Horvat & Juric (No 3)
[2022] FedCFamC1F 733
Federal Circuit and Family Court of Australia
(DIVISION 1)
Horvat & Juric (No 3) [2022] FedCFamC1F 733
File number(s): SYC 5613 of 2017 Judgment of: ALDRIDGE J Date of judgment: 27 September 2022 Catchwords: FAMILY LAW – PROPERTY – Application for final property settlement orders – Where the parties agree that the property distributed so that the wife receives 57.5% and the husband receive 42.5% – Where the value of the property to be divided is in dispute – Orders made for the husband to transfer to the wife a property upon the wife discharging the mortgage – Orders made for the husband to make a cash payment to the wife – Further orders made to deal with those events not occurring. Legislation: Family Law Act 1975 (Cth) ss 75(2), 79, 117 Cases cited: Chorn and Hopkins (2004) FLC 93-204
Christmas v Nicol Bros Pty Ltd (1941) 41 SR (NSW) 317
Dublin, Wicklow & Wexford Railway Co v Slattery (1878) 3 App Cas 1155 at 1201
Jones v Dunkel (1959) 101 CLR 298
Norbis v Norbis (1986) 161 CLR 513
Sahrawi & Hadrami (2018) FLC 93–857
Trevi & Trevi (2018) FLC 93-858
Division: Division 1 First Instance Number of paragraphs: 77 Date of last submissions: 26 August 2022 Date of hearing: 18–19 July 2022 Place: Sydney Counsel for the Applicant: Mr Eardley Solicitor for the Applicant: S & R Lawyers Counsel for the Respondents: Mr Doupe Solicitor for the Respondents: Garry Pickering Solicitors ORDERS
SYC 5613 of 2017 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN: MS HORVAT
Applicant
AND: MR JURIC
First Respondent
D PTY LTD
Second Respondent
order made by:
ALDRIDGE J
DATE OF ORDER:
27 September 2022
THE COURT ORDERS THAT:
1.Within 28 days from the date of these orders, the husband will do all such acts and things and sign all documents as may be required to transfer to the wife all of his interest in the property situated at 1 F Street, Suburb G in the State of New South Wales being the whole of the land described in Certificate of Title Reference Lot … (“the 1 F Street property”).
2.In the event that within 90 days of these orders the wife pays the mortgagee of the property situated at 2 F Street, Suburb G in the State of New South Wales being the whole of the land being more particularly described in Certificate of Title Reference Lot … (“the 2 F Street property”) the sum of $758,294, the husband shall forthwith:
(a)Take all necessary steps, including making any necessary further payment, to discharge the mortgage; and
(b)Do all such acts and things and sign all documents as may be required to transfer to the wife all of his interest in the property.
3.If the wife does not make the payment referred to in Order 2 within the time prescribed, the husband shall forthwith do all acts and things necessary to cause the 2 F Street property to be listed for sale by public auction to be held within a further 90 days, unless the parties agree in writing on a different mode of sale.
4.Unless otherwise agreed in writing between the parties, the sale of the 2 F Street property is to be carried out in the following manner:
(a)The parties shall instruct such lawyer as they agree upon to have the conduct of the sale on behalf of both parties or, in the absence of agreement reached within 105 days of the date of these orders, shall instruct such lawyer as may be appointed by the President for the time being of the Law Society of New South Wales (“the lawyer”), the costs of and incidental to such appointment to be borne equally by the parties as and when same fall due;
(b)The parties shall appoint such agent as they agree upon to have the conduct of the sale on behalf of both parties and in default of agreement as to agent within 105 days from the date these orders with such agent as the President of the Real Estate Institute of New South Wales shall appoint (“the agent”), the costs of and incidental to such appointment to be borne equally by the parties as and when same fall due;
(c)List the 2 F Street property for sale by public auction within six weeks from the date of appointment the agent unless otherwise agreed in writing by the parties;
(d)The reserve price for the purpose of such auction shall be such price as the parties agreed upon in writing or, in the absence of agreement reached within 112 days of these orders shall be the price nominated as the fair market value of the 2 F Street property by a valuer appointed by the President for the time being of the New South Wales Division of the Australian Property Institute (“the valuer”), the costs of and incidental to such appointment and valuation to be borne equally by the parties as and when same fall due;
(e)The valuer shall, if requested by either the husband or the wife at a date three calendar months after the date upon which the 2 F Street property is first listed pursuant to Order 4(c) and thereafter at three (3) calendar monthly intervals until the 2 F Street property is sold, nominate a sale price other than the originally nominated sale price;
(f)The parties shall each cooperate in every way with the agent and the valuer including (without limiting the generality of the foregoing):
(i)Making the key available to the agent and the valuer;
(ii)Allowing vacant inspection of the 2 F Street property at all reasonable times requested by the agent and the valuer;
(iii)Doing or saying nothing to hinder or prevent a sale being effected;
(iv)Ensuring the 2 F Street property including the grounds are in a neat and clean condition at the time of inspection by the agent and prospective purchasers; and
(v)Signing all documents requested by the agent in relation to the listing for sale of the 2 F Street property except a contract or agreement for sale which has not been authorised by the parties’ lawyer;
(g)In the event the bidding at the auction does not reach the reserve price, the parties or such of them as attends the auction may negotiate with the highest bidders or any other interested person and effect a sale of the 2 F Street property at a price which is not more than 10% below the reserve price, or at such other price as the parties agree upon in writing;
(h)In the event that the 2 F Street property remains unsold, the parties shall do all acts and things and sign all documents necessary to continue to relist the 2 F Street property for sale by public auction again at three (3) monthly intervals, and the provisions of Order 4(e) to 4(g) shall apply successively until the 2 F Street property has been sold so that at each successive auction the reserve price shall be 10% less than the reserve price at the immediately preceding auction unless otherwise agreed by the parties in writing.
5.Upon the sale of the 2 F Street property as per Order 3, and upon discharging the mortgage and all costs associated with the sale, the wife is to retain the proceeds of sale.
6.That within 90 days from the date of these orders, the husband shall pay to the wife the sum of $253,697 to the trust account of S&R Lawyers Pty Ltd Law Practice.
7.If the husband fails to pay the wife the sum described in Order 6 within the time prescribed, the husband will forthwith do all such acts and things necessary to cause the property situated at E Street, Suburb L in the State of New South Wales being the whole of the land being more particularly described in Certificate of Title Reference Lot … (“the Suburb L property”) to be listed for sale by public auction to be held within a further 90 days, unless the parties agree in writing on a different mode of sale.
8.Unless otherwise agreed in writing between the parties, the sale of the Suburb L property is to be carried out in the following manner:
(a)The parties shall instruct such lawyer as they agree upon to have the conduct of the sale on behalf of both parties or, in the absence of agreement reached within 105 days of the date of these orders, shall instruct such lawyer as may be appointed by the President for the time being of the Law Society of New South Wales (“the lawyer”), the costs of and incidental to such appointment to be borne equally by the parties as and when same fall due;
(b)The parties shall appoint such agent as they agree upon to have the conduct of the sale on behalf of both parties and in default of agreement as to agent within 105 days from the date these orders with such agent as the President of the Real Estate Institute of New South Wales shall appoint (“the agent”), the costs of and incidental to such appointment to be borne equally by the parties as and when same fall due;
(c)List the Suburb L property for sale by public auction within six weeks from the date of appointment the agent unless otherwise agreed in writing by the parties;
(d)The reserve price for the purpose of such auction shall be such price as the parties agreed upon in writing or, in the absence of agreement reached within 112 days of these orders shall be the price nominated as the fair market value of the Suburb L property by a valuer appointed by the President for the time being of the New South Wales Division of the Australian Property Institute (“the valuer”), the costs of and incidental to such appointment and valuation to be borne equally by the parties as and when same fall due;
(e)The valuer shall, if requested by either the husband or the wife at a date three calendar months after the date upon which the Suburb L property is first listed pursuant to Order 6(c) and thereafter at three (3) calendar monthly intervals until the Suburb L property is sold, nominate a sale price other than the originally nominated sale price;
(f)The parties shall each cooperate in every way with the agent and the valuer including (without limiting the generality of the foregoing):
(i)Making the key available to the agent and the valuer;
(ii)Allowing vacant inspection of the Suburb L property at all reasonable times requested by the agent and the valuer;
(iii)Doing or saying nothing to hinder or prevent a sale being effected;
(iv)Ensuring the Suburb L property including the grounds are in a neat and clean condition at the time of inspection by the agent and prospective purchasers; and
(v)Signing all documents requested by the agent in relation to the listing for sale of the Suburb L property except a contract or agreement for sale which has not been authorised by the parties’ lawyer;
(g)In the event the bidding at the auction does not reach the reserve price, the parties or such of them as attends the auction may negotiate with the highest bidders or any other interested person and effect a sale of the Suburb L property at a price which is not more than 10% below the reserve price, or at such other price as the parties agree upon in writing;
(h)In the event that the Suburb L property remains unsold, the parties shall do all acts and things and sign all documents necessary to continue to relist the Suburb L property for sale by public auction again at three (3) monthly intervals, and the provisions of Order 6(e) to 6(g) shall apply successively until the Suburb L property has been sold so that at each successive auction the reserve price shall be 10% less than the reserve price at the immediately preceding auction unless otherwise agreed by the parties in writing.
9.Upon the sale of the Suburb L property as per Order 7 and after payment of any mortgage and all costs associated with the sale, the wife is to be paid $253,697 and the husband is to retain the balance of the proceeds of sale.
10.Within 28 days of the date of these orders, the husband shall take all necessary steps to forward to the wife all such documents as may be necessary to transfer the registration of Motor Vehicle 1 into the wife’s sole name, including a signed transfer of registration.
11.The parties shall otherwise retain all other property held in their name or in their possession.
12.In the event that either party fails to sign any necessary document or instrument or to do any acts required or contemplated by these orders to be done with such failure continuing for fourteen (14) days, then a Registrar in pursuance of the orders conferred by s 106A of the Family Law Act 1975 (Cth), as amended, shall have the power to execute any document or instrument in the name of the person who has refused or neglected to sign any necessary document or instrument or to do any act required or contemplated by these orders.
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 Horvat & Juric (No 3) has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
ALDRIDGE J:
Introduction
Parenting and property proceedings were commenced between Ms Horvat (“the wife”) and Mr Juric (“the husband”) in 2017.
The parties attended a mediation on 31 August 2020 where they were able to resolve the parenting matters. The parties also agreed that their property should be distributed so that the wife receives 57.5% and the husband 42.5%. They were, however, unable to agree on the value of the property to be divided. This judgment deals with the resolution of the various property disputes.
Accordingly, it is necessary only to say a little by way of introduction. The parties’ wealth has been generated largely by the husband who has worked as a tradesman. Most of his business activities were conducted by H Pty Ltd, which is owned and controlled by the husband. An independent valuation of that company has ascribed a value of over $250,000 to it, but it is said on behalf of the wife, that this value does not include or take into account cash transactions. The wife also asserts that a number of legal fees paid by the husband and the proceeds of sale from two properties should also be “added back” as property to be divided.
The use of add backs is no longer encouraged (see for example, Trevi & Trevi (2018) FLC 93-858) (“Trevi”) because the Court, in making orders under s 79 of the Family Law Act 1975 (Cth) (“the Act”), deals with the actual property of the parties either of them held at the time of the order and not property that no longer exists. Thus, the preferred course is to take into account what might be described as the premature distribution of assets that would otherwise be available for division under section 75(2)(o) of the Act. However, because the parties have agreed on a percentage division of their assets, whatever the value might ultimately be found to be, they have had to resort to the mechanism of add backs to account for those matters in issue.
The other preliminary matter to record is that a substantial attack was made upon the credit of the husband and the sufficiency of his disclosure. It is true that the husband has made a knowingly false insurance claim and that his Financial Statement sworn in these proceedings could properly be described as “shoddy and inaccurate”. However, that does not mean every piece of the husband’s evidence ought to be discounted or ignored (Dublin, Wicklow & Wexford Railway Co v Slattery (1878) 3 App Cas 1155 at 1201; Christmas v Nicol Bros Pty Ltd (1941) 41 SR (NSW) 317 at 322; Sahrawi & Hadrami (2018) FLC 93–857 at [59]).
For example, the husband asserted that he had borrowed some $420,000 from Mr Y. The husband did not proffer any documents which evidenced the acquiring of such a loan. The wife therefore took the view that there was either no loan at all and a payment to Mr Y in that amount by the husband was an improper disposition of property or that the whole transaction was a device to hide money because the husband initially provided Mr Y with $420,000 so that it could be “lent” back to him.
In support of the wife’s contention, she issued a subpoena to Mr Y to both attend the proceedings to give evidence and to produce documents. After inspection of the documents so produced, the wife decided that she did not wish to call Mr Y or tender the documents that had been inspected. The husband however, then called Mr Y and tendered the documents which established that indeed there had been a loan agreement entered into between Mr Y and himself, and that Mr Y’s own funds were lent to the husband. Thus, the husband’s evidence turned out to be correct although, obviously, poorly prepared.
I accept, however, that considerable care must be taken with the husband’s evidence but that is something to be determined on an issue by issue basis.
The property to be divided
Motor Vehicle 2 (Item 23)
The husband has a commercial motor vehicle, which is old and, the husband says, is not in good repair. That Motor Vehicle 2 has since been replaced by another of the same commercial vehicle which appears on the balance sheet (Motor Vehicle 4). The husband’s evidence was that the old vehicle was kept by a business that repaired a piece of equipment for the husband in lieu of payment for the repairs.
The repairs to the equipment (which was valued at around $5,500) would have had to have been paid for by some means. True it is, that using an asset for payment as opposed to income, would reduce the amount available for distribution, but Motor Vehicle 2 appears to have little value in any event. It has been disposed of for a reasonable purpose and I do not consider it appropriate to include as one of the notional add backs.
Legal Fees (Items 25–27)
The husband has paid legal fees to a firm of solicitors ($42,904) and two barristers ($107,745 and $110,000, respectively).
The wife submits that applying the principles set out in Chorn and Hopkins (2004) FLC 93-204 (“Chorn & Hopkins”), the legal fees should be added back. The force of Chorn and Hopkins was, however, somewhat weakened by the Full Court decision in Trevi. In Chorn and Hopkins, the Full Court said:
56.In summary, we consider that the above mentioned decisions of the Full Court establish that, while the treatment of funds used to pay legal costs remains ultimately a matter for the discretion of the trial Judge, in determining how to exercise that discretion, regard should be had to the source of the funds.
57.If the funds used existed at separation, and are such that both parties can be seen as having an interest in them (on account, for example, of contributions), then such funds should be added back as a notional asset of the party, who has had the benefit of them.
58.If funds used to pay legal fees have been generated by a party post-separation from his or her own endeavours or received in his or her own right (for example, by way of gift or inheritance), they would generally not be added back as a notional asset; nor would any borrowing undertaken by a party post-separation to pay legal fees be taken into account as a liability in the calculation of the net property of the parties. Funds generated from assets or businesses to which the other party had made a significant contribution or has an actual legal entitlement may need to be looked at differently from other post-separation income or acquisitions.
As Murphy J, with whom Alstergren DCJ (as his Honour then was) and Kent J agreed, said in Trevi, these passages represent guidelines, as opposed to a binding principle of law. As Norbis v Norbis (1986) 161 CLR 513 set out at 520, a failure to follow a binding principle of law is an error, but the failure to follow a guideline:
…does not of itself amount to error, for it may appear that the case is one in which it is inappropriate to invoke the guideline or that, notwithstanding the failure to apply it, the decision is the product of sound discretionary judgment. The failure to apply a legitimate guideline to a situation to which it is applicable may, however, throw a question mark over the trial judge’s decision and ease the appellant’s burden of showing that it is wrong. However, in the ultimate analysis and in the absence of any identifiable error of fact or positive law, the appellate Court must be persuaded that the order stands outside the limits of a sound discretionary judgment before it intervenes.
As Murphy J explained in Trevi at [37]–[39], the basis behind the guidelines set out in Chorn and Hopkins is that ordinarily, a party should not contribute to the costs of the other party, unless it is pursuant to the exercise of discretion under s 117 of the Act. This led his Honour to say:
41.The passages from Chorn, quoted above, draw a distinction between legal costs met from property that would otherwise be available at trial and legal costs met from funds “generated by a party post-separation from his or her own endeavours or received in his or her own right (for example, by way of gift or inheritance)”. The proposition there advanced, that such expenditure “would generally not be added back”, also needs to be seen as a guideline informing the relevant discretion rather than determining it. …
The husband’s evidence was that the payment of legal fees probably came from the proceeds of sale from the Suburb Z or Suburb AA property (both of which I shall discuss shortly). These payments occurred in 2016 and were paid after separation, with funds that would have otherwise have been available for distribution to the parties. If the sums are not added back, the effect is that the husband would have had the use of 100% of these proceeds of sale from the assets, as opposed to the agreed proportion.
I am satisfied that the appropriate exercise of discretion is to include these sums as add backs.
The sale proceeds from the Suburb Z and Suburb AA properties (Items 30–31)
The husband had a one half interest in a property at Suburb Z and in a property at Suburb AA with Mr BB.
The settlement of the Suburb Z property took place in mid-2016 (Husband’s affidavit filed on 15 July 2022, Annexure “D”, p.2). The purchase price was over $500,000. Although the unchallenged evidence of the husband was that there was a mortgage over the property, the mortgage was not apparently discharged on settlement prior to the distribution of funds. Rather, the documents make it clear that a bank cheque in favour of the mortgagee “on a/c [Mr Juric] for $483,780.13” (the surplus after the payment of selling costs and adjustments) was to be handed to the mortgagee (Husband’s affidavit filed on 15 July 2022, Annexure “D”, p.3).
The husband and Mr BB conducted a joint bank account with the mortgagee. On the day of the settlement, $234,855.64 was deposited into the account and described as the “surplus fund from [Suburb Z]” (Exhibit “6”, p.22).
On two dates in mid-2016, two deposits were made from the real estate agent who acted on the sale of the Suburb Z property, which were for $41,020 and $218.67, and both entries were described as relating to the Suburb Z property.
The clear and obvious and, indeed, unchallenged inference, is that these two payments were for the balance of the deposit and the interest on it.
The other obvious inference is that the mortgagee has deducted the amount owing under the mortgage prior to this deposit. Thus, Mr BB and the husband received $276,094.31 as the proceeds of sale from the Suburb Z property. The husband was entitled to one half of this sum or $138,047.15.
The sale of the Suburb AA property took place in late 2016. The purchase price was over $800,000. As with the Suburb Z property, no deduction for the mortgage was made prior to the payment of a cheque to the mortgagee of $753,919.48 on the final distribution of the proceeds of sale.
On the day of the sale, $409,878.63 was deposited into the joint account of the husband and Mr BB (Exhibit “6”, p.25). That sum was followed by two payments on the following two days from the real estate agent who acted on the sale, being $63,787 and $1,122.50 respectively (Exhibit “6”, p.25). Again the inference is that the second and third payments represented the deposit. Thus, Mr BB and the husband received $474,788.13. Again, I infer that this is after payment of the mortgage. The husband’s share was therefore, $237,394.06.
The husband’s unchallenged evidence is that he is the only income earner for the family, which he has continued to support since separation (Husband’s affidavit filed on 12 July 2022, paragraphs 16–19). Although his company has paid the wife wages, she did not provide any services to it. Therefore, the husband has, directly or indirectly, paid all of the outgoings for the wife and the children since separation.
This is consistent with the use of proceeds from three properties sold in 2020 and 2021. They were paid into the husband’s solicitor’s trust account. The payments from that account include many payments obviously for the support of the family. It is consistent with the husband’s evidence (Husband’s affidavit filed on 12 July 2022, paragraph 34).
There is no basis for taking into account the use of assets to pay for reasonable living expenses of both parties.
Further, it was not suggested by the wife that the husband had diverted these funds and continues to hold them in a manner unknown to the wife.
It therefore follows, that the proceeds of sale of these two properties have been used for the payment of business expenses, family living expenses or are otherwise represented on the balance sheet. In that case, the funds have been accounted for and there is no basis for adding them back.
The Suburb M property (Items 33–34)
In late 2016, H Pty Ltd and Mr N entered into a contract for the construction of a residential building at Suburb M for a contract price of over $2 million (including GST). Shortly thereafter, the husband entered into a contract for contractor’s warranty insurance, for which he paid the sum of $9,951.70.
The wife contends that it is clear from the books and records of the husband’s company that no payments were deposited into the company’s accounts for work carried out under this contract and that the husband must have received these payments in cash.
The contract also refers to there being a “[contractor’s] margin of 20%” which, the wife submits, is payable in addition to the purchase price. Therefore, the wife claims that the contract price and an amount over $400,000 (the contractor’s margin of 20%) should be added back as benefits the husband has received that ought to otherwise been received by the company, thus increasing its value.
There are two immediate difficulties with these contentions. The first arises from the terms of the contract referring to the contractor’s margin. Schedule 1 to the contract, which is headed “Particulars of contract” states “the contract price is: [over $2,000,000.00]” (Wife’s affidavit filed on 20 June 2021, Exhibit “MH-11”, p.4). That statement is unequivocal.
The contractor’s margin is identified as being 20% in Clause 8 of Schedule 1. The relevance of that margin appears from Clause 9.4 of the contract which provides that:
For every day the subject of an extension of time caused by an act, default or omission of the owner, delay damages, being the total of the actual increase in cost to the [contractor] to carry out the […] works plus the [contractor’s] margin applied to that cost is due and payable to the [contractor] on demand.
(Wife’s affidavit filed on 20 June 2022, Exhibit “MH-11”)
The contractor’s margin is similarly applied to increase the costs caused by hidden site conditions (Clause 12.3(b) and 12.7).
The margin is applied in those particular circumstances and not to the contract as a whole. Quite clearly, the contract price is not the amount over $2 million plus the contractor’s margin, but simply the former figure.
The second difficulty is that the figure claimed by the wife, makes no allowance for the cost of carrying out the work, if it was carried out, which would obviously have been paid by the husband or his company and what the costs of that work might have been, is entirely unknown. The husband’s evidence was that generally speaking, the contractors work on a 10% margin, but whether they achieve that margin depends on any particular contract.
However, if it became necessary, the Court would do what it could to fix, albeit in a somewhat arbitrary manner, what it thought the appropriate profit from the contract would be. In this case, relying on the husband’s evidence, I would assess it at being 10% as the best that could be done on the evidence.
There is no evidence which attempts to assess the current value of the company on the basis it received $215,000 in 2016 and 2017. That is not surprising as such evidence is likely to be very speculative.
The husband contends that this was not a genuine contract for the construction of a dwelling. His evidence was that he and Mr N entered into the contract so that the company could enter into a contract for warranty insurance, for the benefit of Mr N, who then engaged his own contractors and subcontractors. As I have already noted, such a contract was entered into and indeed claims were made under it. The husband further said that his only involvement with the project thereafter was to act as a site supervisor and that he did not receive any payments in respect of the contract price at all.
The question is whether the husband’s evidence should be accepted.
Neither the husband nor the wife called Mr N. The wife issued a subpoena to Mr N to attend Court to give evidence and to produce documents. After initially agreeing with a process server to meet to accept service of the subpoena, Mr N reneged on that arrangement and declined to make himself available to accept service. Subsequently, orders were made for substituted service of that subpoena on Mr N. It emerges from the evidence of the husband, who spoke to Mr N on the Friday prior to the hearing commencing, that Mr N had received notice of the subpoena, had received legal advice that there was some technical difficulty with either the orders or the service that meant he did not need to attend, and that he was not intending to do so.
Mr N did not attend Court and the wife decided not to seek a warrant for his arrest to bring him to Court to give evidence.
The wife submits that, nonetheless, the husband should have called Mr N and that because he failed to do so, an inference should be drawn against him pursuant to the principles in Jones v Dunkel (1959) 101 CLR 298.
Whilst Mr N is clearly not, as is colloquially said “in the husband’s camp”, which was accepted by the wife, it was suggested that, even so, there was an obligation on the husband to call Mr N.
The husband’s evidence was that he understood or had heard that Mr N was a “loan shark” and a “standover man” and was someone who had threatened him in the past. The husband did not suggest that Mr N had threatened him on the Friday evening phone call. However, I am not satisfied that the husband was obliged to call Mr N, but in any event, given the above, he had a reasonable basis for not doing so.
I decline to draw any adverse inference from the husband’s failure to call Mr N.
As I indicated earlier, the weight to be given to the husband’s evidence must be looked at on an issue by issue basis.
The husband’s explanation for the entry into the contract is not implausible, especially given his description of Mr N.
Significantly, to my mind, there is no suggestion that from the time of the commencement of this contract until its completion, that the husband unexpectedly had available large sums of cash or that that cash remained or remains available for him to use. Similarly, there is no evidence of him paying for materials or subcontractors. Of course, such payments could have been made in cash but that is perhaps, less likely with commercial suppliers of materials. There is no evidence from anyone involved in the home’s construction.
It is more likely than not that if the husband had actually carried out such work there would be some evidence of the receipt or expenditure of funds or of work. That is so even if the building was constructed on an entirely cash basis.
For these reasons on balance, I incline towards accepting the husband’s evidence on this issue.
Finally, on this issue, consistently with the findings of the other properties sold at about the same time, the significant probability is that if there were any proceeds from this contract, if it was carried out and the funds received, they were used for the reasonable business expenses of the husband’s company, or the living expenses of the family or have otherwise found their way into the balance sheet. There is no suggestion that they have been parked somewhere.
If I am wrong about these matters, the add back would have been no more than $215,000.
This claim has not been established.
The payment to CC Pty Ltd (Item 32)
A company known as DD Pty Ltd owned a property at Suburb J which was sold in late 2021. The husband and another person were the shareholders of that company and on the sale of the property, the proceeds of sale were distributed equally between them.
The settlement of the property took place in late 2021 with a purchase price of over $2 million. The settlement sheet shows that the co-shareholder received $579,790.15 (Husband’s affidavit filed on 12 July 2022, Annexure “D”, p.1). The settlement sheet directed that the husband’s share be paid to Mr Y ($420,000) and to CC Pty Ltd ($159,790.15). Thus the husband did not directly receive the benefit of any of the funds. However, the wife contends that the payment to CC Pty Ltd should be added back as there is no evidence that there was a genuine agreement that required the payment.
The husband’s evidence on this issue is less than satisfactory. He said:
36. …
The amount due to [CC Pty Ltd] was $173,228.42 made up of $150,000.00 as the principal loan and $23,228.42 as interest (calculated a 5.75% per annum at $23.63 a day for 983 days between [mid-2019] to [late 2021]). I paid [CC Pty Ltd] the shortfall of $13,438.27 direct to [CC Pty Ltd].
(Husband’s affidavit filed on 12 July 2022, paragraph 36)
The property was sold pursuant to orders of Henderson J on 29 April 2020. The orders provided for the husband to use the proceeds for business expenses, payments for the children and other expenses including the payment of personal loans. The orders required the husband to give an accounting of the expenditure at the request of the wife. There is no evidence that the wife ever did so.
Given these orders, I consider that the probability is that the CC Pty Ltd payment was the repayment of a loan. It is less likely that a property sold under court orders for a specific purpose with an obligation to provide an accounting would be utilise to pay a sham debt.
In any event, as with the other properties, there is no evidence that any of these sums have effectively been ‘parked’ somewhere for the use of the husband.
I am not persuaded that this sum should be added back.
Assets and liabilities
The wife’s liabilities for a vehicle loan for her daughter and a loan from Ms EE have not been included as they were incurred after separation.
Therefore, the property available for distribution is the following:
ASSETS No. Ownership Description Value 1 H 1 F Street, Suburb G NSW $3,650,000 2 H 2 F Street Suburb G NSW $2,150,000 3 H U Street, Suburb V NSW, 50% share owned with other third parties $470,000 4 H FF Street, Suburb GG NSW, 33.33% share owned with other third parties $223,333 5 H JJ Street, Suburb HH NSW, 50% share owned with other third parties $675,000 6 H 1 KK Street, Suburb LL NSW, 50% share owned with other third parties $537,500 7 H 2 KK Street, Suburb LL NSW, 50% share owned with other third parties $525,000 8 H MM Street, Suburb NN NSW, 50% share owned with other third parties $317,500 9 H E Street, Suburb L NSW $1,475,000 10 H K Street, Suburb J NSW, 50% share (as unit trustee) with other third parties $987,500 11 H H Pty Ltd Valuation $259,000 12 H Bank account linked to JJ Street, Suburb HH NSW, 1 & 2 KK Street, Suburb LL NSW and MM Street, Suburb NN NSW NAB Acct. ending …33 50% share owned with other third parties $8,135 13 H Bank account linked to U Street, Suburb V NSW NAB Acct. ending …18 50% share owned with other third parties $2,188 14 H NAB Acct. ending …02 $4,263 15 H NAB Acct. ending …51 $6,677 16 H Motor Vehicle 3 $80,000 17 H Equipment $3,500 18 H Recreational Vehicle 1 $1,200 19 H Recreational Vehicle 2 $1,400 20 H Recreational Vehicle 3 $2,350 21 H Recreational Vehicle 4 $2,000 22 H Motor Vehicle 4 $47,300 23 H Personal bank account Commonwealth Bank of Australia ending #...62 $500 Total $11,429,346 ADD BACKS No. Ownership Description Value 24 H Legal Fees – paid to solicitors $42,904 25 H Legal Fees – paid to barrister $107,745 26 H Legal Fees – paid to QC $110,000 27 H Funds from the sale of Motor Vehicle 5 sold mid-2020 $8,000 28 H Funds from the sale of Recreational Vehicle 5 $700 Total $269,349 LIABILITIES No. Ownership Description Value 29 H Mortgage over 2 F Street, Suburb G NSW $758,294 30 H Mortgage over U Street, Suburb V NSW $203,710 31 H Mortgage over FF Street, Suburb GG NSW 33.33% share owned with other third parties $69,781 32 H Offset account linked to FF Street, Suburb GG NSW $1,102 33 H Mortgage over JJ Street, Suburb HH NSW $213,544 34 H Mortgage over 1 KK Street, Suburb LL NSW $220,801 35 H Mortgage over 2 KK Street, Suburb LL NSW $177,830 36 H Mortgage over MM Street, Suburb NN NSW $107,415 37 H Mortgage over K Street, Suburb J NSW $703,650 38 H Offset account linked to K Street, Suburb J NSW $3,725 39 H Commonwealth Bank Credit Card -$13,877 40 H OO Company Credit Card -$16,200 41 W Westpac Credit Card $23,071 Total $2,452,846 SUPERANNUATION No. Member Name of fund and type of interest Value 42 H Superannuation Fund 1 – Accumulation
Acct. ending …47$212,739 43 W Superannuation Fund 2 – Accumulation
Acct. ending …02$195,966 Total $408,705
Accordingly, the non-superannuation assets come to $11,429,346 and the add backs of $269,349. From these there must be subtracted liabilities of $2,452,846 and superannuation of $408,705 added. This comes to a net assets figure of $9,654,554, of which the wife is entitled to 57.5% or $5,551,368. The husband is entitled to $4,103,185.
Conclusion
The parties provided further written submissions as to how the properties should be distributed given the above finding.
It was agreed in those submissions that the wife should receive Motor Vehicle 1 valued at $60,000. It does not appear separately as an asset in the earlier list because it is owned by one of the companies owned by the husband. It is currently in the in possession of the wife.
It is also agreed that the wife should receive the property situated at 1 F Street, Suburb G (“the 1 F Street property”).
The wife sought that, in addition, she should receive the property at 2 F Street, Suburb G (“the 2 F Street property”), whereas the husband proposed that she receive the property at E Street, Suburb L (“the Suburb L property”). The reasoning behind the husband’s proposal is that the wife does not have any capacity to borrow and to discharge a mortgage. The 2 F Street property is encumbered by a mortgage, unlike the Suburb L property.
Whilst there is force in this agreement, the wife has expressed the view that she will be able to refinance and little will be lost by giving her at least the opportunity to do so. If she is unable to do so, it will be sold. It would not be desirable and not in the spirit of s 81 of the Act for the parties to continue to own adjoining properties.
On the above figures, the husband will have to make a cash payment to the wife. I accept his submission that he will need to refinance and may need to sell a property to make the payment, which could take some time. I do not agree with the wife that the husband should have planned to have a sufficient sum on standby to make the payment. The composition of the property was disputed, making it difficult to finance what payment would be required.
I accept that, to the extent necessary, that a property owned solely by the husband, as opposed to a property owned by him with others, should be sold to make the payment to the wife, if he is unable to refinance.
Accordingly, the orders will provide for the wife to receive the 1 F Street property and Motor Vehicle 1. The wife will have 90 days to discharge the mortgage over the 2 F Street property, and that taking place, the property will be transferred to her. If she is unable to do so, it will be sold with the wife to receive the net proceeds of sale.
Thus the wife will receive the 1 F Street property ($3,650,000), the net proceeds of the 2 F Street property ($1,391,706), Motor Vehicle 1 ($60,000) and her superannuation ($195,966), being a total of $5,297,672.
The husband will make an adjusting payment of $253,697 within 90 days and if he fails to do so, the Suburb L property will be sold and the payment will be made to the wife from the net proceeds with the husband retaining the balance.
Thus, the wife and the husband will respectively bear the rise or fall in the value of the properties at 2 F Street and Suburb L. This recognises that the net value in the properties has been assessed on the values given at the hearing, as, in effect the properties, at whatever value, are to be held by them, if possible. Further, it is a fair way of sharing any risk of change in value.
The parties will retain their interests in their other property, including superannuation.
The above gives effect to the agreed distribution. I consider the orders do so in a just and equitable manner.
I certify that the preceding seventy-seven (77) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Aldridge. Associate:
Dated: 27 September 2022
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