Holbert & Holbert
[2024] FedCFamC1F 85
•21 February 2024
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 1)
Holbert & Holbert [2024] FedCFamC1F 85
File number(s): MLC 2024 of 2018 Judgment of: BAUMANN J Date of judgment: 21 February 2024 Catchwords: FAMILY LAW – PROPERTY – Where the Court disregards alleged debt – Where a Jones & Dunkel inference is made – Where the parties are over $7,000,000 apart on the balance sheet – What orders do justice and equity and achieve finality Legislation: Family Law Act 1975 (Cth) ss 75, 79 Cases cited: Biltoft & Biltoft (1995) FLC 92-614
Clauson & Clauson (1995) FLC 92-595
Gosper & Gosper (1987) FLC 91-818
Hickey & Hickey (2003) FLC 93-143
Jabour & Jabour [2019] FamCAFC 78
Jones & Dunkel (1959) 101 CLR 298
Mayhew & Fairweather (2022) 64 Fam LR 633
NHC & RCH (2004) FLC 93-204
Division: Division 1 First Instance Number of paragraphs: 80 Date of last submission/s: 9 May 2023 Date of hearing: 12–15 September 2022, 10 October 2022 and 9 May 2023 Place: Brisbane Counsel for the Applicant: Mr B Geddes KC Solicitor for the Applicant: Mills Oakley Lawyers Counsel for the Respondent: L Colla (12–15 September 2022) Solicitor for the Respondent: Lakey Family Law and Mediation (12–15 September 2022) Litigant in person (10 October 2022 and 9 May 2023) ORDERS
MLC 2024 of 2018 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN: MS HOLBERT
Applicant
AND: MR HOLBERT
Respondent
ORDER MADE BY:
BAUMANN J
DATE OF ORDER:
21 FEBRUARY 2024
THE COURT ORDERS:
1.That as and by way of a final adjustment of the parties’ property interests pursuant to s 79 of the Family Law Act 1975 (Cth) (“the Act”), the property of the parties be adjusted as provided for hereunder.
2.That within sixty (60) days of the date of these Orders, and contemporaneously:
(a)the parties do all acts and things and execute all documents necessary to cause to be transferred to the wife all of the husband’s right, title and interest in the real property at J Street, Suburb K in the State of Victoria being all of the land described in Certificate of Title Volume … Folio … (“the Suburb K property”).
(b)the parties do all such acts and things and execute all such documents as may be required to cause the husband to be released and discharged from any liability arising under the National Australia Bank Limited mortgage …, with the wife to refinance or otherwise discharge or restructure the said mortgage to give effect to the obligation to release the husband from all liability;
(c)hereafter the wife shall be solely liable for and shall indemnify the husband for all rates, taxes and like apportionable outgoings of and incidental to the Suburb K property, with the wife having sole use and occupation.
(d)contemporaneously, the husband and the wife do all necessary acts and things to transfer to the husband, at the expense of the husband, all of the wife’s right, title and interest in the real property at
12 N Street, City G, Country C, United Kingdom (“the12 N Street property”) which the husband shall retain free from any claim by the wife, subject to the husband being solely liable for and indemnifying the wife with respect to all and any liabilities of whatsoever nature and kind encumbering or affecting the12 N Street property.
3.That the husband retain free from any claim by the wife all of his right title and interest (if any) in the following assets and entities:
(a)O1 Limited;
(b)O2 Limited;
(c)P Limited;
(d)Q Limited;
(e)L Limited;
(f)The R Partnership;
(g)S1 limited (Formerly S2 Limited);
(collectively “the Holbert entities”)
(h)
21 N Street, City G, Country C; and(i)Any superannuation and employment related benefits held in his name.
4.That the husband be solely liable for and indemnify the wife and keep her forever indemnified in respect of all and any liabilities of whatsoever nature and kind that he, the wife or the Holbert entities may be liable for arising from the parties’, or either of the party’s, interests held in the Holbert entities, and any other asset whether in Country C, the United Kingdom, Australia or any other jurisdiction, including but not limited to all and any liability, claims, demands or actions for taxation and/or duty/ies of any nature and kind, save as provided for in Order 2(c) with respect to the Suburb K property.
5.That in the event the wife is unable or unwilling to refinance or otherwise discharge the Suburb K mortgage so as to release the husband from liability, then the following orders shall apply:
(a)The parties do all such things and sign all such documents to sell the Suburb K property upon terms and conditions acceptable to the wife, and where the wife shall be entitled to nominate the real estate agent to effect a marketing and sale of the Suburb K property and any solicitors to be engaged for the seller;
(b)That the proceeds of sale of the Suburb K property shall be applied as follows:
(i)To pay the costs and commissions of the sale;
(ii)To discharge the mortgage encumbering the Suburb K property;
(iii)To pay outstanding rates and other taxes associated with the property; and
(iv)To pay the balance to the wife.
6.That unless otherwise specified in these Orders and save for the purposes of enforcing any monies due under these or any subsequent orders:
(a)each party be solely entitled to the exclusion of the other to all other real and personal property (including choses-in-action and shares) in the possession of such party as at the date of these Orders;
(b)monies standing to the credit of the parties in any joint bank account are to become the property of the wife;
(c)each party forego any claims they may have to any superannuation and employment benefits belonging to or earned by the other;
(d)each party be solely liable for and indemnify the other against any liability encumbering any item of property to which that party is entitled pursuant to these Orders;
(e)insurance policies remain the sole property of the owner named therein;
(f)each party be solely responsible for any liability of whatsoever nature and kind in their respective names, including but not limited to any credit card liability; and
(g)any joint tenancy of the parties in any real or personal estate is hereby expressly severed.
7.That in the event either party fails to execute any deed, document or instrument necessary to give effect to these Orders, within twenty one (21) days of that deed, document or instrument being forwarded to either party by post and by email, then in order to give full force and effect to the terms of these Orders, the Registrar of the Federal Circuit and Family Court of Australia at Melbourne be appointed, pursuant to s 106A of the Act, to execute such deed or instrument in the name of such party and to do all acts and things necessary to give validity to the operation to the deed or instrument, and in that regard:
(a)a defaulting party shall pay the other party’s taxed costs of and incidental to such request and production of documents to the Registrar; and
(b)either party have liberty to apply as to implementation or enforcement of these Orders upon the giving of seven (7) days written notice to the other.
8.That if either party elects to pursue an order for costs of and incidental to the property proceedings, then they shall file an Application in a Proceeding seeking such order, supported by an affidavit and written submissions. The Court shall, in such event, make an order in chambers directing how any application (or cross application) for costs shall be dealt with on the papers, unless otherwise ordered.
9.That all extant property and spouse maintenance applications be otherwise dismissed.
IT IS NOTED:
A.That pursuant to s 81 of the Act, the parties intend these Orders shall, as far as practicable, finally determine the financial relationship between them and avoid further proceedings between them.
B.That these Orders have been amended pursuant to rule 10.13 of the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).
Note: The form of the order is subject to the entry in the Court’s records.
Note: This copy of the Court’s Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 10.14(b) Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 10.13 Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).
Section 121 of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish proceedings that identify persons, associated persons, or witnesses involved in family law proceedings.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Holbert & Holbert has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
BAUMANN J:
This complex property dispute between the Applicant wife Ms Holbert and the Respondent husband, Mr Holbert, has been shaped by significant disputes about, at least:
(a)what represents the various legal and equitable interests in real and personal property in Country C, Australia and the United States of America;
(b)depending on the findings so made, what is the current value of all interests – in circumstances where at first blush, by final written submissions, the wife asserts interests totalling $11,649,976 and the husband asserts nett interests totalling $4,266,399 (a difference of $7,383,577);
(c)a significant number of commercial and other transactions in entities in Country C in which (it is accepted) the husband has a minority interest;
(d)allegations by the wife that the husband has failed to make timely and full disclosure, both as ordered by the Court and/or as required under the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth);
(e)the husband’s changing legal representation which ultimately led to the husband making final submissions after the hearing, when he says he could no longer afford representation;
(f)a litigation journey that commenced in February 2018 in the Melbourne Registry and had, before the trial before me commenced in September 2022 and an attempted re‑opening in May 2023, at least:
(i)17 judicial Court events;
(ii)trial listings in 2020 and 2021;
(iii)a judicial mediation in 2022; and
(iv)so many other Court events that it is unhelpful to record.
To this tragic litigation journey must be added the delay in publishing these Reasons, for which the Court expresses its regret.
PRINCIPLES
Shortly stated, but more concisely and elaborately described in the Full Court decision in Hickey & Hickey (2003) FLC 93-143, in a property settlement case, the Court must adopt a well-known four-step process, essentially:
(a)to identify the pool of assets and liabilities generally, and usually at the time of hearing;
(b)to assess the relative contributions of both the financial, non-financial, direct and indirect nature as specified by s 79(4) of the Family Law Act 1975 (Cth) (“the Act”);
(c)to consider the factors as are relevant contained in s 75(2) of the Act; and
(d)finally, consider the ultimate analysis to determine whether the order the Court proposes to make is just and equitable to both parties.
At the final hearing it was clear from the cases run by Counsel for the wife Mr Geddes of King’s Counsel and Counsel for the husband Ms Colla, that both parties contended it is just and equitable to make property adjustment orders (s 79(2) of the Act). I agree.
In an attempt to contain these Reasons within a sensible length whilst dealing, as the Court must, with the most substantial issues which lead the Court to findings necessary to illuminate the pathway to the ultimate orders, the Court does not deal with every factual dispute or comment on every submission. It is not required to do so. In this regard, the filed and tendered material contains numerous documents relating to correspondence between the parties’ lawyers which, although read by the Court, do not need to be canvassed in particular. I accept that some of that correspondence will possibly be relevant if the Court is required, as seems likely, to be asked to decide a costs dispute.
Having decided to take this approach, I have endeavoured, within the matrix of the four-step process earlier identified, to deal with a number of discrete issues – mostly effecting the pool of interests.
CREDIT
The wife contends in submissions that the husband gave some evidence that was “wholly objectively implausible and at times, is inconsistent with the documentary evidence available” such as, I infer, he should be regarded as a witness without credit. The wife accused the husband’s brother Mr T of seeking to mislead the Court.
I have formed the view that the intensive litigation journey did have an effect on both parties and that whilst, as will be seen in these Reasons, I do not accept some of the husband’s assertions, I do so for the reasons given and not because I formed the view that the husband was an unreliable and untruthful witness in every way. Furthermore, I find that Mr T, who had somewhat unexpectedly been thrust into the family business without the historical background of engagement the husband had undertaken, was both a helpful and creditable witness generally. My impression was that there were some matters where he followed the lead of his older brother (the husband).
Mr Geddes KC, in his submissions, raised the prospect of a Jones & Dunkel (1959) 101 CLR 298 inference arising from the husband not calling his mother Ms U. I deal with that issue later, however attempts by the husband in his response to submissions by the wife to explain his mother’s inability to give evidence in this case, is not permissible. The husband was represented by Counsel at the trial. His affidavits had been prepared by expert lawyers. In circumstances where Ms U’s evidence would have been appropriate, a failure to explain that absence during the hearing (with evidence from the husband), is not cured by attempting to do so after the trial is finished.
I provide the following contextual history before dealing with the major areas of factual and evidentiary conflict. Statements of fact hereafter shall be construed as findings of fact.
BRIEF CONTEXTUAL HISTORY
The husband was born in 1974 in Country C whilst the wife was born in Australia in 1978. They are now aged 49 years and 45 years respectively.
The parties commenced cohabitation in City G, Country C in 2005. At that time, the husband was working in the family enterprise primarily.
The parties married in 2006. The husband’s father Mr V (who died in 2012), was a businessman who built up a portfolio of investment properties held in various holding companies – although at this time the primary corporate entity in the group was L Limited. After the husband’s father became ill in 2008, the husband took on more director and manager responsibilities in the group.
The parties were blessed with two children – X born 2010 (now aged 13 years) and Y in 2014 (now aged nine years). Before the birth of X, the wife ceased work, however she returned to part-time employment after X’s birth.
Prior to marriage, after a short-term property investment at D Street, City G, the parties jointly purchased a property at 1 N Street, City G for £345,000 – with a loan of £46,000 approximately from the husband’s father assisting them. The husband says, and I accept, a neighbouring property (2 N Street) that had been purchased by the husband’s father for £150,000 was later gifted to the parties after Mr V’s death, with the consent of the husband’s mother, Ms U.
Before relocating to Australia in late 2014, the husband concedes he generated a good income from the property companies that supported a high standard of living for the family– which included regular overseas trips for business and pleasure. In early 2015, the parties purchased the family home at J Street, Suburb K (“the Suburb K property”) for $1,825,000 – with the benefit of a bank mortgage for $1,300,000. Over the next six months the Suburb K property was extensively renovated at a cost of around $220,000. It has increased significantly in value.
Sadly, by the time of relocation, the parties’ marriage had began to deteriorate – I infer not assisted by the need for the husband to spend considerable time in Country C for business purposes. The wife commenced employment as an office worker in late 2017, working part‑time.
The parties finally separated in February 2018 and the day after separation the wife filed her Initiating Application. Since separation, the wife has remained living in the Suburb K property with the children – the husband returning to Country C in early 2018 where he has continued to primarily live, whilst returning infrequently (around six visits) since then for visits to see the children or some Court events (including the final hearing).
As earlier indicated, the litigation journey has been somewhat tortious. I will, as required, refer to some relevant Court Orders – save to generally observe that with the level of trust between the parties having substantially evaporated, the wife has not accepted that the husband’s business interests and income in Country C has been as adversely affected as the husband claims – and this has meant the continued applications for discovery and production of documents has been unrelenting.
The steps taken in late 2019 in the business entities, which the wife characterises as a form of “conspiracy” between the husband and members of his family and other business associates in Country C to artificially reduce or diminish his assets and/or increase debts, is an important issue at the core of this, conflict together with the huge disparity in the asset values of the various interests as set out later.
The competing proposals, which I refer to next, identify a clear difference in positions – with the wife wishing to retain the family home in Australia and seeking a cash adjustment (to enable her to pay the mortgage on the home), and the husband asserting that the equity in the home is the major remaining asset and that it needs to be sold to help defray numerous liabilities he says he owes.
The secured mortgagee, although the equity in the Suburb K property is substantial, has not been receiving full mortgage repayments and they, not surprisingly, want some action to be taken by the parties in respect of the mortgage debt. The uncertainty of this situation, on top of the litigation journey, causes the wife significant anxiety and she clearly blames the husband for her predicament.
COMPETING FINAL PROPOSALS
At Appendix One to these Reasons is the final orders now sought by the wife, consistent with her final submissions.
At Appendix Two to these Reasons is the final orders now sought by the husband, consistent with his final submissions and his amended Response filed 26 August 2022. As is apparent, the positions are “poles apart”, with the differences to be further analysed when discussing what orders achieve justice and equity for both parties.
Simply stated however, the wife sees to secure a payment from the husband of $2,250,000 which will enable her to discharge the mortgage on the Suburb K property and, pending payment, seeks some security over the Country C entities. In broad terms, the wife seeks, in percentage terms, a division of the interests in the proportions of between 45% and 50% to her.
The husband’s proposition is that a division of 65% to the husband and 35% to the wife is just, although his minute of order is confusing as he seeks 75% of the nett proceeds of sale of the Suburb K property without any cash adjustment for other interests held by him in Country C.
I will now seek to explain how the Court has reached its conclusions as to the nature and value of the numerous interests in the overseas entities.
BUSINESS ENTITIES GENERALLY
On 13 November 2018, the parties were ordered to jointly instruct a United Kingdom based accountant to prepare a report as to the value of the husband’s interests in the Country C entities “having regard to the agreed/determined real estate values, and the husband’s percentage interest in each entity”. The parties further agreed to have the expert report as to the impact of any inheritance tax on the husband’s entitlements and tax impacts generally.
Although this seems to be a simple enough order, a combination of factors caused difficulties (and numerous Court events) in its implementation. I have decided to spare the reader of these Reasons a fulsome examination of those difficulties, but rather get to the nature of the expert evidence offered by the parties at the trial – with, to some extent, that evidence being tested in cross-examination.
It transpired, despite the Orders for a single expert, that the husband engaged the firm W Financial Services of City G in March 2019 to prepare a report on his “net assets”. Reports were subsequently “updated”, with that report relied upon by the husband (see annexure C) to the affidavit of Mr Z filed 26 August 2022. Although Mr Z is a senior executive at W Financial Services and a licensed practitioner, the report was actually prepared by a different senior executive – Mr BB. Mr BB, who was apparently on leave when one would have expected him to be available for cross-examination, had experience as a forensic accountant in preparing such reports – an expertise Mr Z, who was cross-examined, acknowledged he did not have.
The wife was given leave on 22 November 2019 to file and rely upon evidence from a UK‑based forensic and investigative accountant and she retained, Mr CC. as her expert. Mr CC prepared two reports dated August 2022 and September 2022, both annexed to his affidavit filed 5 September 2022.
Earlier, as directed, the two experts conferred by video conference on 4 August 2022 and a joint memorandum of that conference was tendered and marked Exhibit 1.
In circumstances where the relevant entities (and the husband’s interest in those entities) was agreed as follows:
(a)Q Limited - $27%;
(b)P Limited – 33%;
(c)O2 Limited – 33%; and
(d)R Partnership – 33%,
(hereafter collectively called “the entities), the critical issue was the current market value of those interests. All the reports were based on earlier financial statements generally, however it was of some assistance that at the final hearing, unaudited financial statements for the year ended 31 March 2022 were ultimately tendered and considered as follows:
(e)Q Limited – Exhibit 10;
(f)O2 Limited – Exhibit 11A;
(g)O2 Limited – Exhibit 11B; and
(h)P Limited – Exhibit 12.
The essential difference in the financial statements Exhibit 11A and 11B are that in Exhibit 11A, the balance sheet reveals fixed assets in the form of “investment property” with a value of £895,000, whilst Exhibit 11B asserts a value of £430,000, and in current assets a difference in the statement as to “debtors” between £143,871 (Exhibit 11A) and £608,871 (Exhibit 11B).
Before both Mr CC and then Mr Z were the subject of cross-examination, a further opinion of Mr Z dated 15 September 2022 was tendered (and marked Exhibit 19). In short, that report, said to be based “on the finalised 2022 accounts” but applying the same assumptions, estimated the husband’s combined interest in the entities was the equivalent of $3,283,503, which Mr Z said should be discounted by 40% to a total value of $2,222,496. Mr Z also stated that:
In the event that it was determined by the Court that the loans were to be disregarded for the purposes of litigation or are in fact not repayable, them the nett asset position of each company would have to be reduced by the level of the loan as effectively the asset on the balance sheet, being the debtor, would be written off.
And in this scenario, Mr Z estimated the value of the husband’s discounted share value would be reduced to AUD$2,044,504.
Mr Z further opined that in the scenario of “non-payment of the loans” a corresponding s 455 tax (calculated at 32.5% of the loan amount) levied on the company would crystalise, further reducing the nett assets of the relevant entities. This would equate to tax of AUD$307,053, with the husband’s notional share of AUD$102,249, with possible penalties.
Mr Z further stated that in the event the overdrawn loan accounts are not repaid, there will be a personal tax liability against the husband, and assuming at the time the top tax rate of 46% applied, this could amount to a figure in the region of AUD$435,000.
These statements identify the significance of how the asserted loans are to be treated.
Mr Z confirmed he attended the meeting on 4 August 2022, but that Mr BB and Mr CC were the main debaters.
Whilst Exhibit 19 speaks for itself, the areas of agreement that were recorded were:
(a)adopting a nett asset approach as a starting point. Because of the nature of the assets, it is clear that valuations secured from qualified real estate valuers were relied upon by both experts;
(b)the total nett assets (before applying the husband’s share and before discounting) at March 2021 totalled £9,796;
(c)the companies reported nett assets decreased by £4.5M between 2021 and the draft March 2022 figures was because of two main factors:
(i)reported losses principally owing to loans written off during 2022 in Q Limited and O2 Limited; and
(ii)decreases in property values,
as identified and broken down in the joint memorandum.
The joint memorandum then identified four areas of disagreement between the experts, being as follows:
(a)Should valuations be based solely on the most recent sets of draft statements? Mr CC is reported as having had difficulty in reconciling the property values to the property valuations undertaken by H Company and any potential changes in values since March 2022 should also be taken into account. The Court has not received any evidence updating real estate valuations in Country C since March 2022;
(b)Should the value of the husband’s shareholding be discounted to reflect his minority shareholding? I infer (from Mr Z “signing” the joint memorandum) that Mr Z’s opinion that “a discount of 40% is appropriate in respect of the family companies and 20% in respect of the [R Partnership]” is based on Mr BB’s comment at page 32 of 45 of the filed report, where he opined that:
Minority discount in small family companies is extremely subjective and can vary hugely depending upon the particular circumstances.
And after indicating a view that an order to facilitate any payment to the wife the company would have to agree to sell assets to release funds to Mr Holbert, Mr BB said a discount of 40% “is not appropriate” before concluding on this topic that:
In order to properly assess the most appropriate minority discount we would require a separate engagement and more detailed information regarding the background share transfer history and other similar information.
This “discount” issue is a critical factor and the difficulty for the husband in failing to produce Mr BB but relying upon Mr Z, who properly conceded that he is an insolvency practitioner and has “not specialised in valuing companies”, meant that the evidence of Mr BB, who is an expert valuer, opined that if a discount was to be applied, it should be 10%, was the only evidence tested. I deal with his evidence later in these Reasons on this issue.
(c)Should the husband’s overdrawn loan account be deducted from his net assets? The joint memorandum reveals Mr BB held that view that $1.24M should be deducted “to reflect [Mr Holbert’s] overall financial position accurately”, whilst Mr CC was recorded as stating that “this is a matter of evidence for the Court” and further said he saw no necessity for this “because many of them date back as far as 2006/7; they have not been disclosed as loans to directors in financial statements, and they have not yet, and may never be repaid”. Mr CC gave further evidence on this issue;
(d)Should the husband’s potential liability under s 455 tax be deducted from his net assets? Mr BB stated “that the deduction of $135K is appropriate but only in the event that the loans cannot be repaid. Whilst the s 455 tax is not a personal liability of [Mr Holbert], each company will have to meet that liability, further reducing the companies net asset position”. In short, Mr CC stated the potential liability should not be deducted from his net assets, because it is a tax on the company.
I have considered the further evidence adduced by cross-examination of the experts, and again identify how the husband’s case was less effective on this issue by the failure to offer Mr BB for cross-examination. Doing the best he could, frankly I generally found Mr CC’s evidence more persuasive. However, even after Mr CC, who said he had little opportunity to view Exhibit 19 before it was tendered, pointed to some concerns, being at least:
(a)the discrepancy that he has uncovered between the alleged directors’ loans in P Limited set out at note 12 (“related party disclosures”) and the official lodged return with Companies House (Country C – registered number …) where no “note 12” is revealed. This discrepancy was not adequately explained to the Court;
(b)Exhibit 10 for the Q Limited reveals debtors of £279,935 (note 7) but it is impossible to determine what share are the husband’s loans;
(c)similarly, Exhibit 12 (for P Limited) reveals debtors of £174,916 but note 7 gives no breakdown – and further the amount in the financial statements is different to the amount the husband claims he owes;
(d)similarly, Exhibit 11B (for O2 Limited) reveals debtors of £608,871, but note 5 gives no breakdown;
(e)the personal tax liability against the husband if the overdrawn loan accounts are not repaid will depend on his personal tax position and for the reasons set out in the final paragraph of the joint memorandum, the husband’s tax affairs are complex; the tax authorities may not be aware of these potential liabilities; the husband may be able to compromise or defer them and the husband “may be able to mitigate any tax liabilities by writing the loans off and remitting income over a number of years to remain within low/zero tax bands;
(f)his understanding is the “debtors” are a combination of loans to the husband and also other loans;
(g)again, under cross-examination, Mr CC gave me the clear impression that the 10% discount figure he adopted was an alternate to no discount and certainly it would not be appropriate to discount further – or to a level of 40%. In cross-examination, he gave evidence of the factors he took into account, including:
(i)there is no opportunity cost;
(ii)the companies are not trading companies and all shares are held by family members in what is a long term family company, such that they are likely to remain within the family and not be sold on the open market;
(iii)the husband is likely to remain involved and/or influential in the business;
(iv)he took into account the lack of control and marketability; and
(v)he did not accept there is no liquidity.
The evidence as to value of these entities is significantly affected by whether the updated financials for the entities (and by Mr Z for Exhibit 19) should be the basis, as Mr CC opines on the 2021 accounts (which are materially the same as those in 2020). The difference is stark as follows in respect of nett assets:
2021 2022 Figures ‘000 Figures ‘000 Q Limited £3,977 £2,528 P Limited £1,031 £626 O2 Limited £2,070 £45 R Partnership £2,0718 £2081 £9,796 £5,280
a difference of £4,500,000.
Whilst Mr Z adopted the nett assets reported in the 2022 draft accounts for the reasons identified by Mr CC at page 22 of his September report, Mr CC felt uncomfortable in relying solely on nett assets reported in the financials. He then gave the comparison above (identifying the significant difference) before finally opining that:
In our opinion it is therefore necessary to have an eye to net asset values in 2020 and 2021 – which are materially unchanged from each other – and treat the 2022 accounts with a professional scepticism.
Of course, the husband gives evidence of the commercial aspects of the business interests and the significant downturn a position which the joint memorandum as I read it seems to accept. In the absence of any cross examination of his issue, Mr CC does not adequately explain to the Court why, on 4 August 2022 in a joint conference, he is recorded as agreeing on the reasons for the change in nett assets between 2021 and 2022, but by the time he completed his report on 2 September 2022, he moved away from that position, to a position of being “professionally sceptical”.
This, in many ways, on reflection when preparing these Reasons, presents as a major issue on the pool. The difficulty for the Court is that to accept Mr CC’s view that the figures in 2021 should be accepted, would be to entirely ignore and disregard the evidence of the husband and the independent real estate values. I am not prepared to do so.
It is common ground that the experts adopted a nett asset approach and neither were real estate valuers, however the most recent evidence of values and conditions in the market arise from the valuation report of H Company of 20 October 2021. This evidence was not tested during the hearing. Those values were the basis of the 2022 financials and I do not agree with Mr CC’s statement therefore, that the accounts are “based entirely on the views of directors who are [Mr Holbert’s] family members” if that is to be construed as the directors not being entitled to rely on commercial valuations.
I have considered the submissions of the husband on this issue, and the reply submissions of the wife which was (at 2.2.3) that:
The Court should prefer the opinion of [Mr CC], there being no reliable or admissible evidence adduced by the Husband (the author of the [W Financial Services] Report, [Mr BB], not having been made available for cross-examination
As is apparent, I have preferred the evidence of Mr CC on the discount rate and have adopted the reservations expressed largely about the associated unclear directors loans summarised at page 16 of his September report.
A Court is not obliged to accept every aspect of an expert’s evidence, and in this case, I will proceed in valuing the husband’s interests based on the nett asset position set out in Exhibit 19, to be adjusted by removing alleged loans and applying a discount rate of 10%.
This discussion about the business entities calls into focus the transactions and history of the asserted directors/company loans. In support of the wife’s case that the loans should not be brought into account, in final submissions it is contended against the husband that at least:
(a)at paragraph 114 of the husband’s trial affidavit, he conceded many of the company loan balances were offset by either declaring a divided or being paid a bonus, with such “write offs” referred to by the husband in a letter to his Melbourne accountant on 8 May 2017;
(b)Exhibit 3 dated 24 June 2019 confirmed that none of the loans have been properly disclosed in the financial accounts historically – a breach of the Companies Acts 2006 (United Kingdom);
(c)Mr T conceded that many of the companies’ loans have been repaid;
(d)Even if the husband owed monies to L Limited (which is uncertain), there is no evidence that the administrators of L Limited have made any demand on the husband or has sought repayment. I agree;
(e)the Court should not accept the various statutory demands by the companies in October 2019 “to attempt to substantiate the existence and quantum of the alleged loans”. I agree with this submission (paragraph 3.17 of the wife’s submissions) because of the way in which, on the evidence, the documents were both created (the day after the husband’s resignation); the lack of supporting documents that reliably establish any loans; the lack of evidence from the husband’s mother who was involved in these “transactions”; the attempts to give the demand some legitimacy by the establishment of alleged pledges following a minute in April 2020 and thereafter the lack of any evidence, even if the loans exist, that the entities will seek to recover the loans.
In some ways, on all the evidence, I was concerned that the husband instructed personal and longstanding legal advisors (indirectly) to perfect transactions that were designed to give an appearance of authenticity so as to, post separation, cause the value of the husband’s personal interests to dimmish.
As a result, for these reasons, and fundamental to establishing some of the largest and important interests of the husband for the purpose of the balance sheet, I make these findings:
(a)I adopt the calculations of nett assets in Exhibit 19, but would disregard the alleged loans, which I will accept as a total sum of £659,000 being the asserted debts under the minute of agreement made 21 April 2020 (excluding the GG Investments debt of £20,000);
(b)On this basis, the total value of the interests amounts to £5,240,455 or at an exchange rate of 1.74 – $9,118,391;
(c)Adopting this assumption, and a discount rate of 10% as opined by Mr CC, which evidence I accept, I find the husband’s current interest to be:
(i)Q Limited
£2,528,181 less than £188,614 = £2,339,567 x 27% = £631,683 less discount of 10% = £568,514 or the equivalent of AUD$989,214 at an exchange rate of 1.74.
(ii)P Limited
£646,018 less loan £191,602 = £454,416 x 33.33% = £151,456 less discount of 10% = £136,311 or the equivalent of AUD$237,181 at an exchange rate of 1.74.
(iii)O2 Limited
£644,874 less loan £209,111 = £435,763 x 33.33% = £145,239 less discount of 10% = £130,715 or the equivalent of AUD$227,444 at an exchange rate of 1.74.
(iv)R Partnership
£2,080,382 x 33.33% = £693,391 less discount of 10% = £624,051 or the equivalent of AUD$1,085,848 at an exchange rate of 1.74.
By way of assessing the value by a different method, in Exhibit 19, Mr Z relied upon the finalised financial 2022 accounts, which I regard as appropriate as indicated, and calculated the husband’s shareholding (after loans are disregarded but adopting a discount rate as below) as follows:
Value less loans Discount applied Q Limited AUD$701,183 40% P Limited AUD$175,141 40% O2 Limited AUD$158,602 40% AUD$1,034,926 R Partnership (no loans) AUD$1,009,578 20% AUD$2,044,504 Logically therefore, in circumstances where there is no certainty on the evidence of which loans were deducted from the three corporate entities, the value before the applied discount of the entities must be:
(v)three entities AUD$1,034,926 ÷ 60% x 100% = 1,724,876
(vi)R Partnership $1,009,578 ÷ 80% x 100% = 1,261,972
If these amounts are discounted by 10% as opined by Mr CC, then the estimate of the husband’s shareholding is approximately as follows:
(vii)three entities AUD$1,724,876 less 10% = AUD$1,552,388
(viii)R Partnership AUD$1,261,972 less 10% = AUD $1,135,774
Total = $2,688,162.
which is similar to the sum earlier calculated. The difference may be attributable to the exchange rate adopted by Mr Z in Exhibit 19 (which appears to be 1 GBP = AUD1.82 – a different rate than either the wife or husband adopted in final submissions). Furthermore, Mr Z adopted a minority shareholding in both O2 Limited and R Partnership of 33.33% whereas the joint experts memorandum (Exhibit 1) adopted a figure of 33% (the same as P Limited). Doing the best I can in this confusing scenario, I adopt for the pool, the values set out for the husband’s interests as set out therein and calculated above – a total of AUD$2,539,687.
(d)As the loans will be disregarded, at least for the sake notionally of the calculation of the pool of interests, it is proper to take into consideration:
(i)the potential loss of value of the husband of his interest in the entities as a possible result of the imposition of s 455 tax – calculated by Mr Z (in Exhibit 19) at $102,249; and
(ii)the potential personal tax impost on the husband if the loan accounts are not repaid.
The husband is an extremely astute and experienced businessman, unlikely to pay more tax than legitimately he is bound to pay under United Kingdom taxation laws. I accept the evidence of Mr CC that there may be tax reduction strategies available to the husband to minimise any tax personally imposed on him. Also, I find it likely that the majority shareholders in all the entities in which the husband has an interest, will be alert to strategies which legitimately deal with any potential s 455 tax. I say this in circumstances, especially where there is uncertainty as to how (if at all) the tax authorities have been informed in the financial statements of the entities about the existence of these alleged loans, such that an impost may never be made.
The uncertainties around the tax issues (and likely payment) persuade me, in the exercise of my discretion, that justice and equity to both parties is served by not including in the pool of interests any contingent liability, but rather regard this contingent liability as a matter to be taken into account under s 75(2)(o) of the Act.
It follows that that the exclusion of the alleged loans/debtors as assets of the various entities (so far as can be inferred relating to the husband) means such liabilities should be excluded from the pool of interests. This is not actually a “balance sheet neutral” outcome as the husband only has a minority interest in the entities which means his “share” of the values of those entities reduced by notionally disregarding those loans etc, will be less than bringing into the pool of interests the whole of the asserted loans.
Consistent with a discretion, when seeking to do justice and equity to the parties, to disregard a debt (see Biltoft & Biltoft (1995) FLC 92-614), as already referred to, but in summary, on all of the evidence including persuasively that of Mr CC in his report, I am of the view on the balance of probabilities, that:
(a)the husband has failed to establish that the alleged liabilities actually and genuinely exist. There is confusion about whether previously loans have been historically discharged in some way (for example dividends or offset bonuses);
(b)the financial statements of the entities are inconsistent;
(c)the attempts by the husband (for I find he was the “architect” of the process more than his brother Mr T) in October 2019 and thereafter to give some credibility to the statutory demands and subsequent security has been unconvincing;
(d)no legitimate demands on actions for recovery have been taken by the corporate entities;
(e)on balance, I regard loans etc which are not statute barred already, are not likely to be the subject of action against the husband; and
(f)I infer that the husband’s mother, who failed to give evidence, but who had a role in both the entities and the events of October 2019, would not have given evidence likely to assist the husband (applying Jones & Dunkel).
OTHER POOL INTERESTS TO BE DETERMINED
To further establish the pool of nett interests, I make the following further findings on the evidence.
Adopting the item numbers contained in the wife’s submissions at paragraph 2:
(a)Items 1 and 2 – the difference in the attributed values represents the adoption of a different exchange rate. The wife adopted 1 GBP = AUD$1.74. The husband adopted 1 GPB = AUD$1.93. In circumstances where the wife has not sought to re-open evidence and her submissions adopt the rate above, I have used that exchange rate of 1.74;
(b)Item 4 – the United States property. Although the parties in final submissions agree a value of $72,000 should be ascribed to the husband’s one fifth interest, the husband contends that value does not include outstanding taxes due on the property and, as the parties made no contribution to the property it should not be included in the pool but treated as a “financial resource”. The husband’s interest has vested, and it should be treated as an asset of the husband. The fact that the interest, I accept, arose from an inheritance is a contribution consideration – weighing in the husband’s favour;
(c)Item 5 – partial property settlement to wife. The wife contends that $487,400 (particularised in her written submissions) should be included. The husband says the following additional sums should be included in this item as follows:
(i)$100,000 received 20 July 2018 pursuant to Orders made 12 July 2018 – with the sum to be characterised by the trial judge. In my view, as $90,000 was used for legal expenses, it should be included adopting usual principles (for example NHC & RCH (2004) FLC 93-204). The balance of $10,000 I infer was used for living expenses and should not be included;
(ii)A dispute arises as to whether the proceeds of sale of Vehicle 1 of $9,344.55 received mid-2019 were applied to the mortgage as well as the proceeds of sale of Vehicle 2 of $5,995 received 9 September 2019. “[MSH] 28”, the DD Lawyers Trust Account statements, confirm $9,344.55 was paid to the mortgagee by two payments on 29 August 2019 and 6 September 2019 and a further payment of $5,995 was paid to the mortgagee on 21 October 2019. Where the funds have been paid to the joint mortgage, they should not be added to the pool;
(iii)The husband contends in his submissions filed 18 October 2022 that the wife withdrew £10,000 from EE Bank (UK) account on 23 January 2019 and further withdrew $25,000 from the joint National Australia Bank account in February 2018. These allegations were not put to the wife in cross-examination. In any event, the wife says, and I accept, she had some real concerns at separation that the husband would reduce his financial support for her and the children and she needed funds to pay normal living expenses. In achieving justice and equity, I am not persuaded these sums should be included;
(iv)The husband asserts $18,350 was debited by the wife to a joint credit card to pay for her hiring a private detective as well as initial legal fees and cash withdrawals. I am not satisfied the husband has, on the evidence, established the wife accessed those funds for that purpose;
(v)On 30 October 2019, the husband asserts the wife accessed the children’s accounts to the extent of $12,000 to pay legal fees. The evidence (noting again this was not put to the wife during the trial) does not establish this as a fact;
(vi)The husband says, and the wife does not accept, that there was $5,000 cash in the safe at separation. If such monies existed (and I am far from satisfied they did), then both parties had access to the safe. I cannot be satisfied on the evidence who took cash – if at all;
(vii)The husband seeks to include $3,750 he had to pay “as a result of the wife’s refusal to provide a certified child support agreement”. In the circumstances of this case, the husband seems to be saying he paid $3,750 more child support then he should have to the wife, for the children. I would not include a child support payment the husband was clearly assessed to pay.
In these circumstances, I will increase the amount at item 5 by $90,000 to a figure of $557,400.
(d)Item 10 – it would be double dipping to include the wife’s cash at bank of $12,220;
(e)Item 11 – superannuation withdrawals by the wife. The wife took the opportunity to access her superannuation entitlements to the extent of $20,000. I regard that action as a premature disposition. The wife conceded some of the funds were used for legal expenses. The total sum of $20,000 should be included;
(f)Item 12 – monies held in trust with Mills Oakley. I agree the funds sourced from partial property distributions, totalling $54,214, should not be included in circumstances where the partial property payments have already been included as this would amount to double dipping;
(g)Item 13 – monies received by the wife from legal expenses paid to DD Lawyers. In my view, it would be a double counting to include the refund when the amount of legal costs are not included;
(h)Items 14 and 15 – the evidence does not establish the level of the husband’s accounts, although in his submissions filed 18 October 2022, reference is made to two modest accounts. It is proper to ignore them;
(i)In circumstances where no probative evidence was produced by either party as to the current value of chattels and or other personalty (including jewellery), I do not include any amount in the pool. In a pool of this size, the inclusion of a speculative sum would be a di minimis;
(j)Items 21 and 22 – add back against the husband. The wife says that the husband had “sundry assets” at separation as deposed to in his Financial Statement filed 12 April 2018. She seeks to add back $677,626. The said Financial Statement identified:
Item 37 – funds in bank $330,962 Item 38 – investments $346,664 $677,626
At paragraph 279 of his trial affidavit, the husband said he sold his shares “to combat the excessive legal threats”. He used funds from the sale of inherited shares as they “were my only remaining source of funds”. I infer he was asserting he used the funds to defray living expenses, some credit card liabilities and legal fees.
In his written submissions, he says he used funds as follows:
(i)$100,000 – partial settlement to the wife;
(ii)$64,225 – mortgage payment, household expenses and school fees (February to August 2018);
(iii)£40,000 – mortgage payments (September 2018 to February 2019);
(iv)Works on the Suburb K property;
(v)Partner contributions of £5,000 per month to R Partnership;
(vi)Repayment of FF Limited personal loan on 28 May 2018 for $91,000; and
(vii)Sundry travel costs.
Although not all of the expenses referred to seem to be corroborated, the wife in her closing submissions did not seem to challenge (but adopted) the add back at least of $191,000 for legal expenses, but did challenge the liability of R Partnership (arising during the marriage) to FF Limited, asserting merely a failure to disclose any of the bank statements. I accept there was some confusion but I am prepared to accept the husband’s evidence at page 33 of his trial affidavit. I also accept his obligations to the partners in R Partnership required some continuing payments. Doing the best I can, and accepting the major of expenses went to the mortgage, school fees etc as set out, I include $191,000 as the conceded amount from these funds the husband paid for legal expenses;
(k)Item 25 – mortgage and security over 1 N Street – the husband seeks to include a liability of $748,200 which are alleged to an entity in administration L Limited. In circumstances where:
(i)the husband deposed that historical loans had been paid, including the directors loan account to 1 December 2018;
(ii)there are no debts that postdate 1 December 2019;
(iii)Mr T when cross-examined about debts owed by the husband to L Limited, said there was no debt; and
(iv)the administrators of L Limited do not regard the husband as indebted to the company and there is no evidence of a demand made at all,
the husband has failed to establish, to the required standard, that the alleged debt exists. As a result, it will not be included.
(l)Item 26 – the husband asserted a debt in respect of 1 and 2 N Street for maintenance fees. I am prepared to accept his evidence;
(m)Item 28 – the husband asserts a current liability for his credit cards, accumulated post separation, should be included. I disagree. How the husband chooses to accumulate credit card liabilities (either for frequent flyer points or otherwise), is entirely a matter for his discretion. He should solely bear the consequences;
(n)Item 30 – loans to the husband’s mother, Ms U. The husband seeks to include as debts:
(i)$411,250 created, he says, during the marriage and
(ii)$179,547 created post separation.
Whilst I am prepared to accept that the husband and his mother have a close relationship, and that as the husband (at least for the period 2008 – when his father became ill – until late 2019) was the person who managed the family’s real estate portfolio (which supported his mother), the husband failed to produce admissible and persuasive evidence from his mother – merely asserting (with a form of medical report, untested and unsworn by the health professional concerned) about his mother’s state of health. On balance, I am prepared, in failing to call her as a witness or even to have an affidavit sworn and seeking to rely upon it, to accept the Jones & Dunkel inference sought by the wife’s Counsel Mr Geddes KC. My firm impression is that money moves between entities as needed, and that accountants at the end of a financial year are asked to record transactions in a way that seeks to adopt professional accounting standards. On this alleged debt, I am not able to accept the husband’s evidence. The debt will not be included as a result. I further say I see no basis for the wife to share in debts accrued post separation from his mother where the use of those funds was uncertain;
(o)Items 31 to 35 relate to loans already essentially dealt with in these Reasons. In not taking into account the asserted loans to Mr T, L Limited, Q Limited, O2 Limited and P Limited, in some respects the value of the husband’s minority interest has reduced slightly. The debts, if not regarded as an “asset” of the various entities, can hardly be a personal obligation of the husband for the purpose of the pool;
(p)Items 36/37 – further loans. Counsel for the wife referred to the concession made, in open Court (not as the husband seeks to assert as a part of settlement negotiations) by his Counsel Ms Colla, not seeking to maintain these entries on the balance sheet. The husband is bound by the case as he presented it during the trial. As a result, an alleged loan to GG Investments ($34,800) and for the alleged interest on the loan over 1 N Street is not included;
The parties agreed on superannuation interests. As a result of these findings, I find the pool of interests total a nett figure of $7,441,008 as set out in Appendix Three.
For completeness, after hearing the cross-examination of Mr T (who I regarded as a reliable witness), I am not persuaded that the husband has any equitable interest in the property owned by Mr T at HH Street, City G. I accept the husband has the benefit of temporary accommodation as a generous offer of his brother, who is the legal owner and who gave evidence about his plans for his property.
In the circumstances, I am not persuaded it should be treated as a financial resource for the purpose of s 75(2) of the Act.
CONTRIBUTIONS
Authority (such as Jabour & Jabour [2019] FamCAFC 78) requires the Court to adopt a “holistic” approach, and not a strict mathematical approach, when exercising a discretion under s 79. The Court must weigh up and balance a number of different and diverse financial and non-financial contributions from cohabitation to the hearing of the case.
With cohabitation commencing in 2005, the intact relationship spanned 13 years, with a further four years post separation to the hearing before me. Whilst Senior Counsel for the wife, in his written submissions properly concedes the husband’s initial contributions and family support (including gifts and inheritances) contributed by the husband were superior, the husband’s written submissions (in reply and without the benefit it seems of legal advice) almost entirely focus on financial contributions he made and largely ignore the non-financial homemaker contributions (and more modest financial contributions) by the wife. It has long been recognised in Australian family law jurisprudence that real weight needs to be given to such non-financial contributions which are almost impossible to quantify in monetary terms – unlike taxable income, profits and receipts of windfalls and gifts.
In the period from cohabitation to separation, I find the contributions by the parties can be summarised as follows:
Husband
(a)The husband at cohabitation owned property at J Street (sold in 2013); D Street (sold in 2015) and properties in Country KK and Country LL. The evidence does not permit a clear finding as to their value or the level of loans/mortgages on these properties, but the wife concedes that the proceeds were contributed to the Suburb K property;
(b)The couple had free rent initially in one of the husband’s father’s flats and when they purchased 1 N Street (in the husband’s name), he provided some initial finance. The neighbouring property at 2 N Street was transferred to the parties after the father had purchased the property and died in 2012. The wife says the transfer into joint names of 2 N Street should not be regarded as a sole contribution by the husband. I disagree. As best I can assess on the evidence, the presumption that a gift to a child is a contribution by that child (see Gosper & Gosper (1987) FLC 91-818) was not rebutted merely by the transfer. He also inherited D Street (also vested in joint names). I find it likely the husband elected to vest the property in joint names as they were married at the time;
(c)Whilst the husband says he managed and paid “all the expenses and mortgages relating to the properties”, he fails to recognise that the fund he was using post separation, although coming from his family companies and income as a shareholder and employee, was essentially joint funds so generated post cohabitation;
(d)The husband was effectively given his shareholding in a number of family entities when he commenced working for them in around 2006, and in 2012-13 he acquired further shares in Q Limited and L Limited;
(e)I accept that for most of the marriage the husband’s income was the basis for the lifestyle the parties enjoyed, but he was able to do so to a large extent because the wife was the primary carer and homemaker after the birth of the children in 2010 and 2014;
(f)The wife concedes, and I accept, the husband did work long hours and the management of the property portfolio was stressful, especially when the economy in Country C began to deteriorate around 2017. The financial statements for the entities revealed in the expert reports demonstrates the declining income and values during that period and thereafter;
(g)The husband, post separation, has lived most of the period in Country C – thereby reducing his capacity to make a parental and non-financial contribution to the family unit. Certainly he did for a time meet mortgage and school and living expenses, although a significant amount of those expenses were funded from the funds and investments under the husband’s control at separation;
(h)Again, I observe, the husband’s submissions continually refer to “his” money and income and he asserts the wife “has continued to spend excessively despite claiming poverty for herself and the children”. The husband admits, to a significant extent the wife has relied on government benefits. The husband contending that:
Every single item on the balance sheet except the wife’s pension was a contribution by the husband. The wife contributed mothing except for a small salary which she did not share but kept for herself.
I could not imagine, if the husband had legal representation when making his submissions, that he would make such a submission.
(i)I accept that the wife (and family) have continued to occupy the Suburb K property since separation and this should be regarded as an indirect non-financial contribution by the husband;
(j)The husband asserts that when he was living in Australia, child caring duties “were split jointly”. I accept that when he was in Australia (the couple only lived here for just over three years) he contributed as a parent but the need to attend to his business interests in Country C meant he had a number of trips away before finally returning permanently in early 2018;
Wife
(k)The wife at cohabitation had few assets and some small debts, but did contribute her modest income between 2005 and 2009, including a redundancy payment of £10,000;
(l)With the birth of the children, the wife’s role was as primary carer and homemaker and a supporter of the husband’s career. I do not find the husband made no non-financial contribution to the family, but his contribution non-financially was significantly less than that of the wife. The wife had, at times, income from part-time or casual employment;
(m)The wife and family benefited from the lifestyle the consistent income generated by the husband provided. I accept the move to Australia was initiated by the wife and it was always going to be a challenge to maintain a relationship when the husband’s business interests were all in Country C; and
(n)Post separation, the wife has had the benefit of living in the home. She has carried, almost entirely, the emotional and day to day responsibilities for the children who were only approximately seven and three years of age at separation.
In final submissions, the husband contends that “based on the overwhelming contributions made by the husband by way of initial contributions, inheritances, gifts from family and contributions post separation of a financial nature should result in a maximum of 20% entitlement to the wife”.
Whilst I accept that the Court must not only look at the nature of the initial contributions but also how they were used and the effect of that solid start for this couple, I regard the husband’s submission as significantly underestimating and gives little value, when weighing up all the contributions, to the non-financial contributions of the wife.
The wife in her written submissions seeks a contribution based entitlement of 35%.
I have come to the conclusion that the wife’s contribution based entitlement should be 35% and the husband’s entitlement should be assessed at 65% – a differential of 30% or over $2,200,000 on the pool as found. Considering the nature of the asset pool and the origin of many of the assets, I regard this as proper. I also accept that the pool, as found by me, does not adopt many of the significant arguments raised by the husband, in particular:
(a)the existence of loans/debtors in corporate entities;
(b)the discount rate the husband sought of 40%; and
(c)the loans he says he owes family,
thereby making the nett pool of all interests almost two times what the husband contended for in this case.
SECTION 75(2) FACTORS
The husband, to his credit, sought to make submissions which dealt with the prescribed factors in s 75(2) of the Act and to ensure he is satisfied proper consideration was given to relative factors. I make the following findings:
(a)Although the husband says he has a diagnosis of ADHD, there is no medical evidence that establishes such a condition is having any significant effect upon him. The parties are of a similar age (the husband being four years older) and otherwise enjoy good health;
(b)I find that the husband, who has maintained engagement in the Country C property industry most of his working life, has both a superior income and superior earning capacity to the wife. The most recent tax return for the husband revealed a taxable income of £73,591 – and I find he continues to attract support from the family entities – although he says only by way of loans yet to be repaid. The wife’s working life was interrupted by her role as a primary carer and homemaker, and her current modest income which she deposed to of $1,218 gross per week could increase in time, but I accept is unlikely to exceed $100,000 per annum gross. The husband, although he says he is overwhelmed by debt and the property market in Country C is not good, nonetheless has the potential to significantly increase his income both from his salary and profits from the entities in which he has an interest. The substantial reduction in the nett assets of the entities between 2021 and 2022 will likely recover as most holdings are long term investments. The husband’s Financial Statement filed 26 August 2022 reveals his only income is rent from 1 N Street – and he claims weekly expenses in total of $5,440 including curiously $580 per week income tax (on income of $229 per week).
I did not regard the husband’s evidence of his access to funds as reliable, although he says he is effectively only meeting his needs by borrowings from his family and the companies, I cannot be satisfied on all the evidence this is the case.
The significant difference in earning capacity requires, in my view, appropriate and substantial recognition.
(c)The wife has the care and control of the children, which restricts her capacity to work and decreases her ability to pay her expenses. In this regard, I accept that the wife has support from her parents (which she claims to pay them for) in looking after the children. With the youngest child Y having at least seven years of schooling left, the obligations on the wife, who wishes to maintain her role as a parent (and with the husband permanently in Country C, she must do so exclusively), must be taken into account;
(d)I take into account the obligations the husband has towards NN, a baby from his current relationship. It is very difficult to know what is the capacity financially for his partner to contribute to the household expenses from her income and property – the wife asserts she is a woman of means. The husband says that the wife gains support (other than assistance with legal funds) from a male person who, although not cohabiting full-time with the wife, is involved with the wife. Consistent with the cases conducted, I was left with the impression both parties had “moved on” with their private lives but the financial circumstances relating to any cohabitation is not entirely clear;
(e)Although the partes enjoyed a lavish lifestyle at times during the relationship, on balance the costs of this litigation and the husband’s claims of having little financial resources of a liquid nature available to him, has meant the standard of living both parties now enjoy has probably reduced – but is still in my assessment reasonable;
(f)The Court is required to consider the terms of any order under s 79. The orders will provide for the wife to retain the Suburb K property (at least initially). Although the wife did not produce evidence of her capacity to borrow, there is a real likelihood she will have to sell the Suburb K property and move to alternate accommodation. It will depend how prepared she is to adjust to living elsewhere, as this will reflect the funds she has remaining from the orders to support her future needs. The husband will, on his case, and to a degree I accept, be “asset rich and cash poor” – but that can be seen to be a feature of any property investor. He will retain his minority interests in the business entities which are valuable. He says he has enormous debts (almost entirely family related), but he is not actually servicing those debts with regular payments now. It seems inevitable that the husband will have to consider selling some of the properties he will own (for example 1 and 2 N Street) or borrow externally. I accept his liquid position will be inferior to the wife initially, but having been involved in the property industry successfully for many years, the sizeable property portfolio he has an interest in offers the potential for future gains and financial security;
(g)Although the husband has continued to support the children’s private school education, the current level of his disclosed income and the fact he resides permanently in Country C, means the assessment and collection of regular child support payments is problematic. At the time of the hearing, an administrative assessment against the husband of $281 per week was being challenged by him;
(h)Section 75(2)(o) requires the Court to consider any fact or circumstances which the justice of the case requires to be taken into account. In this regard, the possible effect of the s 455 tax is an issue that will affect the husband potentially. The decision of the Court not to include significant alleged debts the husband says he has, is a factor to be considered – although I maintain the position recovery from him (either through the “pledged securities” or otherwise) is not certain. The wife’s submissions say the husband’s failure to make discovery in a full and timely manner should result in an adjustment to the wife – as much as 10%. I take into account what I have assessed to be the husband’s lack of timely disclosure. The wife does not assert I should notionally include some undisclosed property interests in any quantifiable way. It may be that, to the extent the Court is critical of some of the husband’s timeliness in disclosure (as I am), that the appropriate way for this behaviour to be considered is any costs application where s 117 is the focus. The Full Court recently in Mayhew & Fairweather (2022) 64 Fam LR 633 at [14] made it clear that any deficiency in disclosure obligations can be considered under s 75(2)(o). I do so.
In the final analysis of these relevant factors, I am satisfied that an adjustment to the contribution based entitlements is required in favour of the wife. As decisions like Clauson & Clauson (1995) FLC 92-595 have held, the real impact of any adjustment must be considered. In a pool of this size, as found by me, I regard an adjustment in the wife’s favour of 10% or an amount of $744,000, on the pool, is appropriate.
In percentage terms therefore, the Court’s view is that the property pool should be adjusted in the proportions of 55% to the husband and 45% to the wife. However, as I discuss next, it is the form of the order, not the mere percentages that must be considered to determine whether justice and equity to both parties is achieved.
JUSTICE AND EQUITY
If the wife was to receive 45% of the pool of $7,441,088 as found by the Court, this would amount to $3,348,489 calculated as follows:
Suburb K property $3,950,000 Partial property settlement $557,400 Share of proceeds from D Street sale $41,150 Superannuation withdrawals $20,000 Vehicle 3 $24,000 Superannuation $28,161 $4,620,711 Less Suburb K mortgage $1,219,713 $3,400,998 Less possible payment to the husband $52,509 $3,348,489
If the husband was to receive 55% of the pool of $7,441,088 as found by the Court, this would amount to $4,092,599 calculated as follows:
1 N Street, City G $376,012 2 N Street, City G $765,711 1/3 interest in OO Street, City PP, USA $72,000 Share of proceeds from D Street sale $41,150 Partial property settlement from Country C properties $201,180 Interests in UK entities $2,539,687 MM Trust 1/3 interest $25,666 Legal fees paid from sundry assets $191,000 Combined UK pension benefits $64,000 $4,276,406 Less mortgage secured over 1 N Street $232,000 maintenance fees over 1 and 2 N Street $4,316 $236,316 Balance $4,040,090 Plus possible payment from the wife $52,509 $4,092,599
The Court has decided that the orders which appear at the commencement of these Reasons, based on the numerous findings contained in these Reasons, and where the wife retains the Suburb K property and other Australian based assets, whilst the husband retains the Country C based interests, do justice and equity.
I would not regard it as just and equitable to require the wife to pay the husband any funds. It may be, if she wishes to continue to live in the Suburb K property, that she can refinance the residual mortgage. Certainly, the current debt to equity ratio of around 30% is not likely to be the issue, however on the evidence she could find it difficult to service a loan of around $1,200,000 approximately.
Of course, if she had to sell the home, the cash from the sale would be available to her. I accept that the wife’s proposal for the Australia based assets and a payment of $2,250,000 was based on a significantly larger pool of nett assets. However, on the pool as found by the Court, her orders as sought would represent 75% of the nett pool – outside any fair range available to the Court in my view.
The husband, in receiving the Country C assets continues to have the benefit from the potential for those UK entities value to increase. In adopting the evidence set out and based on the finalised 2022 figures, the nett assets pool of the parties reduced by approximately 33% of the significant reduction in the value calculated from the 2021 figures of approximately £4,500,000, a sum of approximately £1,500,000 or the equivalent of AUD$2,610,000 (at an exchange rate of 1.74).
He of course continues to assert significant loans to family and the companies which may mean s 455 tax and some additional personal tax being incurred over time, depending on how matters are structured.
In my assessment, on the pool of assets as found by the Court, his proposal which would have seen the Suburb K property sold (and the mortgage paid) with him to receive 75% of the nett proceeds and the wife 25%, would mean the wife would have received approximately $682,000 from the sale and when combined with the other Australian based property or benefits she has received of $670,711 would represent $1,352,711 or approximately 18% of the pool as found to exist – again well outside any fair range available to the Court in my view.
The orders I make have the benefit of relative simplicity but more importantly, finality as prescribed by s 81 of the Act.
I accept both parties are likely to be unhappy with the result of this long and expensive litigation and ultimately the Court may be invited to consider costs applications which will further engage the parties in litigation – but that is a matter for them.
For the reasons expressed, I find the orders at the commencement of these Reasons achieve justice and equity for both the husband and the wife.
I certify that the preceding eighty (80) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Baumann. Associate:
Dated: 21 February 2024
APPENDIX ONE
1.That as and by way of a final adjustment of the parties’ property interests pursuant to Section 79 of the Family Law Act 1975 (“the Act”), the property of the parties be adjusted as provided for hereunder:
2.That within sixty (60) days of the date of these Orders, and contemporaneously:
(a)The parties do all acts and things and execute all documents necessary to cause to be transferred to the Wife all of the Husband’s right, title and interest in the real property at J Street, Suburb K in the State of Victoria being all of the land described in Certificate of Title Volume … Folio … (“the Suburb K property”).
(b)On or before .1 December 2022 the Husband pay, or cause to be paid, to the Wife, the sum of AUD$2,250,000 (“the Payment”) or such other capital payment as is required to ensure that the Wife receives an adjustment of 45% of the pool as determined by this Honourable Court;
(c)The parties do all such acts and things and execute all such documents as may be required to cause a discharge of the mortgage encumbering the Suburb K property in favour of National Australia Bank Limited being registered mortgage no. … (“the Suburb K mortgage”), with all monies required to be paid to discharge the Suburb K mortgage to be sourced from the payment referred to in Order 2(b) herein and thereafter the Wife be solely liable for and indemnify the Husband for all rates, taxes, and like apportionable outgoings of and incidental to the Suburb K property;
(e)Contemporaneously with, and subject to the making of the payment, the Husband and the Wife do all necessary acts and things to transfer to the Husband, at the expense of the Husband, all of the Wife’s right, title and interest in the real property at 1 N Street, City G, Country C, U.K. (“the 1 N Street property”) which the Husband shall retain free from any claim by the Wife, subject to the Husband being solely liable for and indemnifying the Wife with respect to all and any liabilities of whatsoever nature and kind encumbering or affecting the 1 N Street property.
3.That pending the making of the Payment, the Husband by himself, his servants, employees and agents, be and are hereby restrained by injunction from selling, gifting, transferring, encumbering, diluting, altering, or otherwise disposing of all and any of his right, title and interest including but not limited to all and any shareholdings in any and all of the entities referred to in Order 5 herein, save and except:
(a)For the sole and specific purpose of making the payment;
(b)With the Wife’s prior written consent provided by her legal representatives, Mills Oakley; or
(c)By Order of this Court.
4.That in furtherance of the orders made in Order 2 herein the Husband forthwith execute in favour of the Wife transfers of all of his right, title and interest held in each of the Holbert entities to be held in escrow by the Wife pending the making of the Payment and in default of the making of the Payment, the Wife shall be at liberty to forthwith register such transfers, at her sole expense.
5.Contemporaneously with, and subject to the making of, the payment, the Husband retain free from any claim by the Wife all of his right title and interest (if any) in the following assets and entities:
(a)O1 Limited;
(b)O2 Limited;
(c)P Limited;
(d)Q Limited;
(e)L Limited;
(f)The partnership R Partnership;
(g)S1 limited (Formerly S2 Limited)
(collectively, “the Holbert entities”);
(h)1 N Street, City G, Country C; and
(i)Any superannuation and employment related benefits held in his name.
6.That the Husband be solely liable for and indemnify the Wife and keep her forever indemnified in respect of all and any liabilities of whatsoever nature and kind that he, the Wife or the Holbert entities may be liable for arising from the parties’, or either of the party’s, interests held in the Holbert entities, and any other asset whether in Country C, the United Kingdom, Australia or any other jurisdiction, including but not limited to all and any liability, claims, demands or actions for taxation and/or duty/ies of any nature and kind, save as provided for in order 2(c) with respect to the Suburb K property.
7.Unless otherwise specified in these orders and save for the purposes of enforcing any monies due under these or any subsequent orders:
(a)each party be solely entitled to the exclusion of the other to all other real and personal property (including choses-in-action and shares) in the possession of such party as at the date of these Orders;
(b)monies standing to the credit of the parties in any joint bank account are to become the property of the Wife;
(c)each party forego any claims they may have to any superannuation and employment benefits belonging to or earned by the other;
(d)each party be solely liable for and indemnify the other against any liability encumbering any item of property to which that party is entitled pursuant to these Orders;
(e)insurance policies remain the sole property of the owner named therein;
(f)each party be solely responsible for any liability of whatsoever nature and kind in their respective names, including but not limited to any credit card liability; and
(g)any joint tenancy of the parties in any real or personal estate is hereby expressly severed.
8.That in the event either party fails to execute any deed, document or instrument necessary to give effect to these Orders, within 21 days of that deed, document or instrument being forwarded to either party by post and by email, then in order to give full force and effect to the terms of these Orders, the Registrar of the Federal Circuit and Family Court of Australia at Melbourne be appointed pursuant to section 106 A of the Family Law Act 1975, to execute such deed or instrument in the name of such party and to do all acts and things necessary to give validity to the operation to the deed or instrument.
(a)A defaulting party shall pay the other party’s taxed costs of and incidental to such request and production of documents to the Registrar.
(b)Either party have liberty to apply as to implementation or enforcement of these Orders upon the giving of seven (7) days written notice to the other.
9.That the Husband pay the Wife’s costs of and incidental to the property proceedings, such costs to be assessed in default of agreement.
10.These Minutes of Consent Orders remain on the Court file.
11.That all extant property and spousal maintenance applications be otherwise dismissed.
AND THE COURT NOTES
A.That pursuant to Section 81 of the Family Law Act, the parties intend these orders shall as far as practicable finally determine the financial relationship between them and avoid further proceedings between them.
APPENDIX TWO
1.That all previous property orders be discharged.
2.That there be a property adjustment between the Husband and the Wife pursuant to s. 79 Family Law Act (1975) on the basis of 65% of the asset pool to the Husband and 35% to the Wife.
3.To effect the division pursuant to Order 2, the following occur:
4.That within 30 days of the date of these Orders, the parties do all such things and sign all such documents to sell the real property situated at J Street, Suburb K in the State of Victoria, upon such terms and conditions as agreed between the parties.
5.That the proceeds of the sale of the Suburb K be applied as follows:
(a)To pay the costs and commissions of the sale:
(b)To discharge the mortgage encumbering the Suburb K property:
(c)To pay the outstanding rates:
(d)The balance be divided 75 % to the Husband and 25 % to the Wife.
6.That within 30 days of the date of these Orders, the Wife transfer all of her right, title and interest to and in the real property situated at 1 N Street, City G, Country C, and the Husband discharge the Wife from all liability with respect to the mortgage encumbering the real property at 1 N Street, City G, Country C.
7.That the parties do all such things necessary to authorise AA Lawyers to divide the funds they hold in trust for the parties equally.
8.That the parties retain otherwise all assets and liabilities in their respective possession, save that the Wife allow the Husband to collect all of the Husband’s personal items from the Suburb K property within 30 days of the date of these Orders.
9.That the Wife pay the Husbands cost of this Response and such other Orders as deemed appropriate by the Honourable Court.
APPENDIX THREE
ASSETS No. Ownership Description Value 1. Joint J Street, Suburb K $3,950,000 2. Joint 2 N Street, City G $376,012 3. Husband 1 N Street, City G $765,711 4. Husband 1/3 share of OO Street, City PP, USA $72,000 5. Wife Partial property settlement $557,400 6. Joint Share of nett proceeds held in trust from D Street Wife received $41,150 Husband received $41,150 7. Husband Partial property settlement from Country C properties $201,180 8. Husband Interests in various UK entities (ignoring some debtors/loans and discounting by 10%) - Interest in Q Limited $989,214 - Interest in P Limited $237,181 - Interest in O2 Limited $227,444 - Interest in R Partnership $1,085,848 9. Wife Withdrawals from superannuation $20,000 10. Wife Vehicle 3 $24,000 11. Husband MM Trust 1/3 interest $25,666 12. Husband Legal fees paid from sundry assets $191,000 TOTAL ASSETS $8,804,956 LIABILITIES 13. Joint Mortgage secured over the Suburb K property (after allowance for payment of $106,000 under the terms of the Order dated 15 September 2022) $1,219,713 14. Joint Mortgage secured over 2 N Street $232,000 15. Joint Maintenance fees over 1 and 2 N Street $4,316 TOTAL LIABILITES $1,456,029 SUPERANNUATION 16. Wife Superannuation Fund 1 $28,161 17. Husband Combined UK pensions $64,000 $92,161 TOTAL NETT NON-SUPERANNUATION POOL $7,348,927 TOTAL NETT ASSETS INCLUDING SUPERANNUATION $7,441,088
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