12 year relationship. The husband’s employment was the sole source of financial support of those children between 1994 and 2000 when the parties were in North America and these were obviously the expensive teenage years of those children. Their own father did not provide support. Whilst the parties dispute the period involved, for some period private school fees for the education of these children were involved. The husband also provides evidence, which I accept, that for a time one of these children resided in the home unit owned by The Hawkins Superannuation Fund on favourable
(non-commercial) terms. All that goes with the financial and other support of children of those ages over a period of about 10 years out of 12 years of this relationship is a very significant factor in the husband’s favour.
[17] In the Marriage of Robb and Robb (1995) FLC 92-555.
The husband is 67 years of age and I accept his evidence that he is retired. The wife is 53 years of age and operates her own business earning a modest income of about $400 per week. Undistracted by litigation she has pursued for the past 10 years since launching her Supreme Court litigation, (and for substantial periods representing herself), there are reasons to conclude that the wife can increase her earnings either from her current business or in employment. The wife performed an administration/financial management role in the parties’ businesses and then within W and she presents as capable of discharging a range of employment roles. In comparison to the husband, at his age, the wife, at her age, enjoys a residual earning capacity for the balance of her notional working life that the husband does not have.
Fundamentally, the relevant s 75(2) factors favouring an adjustment in favour of the wife include the substantial disparity in assets between her and the husband and the disparity produced by a 60 per cent/40 per cent outcome of contribution-based entitlements. Taking also into account, as earlier referred to, that substantial notional assets which no longer exist have been brought to account as notional add backs, the disparity referred to assumes particular significance.
The wife’s actual liabilities, including her debts for legal costs in the Supreme Court proceedings and her credit card debts, are essentially post-separation created and are of the wife’s own making. The wife has been the author of her own (and to a significant extent the husband’s) financial misfortune. I do not consider that in those circumstances s 75(2) is a legitimate means to address the wife’s liabilities. That would, in my judgment, be antithetical to the overall, and overriding, objective of achieving just and equitable orders.
Balancing the competing considerations overall it seems to me that a 5 per cent adjustment for s 75(2) matters in favour of the wife is called for. That represents a disparity of 10 per cent equating to $162,637.40 in value of the notional pool considered adjusted in the wife’s favour.
For the husband to receive his overall 55 per cent entitlement in the notional pool he is to have or receive $894,505.70. As reflected above he currently has or has received the benefit of $862,668.50, a difference of $31,837.20. That amount will need to be found from the wife’s member benefit in The Hawkins Superannuation Fund. That adjustment will reduce the wife’s member benefit from $120,239 to $88,401.80.
Just and equitable orders
The husband gave evidence, which I accept, of his desire to sell as soon as possible the interest held by E Pty Ltd as trustee of the Hawkins Family Trust in W (W Pty Ltd; F Unit Trust; X Pty Ltd and G Unit Trust) and of his reasons or motivation to effect such a sale, which I also accept. The husband provided evidence, as earlier referred to, of a prospective sale he had negotiated with Mr R.
In summary, the husband expressed what on the evidence overall I accept to be legitimate, concerns about the ongoing decline in the W business borne out by evidence already referred to, and that Mr R was interested in acquiring the interests of the other involved parties so that he might take the business of W in a different direction. In both his report and oral evidence Mr AA referred to the future risks to the ongoing profitability of W and I accept the genuineness of the husband’s expressed concerns in this respect.
I have earlier referred to the fact that the Court’s invitation to the parties to provide the Court with Mr AA’s calculation of any relevant taxation or realisation costs in light of the offer from Mr R was not pursued by either party.
That noted, by reference to the offer of Mr R referring to a price of $400,000, it may be that the husband via E can achieve a negotiated sale of the relevant interests at a higher net return (net of any realisation or taxation costs) than the value of $366,595 that has been adopted. To allow for that prospect it is just and equitable to make an order that the husband cause to be paid to the wife 45 per cent of any difference between that figure and any higher net sum achieved for those interests, after taking into account any realisation and taxation costs.
The parties are currently jointly and severally liable for the debt to the Y Bank of Country J; and the parties jointly have an interest in each of the Supreme Court security deposit and the remaining funds from the sale of B Street held in the Wrightway Legal trust account. If orders are made, as I consider to be appropriate, for the husband to assume sole responsibility to pay the debt to the Y Bank of Country J; and for the husband to receive the wife’s share of the other items; this can be adjusted for from the wife’s member benefit in The Hawkins Superannuation Fund. The necessary net adjustment amount allowing for these items is $17,533.50.
If the earlier discussed adjustment amount of $31,837.20 plus this amount of $17,533.50 (total rounded $49,371) is adjusted for from the wife’s member benefit, it reduces from $120,239 to $70,868.
In my judgment it would be unjust and inequitable to the husband if the wife receives or retains benefits from final property orders on the one hand, but declares bankruptcy, as she foreshadows, so that the husband achieves no recovery of the ordered costs in circumstances where he applied $235,000 of mainly his post-separation income in successfully defending himself in the Supreme Court proceedings. On that basis the balance of the wife’s member benefit of $70,868 ought be assigned to the husband in partial satisfaction of the debt owed by the wife to the husband pursuant to the costs order of the Supreme Court. That debt is in the amount of $202,742.66 and would thereby be reduced to $131,874.66.
Whilst this would have the overall effect of increasing what the husband receives from the pool of assets considered, it also has the effect of reducing a liability of the wife, which I have found she ought bear sole responsibility for, by that same amount.
Otherwise I consider that orders should be made for each party to receive or retain the benefit of what each currently has or has had the benefit of.
Any notional or apparent unfairness to the wife of such an overall result is, in my judgment, of the wife’s own making. On my findings the wife has already had the exclusive use for her own benefit of the $525,000 in capital she applied to her Supreme Court litigation which in turn produced the consequences to the husband already discussed. But for that litigation, it is more probable than not that the full amount of the B Street sale proceeds of $850,000 would be available to the parties, rather than the modest balance after $770,000 in debt had to be paid. I have already referred to the feature that between them the parties have expended $869,000 in legal costs in the Supreme Court litigation for no return to them of any positive result. In other words, the loss of $869,000 just in legal costs.
I am therefore satisfied that in the unfortunate circumstances of this case, the orders proposed are just and equitable and appropriate within the meaning of s 79.
Spousal maintenance
I reject the wife’s proposition that, fashioned as an order for spousal maintenance, the wife should have secured to her 50 per cent of the distributions from W on the foundation that orders be made for this interest to be retained. I have already determined that it is just and equitable for the husband to retain that interest and to sell it as he seeks to do.
On 2 December 2014 for Reasons then given (Hawkins & Hawkins [2014] FamCA 1065) I dismissed the wife’s then claim for interim spousal maintenance in the weekly sum of $1,397. In those Reasons I set out, by reference to authority, the applicable principles for the determination of spousal maintenance and I incorporate those Reasons to avoid the need to restate those principles here.
On 9 December 2014 for Reasons then given (Hawkins & Hawkins (No 2) [2014] FamCA 1128) I made the currently operative interim order for spousal maintenance in favour of the wife to commence on and from 11 January 2015, in the context of that being the date when the wife assumed occupancy of B Street on the condition that she thereafter meet the mortgage repayments. As earlier discussed, the wife did not meet that condition and further orders governing sale of B Street had to be made for the Reasons given on 20 April 2015 (Hawkins & Hawkins [2015] FamCA 284) and on 8 September 2015 (Hawkins & Hawkins (No 2) [2015] FamCA 735).
In her financial statement filed on 14 March 2016 the wife deposes to a total average weekly income of $890 from a combination of the $500 in weekly interim spousal maintenance and an estimated $390 received from her
self-employment. She there deposes to $890 in weekly expenditure although $300 of that is unparticularised, described as “other necessary commitments” which are not specified.
Counsel for the husband did not challenge the wife in cross-examination as to her claimed expenditure or claimed needs. Moreover, whilst in the husband’s affidavit material he urges the contention that the wife and Mr D remain in a de facto relationship (with the attendant financial considerations), this too was not a topic explored by counsel for the husband in his cross-examination of the wife. On her affidavit evidence the wife contends that her intimate personal relationship with Mr D ended in 2012.
Given the evidence of the wife which went unchallenged by cross-examination it can reasonably be concluded that the wife has a prima facie need she is unable to herself meet, currently, for $500 per week in spite of my disquiet that her evidence does not particularise the $300 per week component of her expenses earlier referred to.
As noted in my Reasons delivered on 2 December 2014, s 72(1) of the Act sets out the three circumstances which may cause the need for maintenance to arise and, relevantly here, provides in subparagraph (b):
(b) by reason of age or physical or mental incapacity for appropriate gainful employment …
I have already made reference to the likelihood that if the wife is no longer occupied in litigation, as she has been since her institution in 2007 of the Supreme Court litigation, she will be able to better pursue her business activity or more fully exercise her residual earning capacity.
The wife advances no medical evidence of any physical or mental incapacity as precluding her from appropriate gainful employment nor, at her age, can she be taken to be beyond the age for appropriate gainful employment returning an income sufficient for her own support.
Section 74(1) of the Act refers to the Court making such order for maintenance as is considered “proper”. I do not consider that criteria is met if an order for maintenance focuses upon the need for the wife to address the financial consequences created of her own making, in the respects already addressed in the circumstances of this case.
With respect to the husband’s capacity, with the prospective sale of the W interest the husband will have assets or capital but will no longer have an ongoing source of income. He currently resides in rental accommodation and it is reasonable to conclude that a substantial proportion of the husband’s capital will be utilised in the husband housing himself in future and for his own needs in retirement. As already discussed, the husband can be taken to have no residual capacity to derive employment earnings, compared to the wife’s position. The other relevant s 75(2) matters have already been discussed and that discussion need not be repeated here.
Section 80(1)(ba) of the Act permits the making of an order for a specified transfer or settlement of property to be made by way of maintenance and subsection (a) of that section authorises an order to be made in lump sum form.
In my judgment, perhaps erring on the side of generosity to the wife, even if she undertakes some course or courses of retraining to better equip her for external employment, her capacity to meet her needs in full ought be able to be established within the next two years, if not far earlier.
If the amount of $500 per week is capitalised for the next two years an amount of $52,000 is arrived at without discounting for present values of a lump sum.
In my judgment, in the unusual circumstances of this case, the “proper” order for spousal maintenance is to order that $52,000 of the remaining debt owing by the wife to the husband pursuant to the Supreme Court costs order ought be settled upon the wife as and by way of payment to the wife by the husband of lump sum spousal maintenance.
This has the effect of reducing the remaining liability of $131,874.66 by $52,000, to a total of $79,874.66.
Form of orders
On a number of occasions in the course of the trial, including at the final submissions stage, I impressed upon counsel the need for the Court to be provided with a comprehensive form of orders in enforceable form, as sought by each party.
At the conclusion of the trial both counsel were afforded a further opportunity to submit by close of business on the following day a form of orders meeting that description.
The further orders submitted by counsel for the husband on 16 March 2016 do not meet that description. For example, the order sought in relation to the wife’s member benefit in The Hawkins Superannuation Fund is in an unenforceable form.
This is particularly disappointing in the context of the husband having incurred $59,000 in liabilities for legal fees in respect of this trial (Exhibit 7).
I have therefore had to resort to formulating myself the form of orders now set out at the commencement of these Reasons.
Whilst the wife’s counsel submitted on 15 March 2016, in accordance with the direction referred to, a comprehensive minute of draft orders sought by the wife, on the following day the wife elected to submit her own minutes of orders.
To the extent that by these minutes the wife purports to resile from agreements reached on issues resolved during the trial, for example the agreed value for the W interest, I do not propose to engage with them otherwise than as discussed already in the foregoing Reasons.
I would only note that even if the wife were to be permitted to depart from admissions made by her counsel, on her instructions, during the trial (at significant prejudice to the husband), my acceptance of Mr AA’s evidence produces the same outcome as to my findings as to the value of the W interest; and the reasonableness of the husband’s position in now seeking to sell that interest. As Exhibit 9 reflects neither parties’ counsel directed any argument in final submissions departing from Mr AA’s assessed value for the W interest as that item had been agreed.
Whilst each party sought an order for costs such an application can only be considered if it is made in the context of, with submissions focused upon, the findings and conclusions expressed in these Reasons.
For these reasons I make the orders set out at their commencement.
I certify that the preceding three hundred and thirteen (313) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Kent delivered on 3 June 2016.
Associate:
Date: 3 June 2016
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