Ingold & Ingold

[2019] FamCA 734

FAMILY COURT OF AUSTRALIA

INGOLD & INGOLD [2019] FamCA 734

FAMILY LAW – PROPERTY – modest asset pool – where the major asset is a non-saleable income stream with a value of approximately $80,000 – what orders achieve finality and justice and equity.

Family Law Act 1975 (Cth) ss 79, 75

Hickey & Hickey (2003) FLC 93-143
Biltoft & Biltoft (1995) FLC 92-614
Jones & Dunkel (1959) 101 CLR 298
Stanford & Stanford [2012] HCA 52; (2012) 247 CLR 108

APPLICANT: Ms Ingold

RESPONDENT: Mr Ingold

FILE NUMBER: SYC 6816 of 2014

DATE DELIVERED: 28 October 2019

PLACE DELIVERED: Brisbane

PLACE HEARD: Sydney

JUDGMENT OF: Baumann J

HEARING DATE: 23, 24 and 25 September 2019

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr D Dura

SOLICITOR FOR THE APPLICANT: Diamond Conway Lawyers

COUNSEL FOR THE RESPONDENT: Mr G Stapleton

SOLICITOR FOR THE RESPONDENT: Pearson Emerson Meyer Family Lawyers

Orders

1. That by 4.00pm (Queensland time) on 11 November 2019 the parties submit an agreed order which complies with the Reasons delivered 28 October 2019 by the Honourable Justice Baumann.

2. That if the parties are unable to agree by 4.00pm (Queensland time) on 11 November 2019 on the terms of the order, then the proceedings will be adjourned to 9.30am (Queensland time) on 18 November 2019 in the Family Court of Australia at Brisbane, to hear oral submissions or receive additional written submissions as to the form of the order.

3. That the parties and their legal representatives be granted leave to appear by telephone 18 November 2019.

Note: The form of the order is subject to the entry of the order in the Court’s records.

IT IS NOTED that publication of this judgment by this Court under the pseudonym Ingold & Ingold has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).

Note: This copy of the Court’s Reasons for Judgment may be subject to review to remedy minor typographical or grammatical errors (r 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to r 17.02 Family Law Rules 2004 (Cth).

FAMILY COURT OF AUSTRALIA AT  BRISBANE

FILE NUMBER: SYC 6816 of 2014

Ms Ingold

Applicant

And

Mr Ingold

Respondent

REASONS FOR JUDGMENT

Introduction

1. In the course of property settlement litigation which has spanned over four years, the Applicant wife Ms Ingold and the Respondent husband Mr Ingold, have incurred legal costs between them of not less than $530,000 (see Exhibit 7).

2. In the ultimate analysis, the only substantial asset which remains (and which both parties desperately seek to retain), is an “interest” in a Company F distribution agreement that the Single Expert witness opines has a value of just over $80,000.

3. It defies logic and common sense that the parties could not find a sensible compromise to their dispute and, I accept, their lawyers probably encouraged them to do so.  However, having seen the parties give evidence, and assessing the level of mistrust and antipathy they hold for each other, I am left with the unhappy conclusion that the somewhat unrealistic view they have carried about the security and level of their joint (or separate) financial position impacted on their ultimate desired outcomes from this litigation.

4. These Reasons seek to explain to both parties why the orders now pronounced are just and equitable to both – however I hold no confidence at all that either of the parties will see it that way.

Statutory pathway

1. 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 (“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.

Contextual history

1. I more fully deal with some of the critical issues when discussing the contributions made by the parties later in these Reasons, however the following shorter chronology provides a contextual history.

2. Hereafter, statements of fact shall be construed as findings of fact.

3. It is appropriate to record that neither experienced Counsel – Mr Dura for the wife and Mr Stapleton for the husband – contended for a finding on credit.  In my assessment, both parties were reliable witnesses, although as is often the case they saw their contributions and the value of those contributions through a prism of their view of what is fair.  At times they tended to exaggerate their own contributions whilst, at the same time, minimising the contributions of the other party.

4. The husband is 54 years of age and was born in Country T, immigrating to Australia in 1993.  The wife, a native of Country V, is currently 46 years of age.

5. On or about 9 May 1989, the husband commenced as a Company F Distributor – selling products that formed part of a USA based system akin to a pyramid sale design.  In these proceedings, the Original Company F Distribution ..., has been often referred to by the abbreviation “OFD”, which I adopt in these Reasons.

6. The parties, having met in the USA at a Company F convention in 1999 began a relationship that developed during the following year or so, culminating (after some visits to Australia by the wife under tourist visas), with the husband supporting the wife coming to Australia under a spouse visa – which she did during 2002/2003 when cohabitation commenced and the parties committed to a future marriage by announcing their engagement.  The marriage took place in Australia in 2003.

7. In mid-2004, the parties jointly purchased a property at U Street, Suburb E for $730,000.  The parties secured a loan from a bank of around $570,000 to $600,000, but a dispute exists as to how the balance was sourced.  I deal with this dispute later in these Reasons.

8. In October 2004, the wife was added as a “spouse”, with the husband’s consent and in accordance with the Company F Rules at the time, to the OFD.  Thereafter the income from the OFD was generally regarded as “partnership” income and so asserted to the Australian Taxation Office (“ATO”).

9. In 2005 the parties’ first child B was born, followed 18 months by the birth in 2006 of the parties’ son C.  Shortly prior to the birth of the third child D in 2007, the parties (as an apparent wealth creation strategy) purchased two investment units in Suburb W for $311,000 each with the purchase price fully borrowed using the additional security of the Suburb E property.  Regrettably, a sale of those “investments” in September 2013 did not result in any nett capital growth being available – although for the six years of their retention, the parties were able to claim on their personal taxation returns, some loses from the negatively geared properties.

10. As part of the strategy to “grow” the OFD business, it was decided to open a Company F Club.  The costs of doing so, appeared on the evidence, to be one reason why in mid-2010 the family moved to a rental property and elected to rent out the Suburb E property.  The differential, I infer, was anticipated to be cash flow positive.

11. It is difficult to know, on the evidence (and in light of the “blame game” engaged in before me), if the parties by this time accepted they were clearly living beyond their means.  Although the husband had been elevated to the “Millionaires Team” in the Company F organisation as early as March 2000 (causing at one stage the parties deciding to lease a Mercedes Benz motor vehicle which they could not realistically afford), I am satisfied that the income being generated from the OFD was insufficient to maintain the lifestyle the parties desired to both enjoy and demonstrate to others.

12. As much is apparent from the level of credit card debt that was repaid when the sale of the Suburb E property in June 2014 for $1,210,000 generated nett proceeds of $620,646, a significant portion of which went to pay credit card liabilities.  The disbursement of these funds is generally accepted as being accurately depicted in the document prepared by the wife and being “YI-3” in the wife’s tender bundle.  That document reveals that the nett available proceeds of $620,646, was disbursed as follows:

To the husband (including funds to repay his mother an agreed loan of $43,000)	$82,500
To the wife (including funds to repay her mother and sister)	$275,000
To credit card payments and loans from joint ANZ account ending in …04	$183,801.20
To payment to the husband’s brother Mr A Ingold for stock	$20,549.67
To other agreed payments (Mr H $11,000; to account ending in …15 $20,238.70)	$31,238.70
To balance remaining in joint account at that time	$27,556.55
$620,646.12

1. The wife, in final submission, contends that a loan was made by her (post separation) to Mr G of $120,000 – essentially from the funds received by her of $275,000, and by so doing she was unable to repay in June 014 (or since) the “loans” she asserts she owes to her mother Ms J (of $108,000) and to her sister Ms X (of $28,000 nett).  Later in these Reasons I discuss how to properly treat these asserted loans, and further how the evidence persuades me to treat the loan to Mr G and other funds available to the wife from the Suburb E sale.

2. I am satisfied that the financial pressures in the relationship contributed to the final breakdown of the marriage resulting in separation in March 2013, with initially the wife leaving the family home without the three children.  This meant the father, for a time, did carry the responsibilities after separation of the children’s care and financial support, however by the time of the hearing a more equal care arrangement (without court orders) had been in existence for some time.

3. Two further events occurred in the history (truncated as it has been described), of note.  Firstly in July 2014, the husband made an “investment” of $140,000 from funds or income available to him or borrowed, in an enterprise known as Y Pty Ltd.  This was a unilateral business decision by the husband which he concedes was a bad decision.  The husband says, and I accept his evidence, that his investment was induced by fraudulent conduct and that none of the funds are likely to be recovered.  I observe that what appears to have been, in hindsight, a high risk decision, was probably shaped by the husband’s difficult financial position.

4. Secondly, in or around March 2015 the husband says that he severed the partnership, but more importantly at that time, the parties individually created separate distribution agreements.  The connection between these separate agreements (in the Company F structure) and the continuation of the OFD, was the subject of further evidence and cross-examination, and is referred to further below.

Some procedural history

1. As may be inferred from the quantum of costs incurred by each party, the proceedings commenced in this Court by the wife on 30 June 2015 has been the catalyst for a significant number of events and appearances before both Registrars and Judges of the Family Court of Australia in Sydney.

2. No useful purpose is now served in dealing with all of these events (totalling in the region of 18 events), however it gives some context to findings that are made to set out some critical orders, particularly where it is a “theme” in the husband’s case that he has unfairly and entirely since separation carried the financial burden of all the “business” expenses when he did not have control of all the gross income.  I record that:

   a)the initial application of the wife sought orders, inter alia, that there be a declaration that the OFD be held in equal shares and that future income be split equally.  The husband’s Response filed 20 October 2015 sought on a final basis, inter alia, that he hold the OFD solely and pay the wife the sum of $150,000;

   b)the matter proceeded to a Conciliation Conference on 23 March 2016, but did not resolve, however prior to the Conference the husband filed an Application in a Case seeking final orders that the wife resign as a “spouse member” of the OFD and that the husband pay to the wife 30% of nett value of the distributorship;

   c)competing applications for interim relief were filed by the parties including by the wife for spouse maintenance and lump sum payments which came before Stevenson J on 18 May 2016 for urgent determination;

   d)on 18 May 2016, Stevenson J by consent made orders in the following terms:

   “1.  Orders and notations are made in accordance with paragraphs 1 to 5 and A of a document dated 18 May 2016, filed herein as set out hereunder:

   1.        That the parties do all things and sign all documents necessary to pay by 5.00 pm tomorrow $25,000 to the Applicant and $25,000 to the Respondent from the joint Australian and New Zealand Bank account BSB … Acc … by way of interim property settlement.

   2.        That the parties do all things and sign all documents necessary to pay by 5.00 pm tomorrow $5,000 to the Respondent for the purpose of expenses associated with the parties Company F Distributorship.

   3.        That the Respondent provide to the Applicant’s solicitors receipts evidencing the $5,000 expenditure referred to in Order 2 within three weeks of having incurred the expense.

   4.        That within seven days the Applicant’s solicitor return the folders enclosing bank statements, credit statement and other source documents relating to the joint Company F Distributorship.

   5.        That the Respondent provide to the Applicant’s solicitor evidence of any expenditure incurred by him for the joint Company F Distributorship from 30 June 2015 to the date of these Orders.”

   Until this order was made, I am satisfied that for most of the period from separation in March 2013 to this order, the husband and wife arranged for the gross distributions under the OFD to be split equally.  The husband, on more than one occasion during the hearing, protested that he never thought that was fair.  The history suggests, if that was his position, he never did anything to prevent that occurring during this period;

   e)On the adjourned date of 27 July 2016, the matter came before McClelland J when the Interim Hearing for spouse maintenance was heard on the further adjourned date of 2 August 2016 and in a written Judgment delivered 18 August 2016, his Honour ordered the wife receive by way of spouse maintenance $5,000 a month from the joint account;

   f)After delivery of the Judgment, on 1 September 2016 the husband filed a fresh Application in a Case seeking further relief – effectively for further distributions to him “for living and business expenses”.  The wife engaged with this new Application seeking its dismissal, and when the Applications then came again before McClelland J on 13 September 2016, his Honour by consent made the following orders:

   “1.      All outstanding interim applications be withdrawn and dismissed.

   2.That the Orders made 18 August 2016 be discharged.

   3.That each of the Applicant and Respondent be paid $7,500 per month from the joint Australia and New Zealand Banking Group bank account BSB ...… Account Number ...… (“Joint ANZ Account”) with such payments to be made on the first day of each month and with the first payment to be made on the first day of the month immediately subsequent to the date of these Orders.

   4.That each of the Applicant and Respondent be paid $36,000 from the Joint ANZ Account within 7 days of the date of these Orders.

   5.Subject to Order 10, 11 and 12 that the Applicant be paid $2,500 per month from the Joint ANZ Account with such payments to be made on the first day of each month and with the first payment to be made on the first day of the month immediately subsequent to the date of these Orders.

   6.The Applicant and Respondent are to do all such acts and things and sign all documents necessary to authorise the Australia and New Zealand Banking Group to effect the payments referred to pursuant to these Orders.

   7.That the Respondent nominate three valuers within 14 days of the date of these orders audit and identify the specific expenses attributable to the parties Joint Company F Distributorship.

   8.The Applicant to choose one valuer from the three nominated y the Respondent pursuant to order7 within 7 days of being provided the names pursuant to Order 7.

   9.That the parties jointly instruct the value nominated by the Applicant pursuant to Order 8 to audit and identify the specific expenses attributable to the parties Joint Company F Distributorship within 14 days of the Applicant choosing the valuer pursuant to order 8.

   10.That order 5 be amended to reflect the expenses calculated by the valuer to reflect the expenses calculated by the valuer pursuant to Order 9 from the date the auditor’s report is released.

   11.In the event the amount calculated pursuant to Order 9 is less than $2,500 per month the Husband will refund the difference to the Joint ANZ Account for each month he has received the same within 7 days of the auditor’s report being released.

   12.In the event the amount calculated pursuant to Order 9 is greater than $2,500 per month the Husband will be paid the difference from the Joint ANZ Account, for each month he has expended the same, within 7 days of the auditor’s report being released.

   13.Each party pay their own costs of this application.”

   The effect of these orders is clear from their terms.  Although payments were to be distributed, some attempt to define what were the business expenses to be paid (as calculated by an independent expert), was prescribed.  Such an order reflects the lack of trust between the parties in my view;

   g)Six months later, on 20 March 2017, the wife then filed an Application in a Case arising, she asserted, from the failure of the husband to comply with the earlier orders made, noting that no appointment of a single expert was available to assist with the business expense calculation.  The husband’s Response to this Application in a Case sought orders allowing an BB Bank liability to be paid.  Another example, with the accumulating credit card debt, that old spending habits had not been corrected.  These competing applications came before Rees J on 5 April 2017 when orders were made seeking to further direct how the income from the OFD was to be disbursed.  The fact that, despite the order made on 13 September 2016 for the appointment of an expert valuer, no appointment had been made is clear from the husband’s amended Application in a Case filed on 20 June 2017;

   h)On 4 and 18 December 2017, a Registrar made directions designed to ensure that the agreed expert Mr K be given further information to complete “his audit”.  However, when the competing Applications in a Case came before Aldridge J on 25 January 2018, further orders, including the discharge of Mr K’s appointment as a joint expert, were made, and it seems that by orders 5, 6, and 7 below noted, a further attempt at regulating the flow of income was ordered, namely:

   “5.      From the first payment in March 2018, the Husband shall receive 60% of all monies received from the Original Company F Distribution Number ... deposited into the parties joint ANZ Deposit Bank Account (BSB ..., A/C ...) and the Wife shall receive the remaining 40%.

   6.        The parties do all things, and sign all documents to direct Company F to make the payment pursuant to Order 5 directly into bank accounts nominated by the parties in their percentages nominated therein.

   7.        The Husband pay $2,786 per month to the Wife for a period of 3 months with the first payment to be made on 21 April 2018, such payment to be made into the Wife’s Solicitor’s trust account.”

   To enable such orders to be given effect Aldridge J discharged a number of the interim orders previously made.

   i)After the orders of 25 January 2018, the matter awaited allocation to a Judge’s docket to permit trial dates to be allocated.  This occurred on 20 December 2018, when Tree J listed the hearing for five days by video commencing 23 September 2019 and made a number of trial directions.  It seems that Tree J may not have been made aware, that the critical issue as to the “value” of the OFD (and possibly how funds were being distributed historically) was still to be the subject of a single expert valuation;

   j)With a Final Hearing approaching before me (the trial being allocated to me when Tree J was unable to hear the matter post his assignment to the Appeal Division in March 2019), an urgent Application in a Case filed 26 August 2019 (less than one month before the trial was to commence) seeking directions as to the engagement of the agreed expert Mr Z was filed and I dealt with the Application urgently by telephone on 29 August 2019.  During that telephone hearing in which the parties were represented by their trial Counsel, I expressed my deep concerns about the estimated trial time and the uncertainty surrounding the very modest pool.  Counsel agreed with me the trial would not take longer than three days – as it transpired to be case;

   k)The single expert, effectively appointed formerly by me on 29 August 2019, received instructions on 30 August 2019 and prepared a report dated 20 September 2019 and, as a result of some specific questions from the wife, provided some further answers.  The report was marked Exhibit 1.  As I soon discuss, Mr Z was not required for cross-examination.

1. I cannot express the level of frustration – bordering on absolute amazement – that the matter has taken this long with such devastating effect on the financial future of these parties.  In the end, as the Court hopes to explain adequately, the options available to the Court are limited and the value of the “jewel in the crown” – the OFD was assessed by the only expert evidence available as having a value of only $81,400.

2. Before I make findings as to the pool available and the underlying interests, I choose now to deal with two discrete issues, which became an important (if not slightly distorted) focus of the parties.

Valuation of the OFD

1. The report of forensic accountant Mr Z is the only expert valuation evidence, and as neither party sought to cross-examination the expert, his report remains unchallenged.

2. Mr Stapleton for the husband contends on this basis that the Court should adopt the conclusion reached by the expert that:

   a)a fair market value of the OFD is $81,400; and

   b)in determining the future maintainable earnings estimated to be $44,000 per annum, the Court should accept the evidence of Mr Z that a reasonable wage and superannuation component for the “Sales Manager” role currently undertaken by the husband is $117,165 ($107,000 plus $10,165).

3. Mr Dura on behalf of the wife does not challenge the methodology adopted by Mr Z, but submits the underlying “figures” are not correct and by a document submitted after the trial (invited by the Court and not opposed by the husband), a set of alternate calculations is advanced culminating in an estimated value of $116,550 or, if the salary and superannuation are excluded an estimated value of $333,305.25 (see document now marked as Exhibit 19).

4. The interest in OFD (or for that matter the additional smaller distribution agreements created individually for both parties in 2015), is not able to be assigned to any third party.  In effect, this means there is no, in my view, “market” for the interest and therefore no “market value”.  The International Valuation Standards Committee uses the term “market value” as being “the estimated amount for which a property should exchange on the date of valuation between a willing seller in an arms-length transaction, after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion.”

5. On this definition, where there can be no purchaser, the concept of “market value” cannot apply

6. Mr Z in his Glossary of Terms (Appendix 11) defines “valuation” as being “the act or process of determining an estimate of value of a business, ownership interest, security, or intangible asset by applying valuation approaches, methods and procedures.”

7. However the characteristics of the OFD interest, and inability to sell the benefit to a third party, combine in my view to require the Court to try and ascertain from the evidence “the value to the owner” of the relevant asset.  Whilst it is likely, in most cases, that the value to owner is the same as market value, the special characteristics of this interest deserve consideration.

8. The parties’ dogged insistence to litigate in the face of increasing costs, about the operation and value of the OFD, demonstrate that each party sees value in the interest and wishes to retain control of the interest.  Perhaps coincidentally, the husband’s initial Response in 2015 sought orders that he retain the OFD and pay the wife $150,000.  The wife’s minute of order (Exhibit 4) primarily seeks orders that she pay the husband the sum of $200,000 and retain the OFD exclusively.  Both parties, in final submissions, submit they should be able to retain the OFD and are able to fund a payment to the other party.

9. On the evidence I propose to adopt the valuation of $81,400 as the notional value to the owner after allowance for a wage to the owner (with superannuation) of $117,165.  Mr Z’s evidence remains as the only expert evidence and the best evidence of value.

10. I have considered the alternate calculations creatively advanced by Mr Dura in Exhibit 19, but do not adopt them for the following reasons:

    a)The wife says the gross income revealed in the Profit and Loss Statement for the year ended 30 June 209 (husband’s tender bundle at pages 117 to 119) which of course is for only 60% of the gross income because of the orders made 25 January 2018, should be reduced by the husband’s individual distribution income of $6,296.  Whilst there is some immediate attraction to this course, such an issue was considered by the expert, and for the reasons in Appendix 4 (at (12)), I also include the Individual Distributorship income in the assessment of maintainable earnings.  The husband’s evidence is that they are “linked” by the way points and volumes under the Company F Rules operate;

    b)Mr Dura says the “costs of sales” of $44,733 should be ignored as the sales/stock can only relate to the husband’s individual distributorship and not the OFD.  However the husband acknowledged that stock purchased is used for marketing and promotion and, I infer, facilitate his training of salespeople under him in the OFD.  No differentiation is attempted to be made in the husband’s Profit and Loss Statement for 2019 and no similar separation was apparent in taxation returns filed since 2015.  The sales costs should not be ignored as a result;

    c)The expense adjustment opined by the expert at Appendix 4 is not challenged;

    d)Because I do not accept, for the reasons given, the variations contended by the wife for the 2018/19 year, it follows that I do not accept the “weighted average adjusted EBIT” is $63,000 but continue to adopt the estimate made by Mr Z of $44,420 (see Table C);

    e)It is appropriate in determining maintainable earnings, in accordance with accepted methodology, to allow for the salary and superannuation of an operator/manager.  In my view, this is particularly the case when “value to owner” is the focus.  I accept from the evidence that whilst the value might be a difficult concept – these parties do accept that the income stream from the OFD is the real value to them.  In my view that is the characteristic of this particular unique property interest keenly sought by both the husband and wife.  In that regard, it also bears mention that the “business expenses” are modest.  No staff or external rented office space is necessary.  The most significant single expense is “travel and accommodation” which for the 2018/19 year amounted to $17,207.  Evidence of regular sales convention (and sale extravaganza) events the parties have attended – often overseas, was given.  As Mr Z properly analyses, a number of expenses have a personal benefit whilst available under Australian tax law as a deduction.

11. In short, an increase in income in the OFD arising from some mentoring, guidance and motivation from the husband, but, in my view, mostly from the over 1,000 people who generate sales in the OFD from which the parties gain a benefit, is not likely to proportionally increase expenses in the OFD.

Loan to Mr G

1. At paragraphs 35 to 39 of the wife’s trial Affidavit she gives a history as to how she decided to loan to a friend Mr G the sum of $120,000 on 18 June 2014 to enable Mr G to purchase a commercial property at L Street, Suburb E.  Prior to the loan being made, the wife had leased the premises for 12 months from December 2013.  The wife concedes that she did not discuss this business decision to open a “… club” on the premises as an adjunct to her sale of Company F products, with the husband.  In view of what the wife claims to be the business (but not personal) arrangement with [Mr G] the husband was very suspicious.  During the discovery process the husband analysed the wife’s bank statements, and ultimately prepared a document (Exhibit 16) which the husband says represents loans made to [Mr G] by the wife (or for his benefit) totalling $272,170.60.  The husband’s assertions found his submission that the balance sheet should include a loan owed to the wife of $267,423 and not $115,000 as the wife contends.  The husband’s submissions should not be accept for at least the following reasons:

   a)Under vigorous cross-examination the wife was able to explain to the Court’s satisfaction, how a number of the expenses set out in Exhibit 16 were her own business or personal expenses (e.g. Q Business; R Business; S Business – see Exhibit 14); payments for personal gym equipment and personal gifts to Mr G;

   b)Of particular interest to the husband was the, I accept, unusual transactions which occurred in or around March 2014.  At paragraphs 9 to 14 of an earlier Affidavit in these proceedings filed by the wife on 26 July 2016, the wife deposed to how she received $43,000 in cash from [Mr G] on 17 March 2014, with $39,950 deposited to her personal bank account with ANZ.  Thereafter between 18 March 2014 and 24 March 2014, the wife made payments in amounts not more than $10,000 to [Mr G]’s bank accounts.  The wife says these funds, returned in these somewhat unusual transactions to [Mr G], enabled him to pay the deposit on the L Street property;

   c)I can well understand that the husband was very suspicious about what was going on.  The wife’s position has been clear at least since the Affidavit of July 2016.  The wife in the circumstances was not obliged to call [Mr G] as a witness.  Certainly the husband, who apparently issued a subpoena to access bank accounts of Mr G, could have subpoenaed him to establish his suspicions that the wife was in some commercial enterprise with the person or that the wife was using undisclosed funds to engage in such activities and/or that [Mr G] holds his legal interest in the L Street property partly on trust for the wife;

   d)The records produced and the cross-examination of the wife do not discharge the evidentiary onus that the husband bears when asserting a fact in dispute.  The wife bore no onus to prove a “negative”.

2. In any event, I am satisfied that post separation the only source of income available to the wife was:

   a)her share of the OFD gross income the husband never, by Court action, at the time sought to restrict; and

   b)the distribution to the wife of $275,000 when the proceeds of the Suburb E property sale were available.

3. In effect, the wife elected not to repay what she claims were debts owed to her mother and sister, but rather to lend funds to [Mr G].  This decision is one of the factors that has led the Court to the conclusion, explained below, that the “loans” should be treated as contributions.  The fact that the wife asserts that the loan (now amounting to $115,000 after a repayment of $5,000) should be in the balance sheet, was a considered position shaped by her legal advice and one I am prepared to accept.

Pool

1. Because of the sensible concessions made by Counsel for the parties, and considering the evidence that was offered during the trial, the constitution of the pool was agreed in most aspects, save for items referred to now:

   a)The parties having separated in March 2013, both Counsel accepted that the current level of bank accounts and consumer debt reflects individual post separation spending habits and it would be just and equitable to exclude such amounts from the pool.  I agree;

   b)The furniture and contents the parties hold now were not the subject of valuation and are of a similar quantity.  They are, as a result, not included.  The husband’s Motor Vehicle 2 and the debt attaching to that motor vehicle, purchased by the husband post separation, are excluded.  The husband conceded that the bare assertion that the wife’s jewellery had a value of $20,000 could not sustain its inclusion in the pool, noting in any event the wife asserts items of jewellery were stolen in a break-in of the wife’s home in November 2017;

   c)The husband, in his most recent Financial Statement, asserted he is indebted to his brother [Mr A Ingold] in the sum of $183,406 and a person, Ms M (who he concedes in his domestic partner in some form) in the sum of $177,726.  In circumstances where the evidence of the husband was that these debts have all accrued post separation and were used for a mixture of living expenses and legal expenses (no breakdown being available), the concession by Mr Stapleton for the husband in final submissions that the “debts” should not be included in the pool as a joint or matrimonial debt, was properly made;

   d)The evidence of the husband (and his accountant Mr O) about the husband’s tax liabilities was confusing.  On balance, I am not satisfied the ATO is likely to pursue the GST debt owed, at one time, by the partnership, totalling $20,535.80.  The ATO portal statement reveals that on 20 June 2018, the ATO effectively decided not to seek to recover the sum.  The words “non-pursuit amount” speaks for itself.  In any event, although the ATO might at some future time elect to recover the sum, the recovery would be against the partners, namely the husband and wife.  The note to the partnership from the ATO dated 28 June 2018 confirms that position.  Properly, in respect of any asserted personal income tax liability, the husband conceded eventually that the tax arises from post separation income received by him.  It is his obligation to pay the tax.

2. On the basis of these concessions and findings I find the pool which is available for “notional” distribution to be as follows:

Ownership	Item	Value
Joint	Original Company F Distribution (“OFD”) number …	$81,400
Wife	Balance loan to Mr G	$115,000
Husband	Partial  property settlement	$61,000
Wife	Partial  property settlement	$61,000
Wife	Superannuation	$16,668
Husband	Superannuation	$3,000
$338,068.00
Partnership	Unpaid accountancy fees	$1,000
$337,068

1. In reaching this conclusion as to the “notional” pool, I rely upon the findings earlier made about the “notional” valuation of the OFD ..., opined by the single expert Mr Z and the reasons for not accepting the alternate assessment creatively raised by Counsel for the wife Mr Dura.

Loans to the wife by her mother and sister

1. In Biltoft & Biltoft (1995) FLC 92-614, the Full Court recognised the discretion that is available to a trial judge in determining whether unsecured liabilities should be taken into account or discounted, including for example, where the liability is vague or uncertain or where it is unlikely to be enforced for repayment. This statement of principle has been relied upon for nearly 25 years without significant variation – merely cases where the principle is applied to a particular set of facts emerge.

2. In this case, the wife asserts she has two debts she feels morally bound to repay, to her mother and sister.  It should be observed, critically in my view, that no evidence from the wife’s mother Ms J or the wife’s sister Ms X (both of whom live in Country V) was offered in a probative form to the Court.  In my view, that failure to do so is not explained and allows an inference under the principles of Jones & Dunkel (1959) 101 CLR 298 to be drawn.

3. Furthermore, the “loans” as asserted now by the wife (and at times previously in Affidavits) are to be assessed within the following context:

   a)The husband does not strenuously contend that funds from the wife’s family were not received as the wife deposes (although the use of the funds is disputed), but says they are not loans.  This is even despite a discussion he said he had with the wife’s sister, when she said she expected to be repaid the funds;

   b)At the critical times of payment to the wife, no loan agreement or other memorandum in writing was created to support a finding that a loan with certain terms was created;

   c)The wife failed to record the loan from her mother in her Financial Statements filed 30 July 2015 (Exhibit 9); 5 May 2016 (Exhibit 10) and 1 August 2016 (Exhibit 11).  The loan from her sister first appears in a Financial Statement filed on 5 May 2016 and repeated in Exhibit 11 filed three months later.  The mother’s “loan” is recorded in the wife’s Financial Statement relied upon at trial filed 6 September 2019 (see Item 53).  I accept that in other Affidavits filed during the long journey of litigation in this matter, the wife has asserted her mother made loans to her totalling $108,000;

   d)No repayments of the loans have been made by the wife and there is no evidence that any demands for repayment have been received.  No “end” repayment date appears to have been identified.  No interest is either agreed; has been paid or is accruing;

   e)Importantly, when in July 2014 the parties had access to the nett proceeds of the Suburb E property, I accept that the additional payments to the wife were on an understanding between the husband and wife that the wife would pay funds to her mother and sister.  She elected not to do so (unlike the payment made by the parties from the nett proceeds of sale to the husband’s mother of $43,000 at that time).  In my view, the wife’s unilateral decision to keep control of the funds, and as we now know, lend at least $120,000 to Mr G, strongly suggests the wife regarded the funds as hers to do with as she wished.

4. In the circumstances set out, and where there are now no available funds to repay these asserted “loans”, I have decided the funds received by the wife should not be treated as a joint debt, but as funds received by the wife and contributed by her to the matrimonial capital as accounted for when I consider contributions below.

Debits by the wife to the husband’s bb bank credit card

1. The husband seeks to bring into account a sum of $13,028 which he says the wife debited to his BB Bank credit card ending in …08.  Pages 760 to 772 of the husband’s exhibits reveal copies of statements from July 2014 to well after the parties had separated, but were by agreement sharing the gross income from OFD.  I accept the wife attended an event in City AA (as did the husband) in July 2014 for Company F.  The wife had continual access to the husband’s BB Bank account.  The statements for that period reveal the husband and the wife debited travel and business expenses to the card.  If, as the husband says, the wife merely had a supplementary card on his account, then no explanation is offered as to why after separation 12 months earlier he had not cancelled the wife’s card, as I infer was a course open to him.  The use of income from the OFD and payment of expenses (business or otherwise) was an issue of some controversy in this matter.  However, whilst some retail purchases by the wife (e.g. Vehicle 1 x 2 on 18 July 2014 totalling $3,114.89) have sparked the husband’s concerns, where no auditing of the use of the BB Bank credit card over this period and how private expenses might have been debited was undertaken, it is not appropriate where the husband allowed the use to occur by the wife, to merely deal with some isolated expenses.  I do not propose to bring into account an alleged debit by the wife (to the husband) of $13,028.

Unpaid stock

1. The husband, without any evidence from his brother [Mr A Ingold] who sat in Court during the trial and was therefore available to do so, asserts that at the time of separation the partnership owed his brother monies for stock purchased.  The disbursement statement (YI-3) at page 26 of the wife’s tendered exhibits confirms that when the parties agreed to distribute funds from the sale of the Suburb E property sale in July 2014, they paid $20,549.67 to [Mr A Ingold].  No reliable or compelling explanation is offered to the Court as to why, at that time, $20,549.67 would be paid but not the alleged balance of $24,006.  I am not satisfied that the partnership which the husband severed in or about 2015, had any residual liability to Mr A Ingold.  The alleged debt will, as a result, not be brought into account in the balance sheet.

1. I am satisfied, having identified the parties’ current legal and equitable interests in the very modest property pool, that it is just and equitable pursuant to s 79(2) of the Act to make an order for property adjustment (see Stanford & Stanford (2012) 247 CLR 108. This is the case each Counsel urged upon the Court.

Contributions

1. I make the following findings in respect of the contributions identified under s 79(4)(a), (b) and (c), namely:

   a)at the time of cohabitation, the husband had his interest in the OFD, but with significantly less volume (in sales or supervising members supporting customers) than now exist.  Furthermore, his income from that source was modest (see paragraph 26) of around $15,000 nett per annum;

   b)the wife says, and the husband concedes, that at the time of cohabitation he had a credit card liability of $100,000 – paid off over subsequent years after cohabitation.  As a result, even though the wife had no nett assets of significance, neither did the husband at cohabitation;

   c)apart from the OFD providing a good income (and I accept the wife was a contributor to that generation of income and identified other distributors etc.), the only other activity that provided a monetary benefit of any significance was the purchase of the Suburb E home.  At paragraph 22, the wife says:

   “22.    My mother has lent [Mr Ingold] and I $108,000 comprising the $75,000 to purchase the Suburb E Property, $18,000 for the wedding expenses and $15,000 to fund the Club…”

   The wife (at paragraph 12) deposes that the $75,000 was paid towards the deposit ($35,000) and the balance of purchase price ($40,000).  The wife also confirmed the husband’s mother “loaned” the husband $43,000, but it is conceded that loan was repaid in June 2014, so that the benefit the parties received from that loan was the opportunity to use it for the purchase and the use of the funds “interest free”.  The husband (at paragraph 48.3) summarised the contribution by the wife’s mother towards the deposit and balance of the purchase price of Suburb E as $110,000 “received from [Ms Ingold]’s mother”.  The contribution by the wife’s mother of $108,000 (as I find it to be), was a significant one in the context of the parties’ financial position at the time, and with the loan from the husband’s mother of $43,000 allowed the parties to acquire the home.

   d)the husband accepts the mother’s sister did provide further funds (used for tax liabilities and other business expenses) of $48,000 of which $20,000 was repaid.  This is a further contribution by the wife;

   e)apart from these extraordinary financial benefits, I am satisfied both parties from cohabitation to separation contributed equally to the combination of duties as were required to:

   i)develop and maintain the business, although the husband, I find, was a more senior and experienced operator in the Company F organisation, and his time involvement was greater than the wife; and

   ii)the roles of homemaker and parent to the three small children, although because of the husband’s commitment and obligations under the OFD, I find the wife’s time involvement in these activities were greater than the husband.

   f)post separation, the wife used some of the funds available from the sale of Suburb E to make the loan to Mr G.  She did so, effectively, with joint funds and that loan balance of $105,000 is properly included in the pool;

   g)I do not ignore the failed investment by the husband of $140,000, however that was made with post separation income available to him from his share of the OFD distributions (and/or external borrowings at his discretion), and the wife is not required to share in that loss;

   h)Although it does appear accepted on the evidence that after separation and initially, the husband did undertake a greater role in the care and financial support of the children, a more equal commitment evolved over time.  I do take this slightly greater initial non-financial contribution into consideration;

   i)the husband asserts that, since separation, he has continued to be the main person involved in and operating the OFD.  I accept that his contribution post separation towards the OFD was superior to that of the wife, however (as paragraph 26 of the husband’s trial Affidavit demonstrates), the “organisational volume” has reduced since separation as had the “supervising members” (down from 166 to 154).  As I understand, and the way Company F operates, the “supervisor members” generate the lower level “members”, and the increase in those “members” and their customers (from 1660 to 1984) should mostly be attributed to the “supervisor members” and in some sense is self-generating.  I accept, as the husband said, that his role as a trainer and mentor/motivator was a factor in preserving the “value” of the OFD.  However, since the separate distributions for each party were created in 2015 (post-divorce), both the husband and the wife have had both the opportunity and incentive to grow those new distribution networks.  I accept the husband has been more successful in that endeavour than has the wife;

   j)the multitude of Orders made by the Court (as set out earlier in these Reasons), to equitably allow a distribution of the gross income whilst making some allowance for the very modest business expenses associated with that income, reveal that although on balance the husband probably did meet more of the business expenses, the differential over the period since separation was the subject of some Court ordered adjustments.  Certainly the failure of the parties (for whatever reason) to enact the carefully crafted process set out in the Order of 18 May 2016, despite attempts (by consent) on 13 September 2016 to refine the process, did not seem to satisfy the husband that the wife was bearing her share of expenses – whilst receiving her share of gross income.  By the Order of 25 January 2018, the way in which the expenses were adjusted was, in effect, to allow the husband the first 20% of the gross income.  The evidence at the hearing was not sufficient to allow the Court to be satisfied, as the husband contends, that he should be given some contribution credit for the expenses he paid for the business because, in so doing, he was meeting some of the wife’s obligations.

2. Because of the matters set out above, on a contribution based assessment, I would assess they slightly favour the wife – because of the earlier contributions by her mother and sister – although the weight of those contributions, when weighed up with the other contributions during a nearly 20 year period to the time of hearing, is reduced.  I do not attribute a particular percentage to this difference.

Section 75(2) factors

1. The parties have many years of working life ahead of them and although the husband is some eight years older than the wife, both parties enjoy good health.  Their commitments to their children now aged 14, 13 and nearly 12 are similar.  Any adjustments for school expenses, not able to be managed through the Child Support Agency, I am satisfied the parents can achieve.  They both have demonstrated, in my view, a desire to live beyond their means and to fund their chosen lifestyle through use of credit card facilities or loans from family or friends.

2. Although not taken into account as a joint liability, I do not ignore that the husband swears to having significant personal debts (mostly attributable, I find, to payment of legal expenses), being primarily:

a)	credit cards	-	$91,139 (six cards in total)
b)	his bother [Mr A Ingold]	-	$183,406
c)	his partner Ms M	-	$173,323

1. The loss by the husband of $140,000 on his “investment” is significant to him.

2. The wife claims current personal liabilities (excluding the “loan” from her mother and sister) as being $48,449 (legal costs) and $25,000 (Ms P).  Notably, the wife does not assert in her most recent Financial Statement filed 6 September 2019, any credit card liabilities.

3. The terms of the orders to be made under s 79 will be (if the husband is able to fund the required payment to the wife) that his debts will not decrease but are likely to increase.  He will however have an income and earning capacity superior to the wife which I discuss below.  His superannuation entitlements, which he will retain ($3,000), are less than the wife’s $16,665), but both entitlements are minimal.

4. By far the most significant factor is the income and future earning capacity of the parties.  The wife has been employed as a retail assistant on a gross income of $1,000 per week (superannuation at the 9.5% rate would accrue ($95 per week)).  Mr Z, the Court Expert, opines, when assessing the nett maintainable earnings for the Company F business, that a gross figure of $117,165 (salary and superannuation) can be both sustained and is reasonable.  The husband has, it seems, elected not to contribute to superannuation (no doubt believing his cash flow and other commitments did not allow for such payment), and he is not obliged to do so in the future.

5. The most enduring benefit from the parties’ efforts during their long relationship is the OFD and the income stream it provides and, I find, is likely to continue to provide if the husband has ownership and operational control.  This is the most valuable characteristic of the OFD and in circumstances where I am not satisfied the wife has the current skills or capacity to significantly improve her current income – either from expanding her own distribution network or from employment – it is a factor that in this case requires a significant adjustment in the wife’s favour.

6. Although I am conscious of higher authority which encourages the monetary value of any adjustment for s 75(2) factors to be usually assessed in real terms, the unusual factors in this case and the nature and value of the modest notional pool of assets, persuades me not to do so, but to actually look at the terms of the order I seek to make and test it against the statutory requirement, that the terms of the order are just and equitable to both the husband and the wife.

What orders achieve justice and equity?

1. Before final submissions, and after the Court indicated that it appeared, subject to final submissions, that the only order that had the prospect of meeting the requirements of s 81 of the Act, was to determine which party was to retain the OFD and on what terms, Counsel for each party contended that their client ought have the “first right” to retain the OFD.

2. Both parties offered no evidence about their capacity to raise any funds, but in cross-examination or questioning from the Bench, asserted no inability in being able to raise funds from family or friends (depending of course on what the amount was to be).

3. I am comfortably satisfied that it is just and equitable that the husband be the party given, by my orders, the first opportunity to retain the OFD for the following reasons:

   d)He commenced the operation in 1989 many years before the marriage;

   e)He is clearly committed - if not somewhat obsessed – with the Company F business; and

   f)Since separation in 2013, he is the party who has primarily preserved and/or maintained the OFD.

4. I take into account that the income stream from the OFD is likely, on the evidence, to continue well beyond the husband reaches normal working retirement age.  This is because the nature of the “business” is in some ways self-generating.  His high profile in the Company F enterprise (it seems both nationally and even internationally) provides some comfort to his ability to maintain the income.  The operation of the business allows for non-cash deductions to be claimed for some business expenses (for example 30% for home office rental).  As the husband’s income over say 20 years would be approximately double that of the wife (around $35,000 nett per annum), to true benefit of the OFD is easily identified – an income stream differential of over $700,000 nett of tax.

5. However the wife leaves the relationship with few assets, save for the “loan” she chose to make to Mr G of $115,000.  There is no evidence offered by the wife as to when Mr G will be in a position to satisfy a demand for repayment although I find, on the evidence, it is recoverable and the wife does not contend otherwise.

6. In the unusual circumstances of this case, but bearing in mind earlier applications filed where the parties have offered to pay or seek payment for the full entitlement of the OFD, between $150,000 and $200,000, I assess a figure of $200,000 to be appropriate if the wife was to retain the interest or $150,000 to be appropriate if the husband is retain the interest

7. The differential seeks to take into account that the wife retains the right to receive a loan of $115,000 from Mr G.

8. I would give the husband 60 days to raise the sum of $150,000 to pay to the wife and to be able to retain the whole of the interest in the OFD and otherwise he shall retain all other interests and be responsible for his personal debts, credit card liabilities and the like.

9. If the husband is unable or unwilling to pay the wife $150,000 within 60 days, then the wife shall then have the option to raise $200,000 and to pay that to the husband within a further 60 days, essentially on the same terms – but also retaining the right to repayment of the loan from Mr G.

10. Although the wife articulated an order (see Exhibit 4) for her to pay $200,000 to the husband so as to retain the OFD, I am not satisfied an order in the terms specified from 2 to 7 meet the requirements of the Company F Rules or whether the Rules provide for any other consents or approvals from the Board of the USA based Company F organisation.  I did not receive any submissions on the form of the order.

11. In these circumstances, I think it appropriate to allow the parties 14 days from today to seek to reach agreement as to a form of order which achieves the result set out in these Reasons, and is capable of being put into effect under the unique Rules of Company F.  Whilst I accept that a copy of the Rules has been tendered in these proceedings, it would be more efficient for those familiar with the Rules to satisfy themselves as to the form of order.

12. Of course, if a legitimate dispute arises on the interpretation of the Rules that enable the order I propose to have effect, the Court will take further submissions on this issue.

13. My view is that it will meet the requirements of justice and equity for an order in the terms proposed to be made, however the actual form of the order needs to be examined to finalise the statutory duty imposed upon the Court.

I certify that the preceding seventy-two (72) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Baumann delivered on 28 October 2019.

Associate: 

Date:  28 October 2019