Kallen & Alvin & Anor
[2013] FamCA 553
•26 July 2013
FAMILY COURT OF AUSTRALIA
| KALLEN & ALVIN AND ANOR | [2013] FamCA 553 |
| FAMILY LAW – PROPERTY PROCEEDINGS – Just and equitable to make an adjustment of property interests – Contributions – Property each party brought to the marriage – Property acquired during the marriage – Property acquired after separation – Family trust – Where each party’s main source of income is from investments FAMILY LAW – ADD BACKS – Legal fees – Where the parties agreed to an add back of legal fees – Where the wife contended the husband had obtained a premature distribution of property |
| Family Law Act 1975 (Cth) s 75(2), s 75(2)(o), s 79, s 79(1), s 79(2), s 79(4) |
| Bonnici & Bonnici (1992) FLC92-272 Bowe & Bateman [2013] FamCA 253 Omacini & Omacini (2005) FLC 93-218 Stanford & Stanford (2012) 293 ALR 70 Townsend& Townsend (1995) FLC 92-569 Watson & Ling [2013] FamCA 57 |
| APPLICANT: | Ms Kallen |
| RESPONDENT: | Mr Alvin |
| INTERVENOR: | B Law Firm |
| FILE NUMBER: | BRC | 11120 | of | 2009 |
| DATE DELIVERED: | 26 July 2013 |
| PLACE DELIVERED: | Brisbane |
| PLACE HEARD: | Brisbane |
| JUDGMENT OF: | Forrest J |
| HEARING DATE: | 8, 9 & 10 February 2012 |
REPRESENTATION
| SOLICITOR FOR THE APPLICANT: | Mr Cooper Charles Cooper Lawyers |
| COUNSEL FOR THE RESPONDENT: | Mr Page of Queen’s Counsel |
| SOLICITOR FOR THE RESPONDENT: | Michelle Porcheron Lawyers |
| SOLICITOR FOR THE INTERVENOR: | Mr Brandon Evans & Company |
Orders
That by close of business on Wednesday, 14 August 2013 the parties bring in an agreed minute of the terms of orders to be made in accordance with the determinations set out in these reasons for judgment published this day.
The matter be mentioned again before Justice Forrest at 9.30 am on Friday, 16 August 2013.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Kallen & Alvin and Anor has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
| FAMILY COURT OF AUSTRALIA AT BRISBANE |
FILE NUMBER: BRC 11120 of 2009
| Ms Kallen |
Applicant
And
| Mr Alvin |
Respondent
REASONS FOR JUDGMENT
Ms Kallen and Mr Alvin married in April 2001 after having met in Sydney in late 1998. During their marriage, they acquired interests in property now worth several million dollars. Their marriage has not lasted and they have not been able to agree as to the division of all of that property between them. That is not surprising given that they cannot even agree as to when they began living together or as to when they finally separated. However, those are but a few of the many matters about which these parties disagree.
Unable to agree on the division of their property interests, Ms Kallen (“the wife”) and Mr Alvin (“the husband”) both come to the Court seeking orders pursuant to s 79 of the Family Law Act 1975 altering their interests in property. The husband wants to retain certain property and to be paid a large cash sum by the wife in return for her retaining other property. The wife wants to retain most of the property and for the husband to retain only a small portion of it, without any further cash payment to him being required.
Their competing applications for property adjustment orders were heard in a trial that took place in this Court over three days between 8 and 10 February 2012.
Around seventeen months have now passed since the trial finished. This is a regrettable fact. I appreciate the distress this long period of time between concluding the trial and delivering the judgment would have caused the parties. Determining these difficult disputes where many factual issues have to be determined takes time. Writing a considered judgment takes time. The responsibility for hearing and deciding so many other matters in this Court at the same time has, regrettably, prevented me from finalising this judgment before now. Hopefully, the parties will be able to move forward with the assistance of this judgment from this point on.
The determination of applications for alteration of property interests
The property interests of parties to a marriage may be altered by the Court making such order as it considers appropriate.[1] The Court’s power to alter the interests of the parties to the marriage in property includes the power to order a settlement of property in substitution for any interest in property and the power to make an order requiring either or both parties to make, “for the benefit of either or both of the parties to the marriage such settlement or transfer of property as the Court determines”.[2]
[1] Family Law Act 1975 (Cth) s 79(1).
[2] Family Law Act 1975 (Cth) s 79(1)(a), (c) and (d).
The Court cannot make an order under s 79(1) though, unless it is satisfied, in all of the circumstances, that it is just and equitable to make the order.[3] The consideration of whether it is just and equitable to make a property settlement order must begin by identifying, “according to ordinary common law and equitable principles, the existing legal and equitable interests of the parties in the property”.[4] Legal principle is to be followed and applied when exercising the discretion conferred by s 79,[5] and care must be taken not to conflate the s 79(2) question of whether it is just and equitable to make property settlement orders at all with the separate s 79(4) question as to the particular orders to be made if any are to be made.[6]
[3] Family Law Act 1975 (Cth) s 79(2).
[4] Stanford and Stanford (2012) 293 ALR 70 at [37].
[5] Ibid at [38]-[39].
[6] Ibid at [40].
Once it is determined that it is just and equitable to make property adjustment orders between the parties at all there are seven matters that must be taken into account in “considering what order … should be made under [s 79(1)] in property settlement proceedings”. Those matters are set out in s 79(4). These include the contributions made by the parties to a marriage (in various forms); the effect of any order on either party's earning capacity; consideration of the matters to be taken into account under s 75(2) of the FLA, so far as they are relevant; any orders already made under the FLA; and any child support that has been provided, is to be provided or might be provided in the future for a child of the marriage.
As Murphy J has identified[7], taking care not to conflate the two questions but to consider them separately, the matters listed in s 79(4), together with any such other considerations as are properly relevant, can also inform the answer to the s 79(2) question as well as the s 79(4) question. Having said that, in my view, that which the Full Court of this Court has described as “the preferred approach to the determination of an application brought pursuant to s 79 of the FLA”[8] is still very much a useful and relevant exercise as part of the process by which the discretionary exercise may be approached. I do not consider that its use in determining the just and equitable orders to be made once the s 79(2) question has been answered offends any of the reasoning in Stanford.
[7] See Watson and Ling [2013] FamCA 57 at [12].
[8]See Hickey and Hickey and Attorney-General for the Commonwealth of Australia (Intervener) (2003) FLC 93-143 at [39] and Coghlan and Coghlan (2005) FLC 93-220 at [22].
That “preferred approach” is said to involve four inter-related steps: firstly, making findings as to the identity and value of the property, liabilities and financial resources of the parties at the date of the hearing; secondly, identifying and assessing the contributions of the parties within the meaning of subsections (a), (b) and (c) of s 79(4) and determining the contributions based entitlements of the parties expressed as a percentage of the net value of the property of the parties; thirdly, identifying and assessing the relevant matters referred to in subsections (d), (e), (f) and (g) of s 79(4) - including, because of s 79(4)(e), the matters that are relevant pursuant to s 75(2) - and determining the adjustment (if any) that should be made to the contribution based entitlements of the parties established at step 2; and fourthly, considering the effect of those findings and determinations and resolving what order is just and equitable in all the circumstances.
Of course, it has never been mandatory to take this four step approach, and now, as just discussed, it is critical, once the parties’ legal and equitable interests in property have been identified, to determine the question of whether it is just and equitable to make property settlement orders at all in all the circumstances of their marriage. The discretion conferred upon the Court is a broad and “holistic” one[9] and it can equally be properly exercised in different ways, as long as legal principles, including those set out in s 79 of the FLA itself, are followed and the reasons that are given make that clear.
[9] Per Murphy J in Watson v Ling, supra at [13].
What are the Parties’ existing interests in property?
In this case, there was no dispute between the parties about the ownership and value of a large number of items of property.
This table sets out the agreed property interests of the parties or either of them (including their interests in superannuation) and the agreed values of those interests. The information included in the table comes from the amended balance sheets relied upon by the parties at the trial and from submissions made by the parties’ legal representatives at the conclusion of the trial.
1. Real property at Property D, C Street, Suburb A, Queensland Wife is the registered proprietor Value $1,550,000 2. Real property at Property E, C Street, Suburb A, Queensland
Wife is the registered proprietor Value $1,000,000 3. Real property at F Street, Suburb G, Queensland
Joint registered proprietors Value $595,000 4. Real properties at Lots H and K, City L, Indonesia Wife is the registered proprietor Value $785,828
(Australian dollar value on conversion rate from agreed US Dollar value as at 1 February 2012)5. 50 Woodlots in AB (now defunct) timber plantation project Joint owners Value $nil 6. 30 droves of cattle in CD Beef Cattle project – investment was converted to shares in now defunct, delisted company Joint owners Value $nil 7. Westpac Classic Plus Account number …87 Joint names Value ($31.36) as at 17.01.2012 8. Westpac Max-I Direct Account number …61 Joint names Value $0.61 as at 17.01.2012 9. St George Freedom Account number …60 Joint names Value ($24.28) as at 19.01.12 10. St George Direct Saver Account number …11 Joint names Value $nil as at 19.01.2012 11. St George Complete Freedom Account number …94 Wife’s name only Value $nil as at 19.01.2012
12. St George Direct Saver Account number …06 Wife’s name only Value $nil as at 19.01.2012 13. St George Power Save Account number …80 Wife’s name only Value $6,473.19 as at 19.01.2012
14. Commonwealth Bank Smart Access Account number …59 Wife’s name only Value $3,367.60 as at 24.01.2012 15. Commonwealth Bank Net Bank Saver Account number …95 Wife’s name only Value $1,001.48 as at 24.01.2012 16. Commonwealth Bank Complete Access Account number …24 Husband’s name only Value $2,425.39 as at 04.11.2011
17. 1 Share in Alvin Pty Ltd Wife is the owner Value $nil 18. 1 Share in Alvin Pty Ltd Husband is the owner Value $nil 19. 1 Share in I Pty Ltd Wife is the owner Value $22,000 20. J Trust Controlled jointly by the parties Value $nil 21. Loan to Alvin Family Trust Husband owns Value $20 22. Wife’s interest in M Superannuation Fund Wife Value $85,894 23. Husband’s interest in M Superannuation Fund Husband Value $6,356 Sub-Total $4,058,310.63
Of this property and superannuation, the parties jointly own property to the value of $594,944.97, the wife solely owns property and superannuation to the value of $3,454,564.27 and the husband solely owns property and superannuation to the value of $8,801.39.
In addition, there is a company, N Pty Ltd, in which the parties each own 1 share and in which the Alvin Trust (through its trustee company) “owns” 100 shares. The company owns an office building – Building O on the Gold Coast. The shares in that company have been valued by a single expert. They are worth in total $3,960,000. The single expert has assessed realisation costs at $250,000 and has estimated Capital Gains Tax liability, if the building was to be sold, at $996,980. The parties do not agree on whether these amounts should be taken into account in these proceedings or not. That is one of the issues for the Court to determine.
Through the Alvin Family Trust, the parties have an interest in another commercial office building – Building P in Brisbane. It is agreed that the parties control this discretionary family trust in which they are both beneficiaries. Neither party takes issue with the notion of treating the assets of the Alvin Family Trust as their property for the purposes of determining just and equitable property adjustment. The Alvin Family Trust’s interest in the office building has been valued by the single expert at $711,250. He has again assessed realisation costs and estimated Capital Gains Tax liability if that building was to be sold. He has determined the Trust’s share of that to potentially reduce the value of its interest to $461,750. Again the parties do not agree on whether these potential liabilities should be taken into account in these proceedings or not. That is another of the issues for the Court to determine.
The value of these interests in the two buildings held by the parties through companies and trusts (before any allowance for realisation costs and CGT liability on sale of the buildings) is $4,671,250. Added to the parties’ other interests in property and superannuation, this amount takes the total value of the parties’ interests in property to $8,729,560.63.
This table sets out the agreed liabilities of the parties.
1. Loan from the Bendigo and Adelaide Bank Limited in respect of AB Project investments Jointly liable Value $187,916.56 as at 1.08.2011 2. Loan owing by both parties to N Pty Ltd Jointly liable Value $49,536 as at 31.05. 2011 3. Loan owing by wife to N Pty Ltd Wife is liable Value $205,952 as at 31.05. 2011 4. Loan owing by husband to N Pty Ltd Husband is liable Value $187,083 as at 31.05. 2011 5. Loan owing by husband to J Trust Husband is liable Value $4,913 as at 31.05.2011 Sub-Total $635,400.56
Is it just and equitable in this case to make a Property adjustment order?
In Stanford at [42] the plurality said that in many cases where property adjustment orders are applied for, the just and equitable requirement is readily satisfied. Their Honours went on in that paragraph to observe why they say that is so.
I am quite satisfied that this is one of those cases. The husband and the wife are no longer living in a marital relationship by choice. They are unable to move on with their separate lives whilst they remain connected by joint ownership of property and joint liability for debts. The express or implicit assumptions that underpinned these property and financial arrangements that they had put in place before separation no longer exist. They have been unable to consensually effect adjustment to these arrangements that permit them to move on with their separate lives. It will be just and equitable for this Court to make property adjustment orders that permit them to do so (provided the
Court is satisfied the particular orders are appropriate and, in themselves, just and equitable having regard to the matters required to be considered pursuant to s 79(4), of course).
As I have already identified, having decided that it is just and equitable in this case to go on to make property adjustment orders, I consider the “preferred” four step approach to be the appropriate way to determine the particular orders to be made.
The First Step and the Issue of “Add backs”
As is already clear, the parties themselves have agreed as to the identity and value of their property, liabilities and superannuation. I have already set out the product of that agreement and the fact that the treatment of notional CGT liabilities and realisation costs in respect of their interests in the two office buildings remains an issue for the Court to determine. I will return to this issue later.
In addition, on behalf of the wife, it was submitted that notional CGT liabilities estimated to currently attach to the three other real properties should be taken into account. Mr Cooper, solicitor, for the wife included amounts for these liabilities in his amended balance sheet handed to the Court that became exhibit 2 in the proceedings. However, he conceded during his oral submissions that there was absolutely no evidence before the Court that supports those figures. Accordingly, I will not be including the three amounts that Mr Cooper included in his schedule of liabilities as CGT liabilities at this step of the process.
Add back of amounts received and paid for Legal Fees
There was also agreement between the parties that I should include in the “pool” of property against which the second step contributions assessment and third step adjustment considerations are measured, two amounts of $80,000, being amounts the parties received and used for the payment of legal fees pursuant to an interim order made by Judge Howard of the Federal Circuit Court when the matter was still before that Court.
Although notionally including amounts in the “pool” at this step of the process is to be the exception, rather than the rule, to include these amounts as sought by the parties is entirely consistent with authoritative principle.[10] However, since Stanford was decided, the discretionary treatment of what are generically described as “add backs” in the light of the High Court’s decision has been discussed by a few of my judicial colleagues on this Court.[11] Young J proffered the view that the decision in Stanford would likely “ensure a change in approach” to the way in which the issue of “add backs” is dealt with. Murphy J in Bowe & Bateman observed that the principles relating to “add backs” “may need to be examined in light of the decision of the High Court in Stanford”.
[10]See Farnell & Farnell [1995] FamCA 140; DJM & JLM [1998] FamCA 97; Chorn v Hopkins 920040 FLC 93-204; Omacini & Omacini (2005) FLC 93-218;
[11]See Watson & Ling [2013] FamCa 57 and Bowe & Bateman [2013] FamCA 253 per Murphy J and Sebastian & Sebastian (No5) [2013] FamCA 191 per Young J
With respect to their Honours, I am satisfied in this case that it is just and equitable to include the two amounts of $80,000 in the “pool” at this stage of the process because:
(i)The parties agree to this particular course being taken by the Court and that agreed course accords with long-standing principle that I do not consider offends the reasoning of the High Court in the decision of Stanford; and
(ii)The amounts are being notionally added to a “pool” against which contributions and adjustment matters are being assessed as part of the process in determining just and equitable adjustment orders to be made against existing property; and
(iii)The amounts the parties agree to notionally “add back” to (or include in) the “pool” represent money they each received from their assets so as to be able to provide for their legal representation that would have, but for the order that provided for that to occur, still been in existence and subject to adjustment order and, as will be seen, I do not consider treating the parties equally in respect of the division of that amount of $160,000 would be just and equitable having regard to my contributions assessment.
There was disagreement between the parties about other amounts that Mr Cooper for the wife was contending in his amended balance sheet (exhibit 2) should be notionally included in the “pool” and treated as having already been received by the husband. In his oral submissions at the end of the trial, Mr Cooper formally abandoned his argument for notionally including several of these specific amounts. That left a small number of other amounts that he still pressed for notional inclusion.
Inheritance Money received by Husband
The evidence establishes that the husband received $196,893 from his late mother’s estate. The wife asserts that his mother died before the parties separated but that the husband received the money from her inheritance after the parties’ separation. The husband does not take issue with that. On the husband’s case, whichever of the various versions he gave as to how it has happened, he has spent and/or disbursed the money since he received it and it is not represented in any of the identified interests in current property. Mr Cooper, for the wife, apparently accepts that it has been spent and contends it should be notionally included in the “pool” at this step of the process. I understand his submission to be that it is a premature distribution of assets and therefore should be notionally included in accordance with principle such as emerged from the Full Court’s decisions of Townsend (1995) FLC 92-569 and Omacini (2005) FLC 93-218.
I accept that the husband has spent the money that he received, although I do not accept that he repaid family members money he allegedly owed them for money said to have been advanced to him to pay out his former wife in their property division. I did not believe his evidence on that. I do not, however, consider that justice and equity demands that the amount be notionally included in the pool. The money was received by the husband after separation. There is no evidence led by the wife and there was no submission made on her behalf that she made some contributions to the acquisition by the husband of that inheritance. I am mindful of what the Full Court said of this sort of circumstance in Bonnici & Bonnici (1992) FLC 92-272 and that adding back is only to be done exceptionally at any time. I consider the fact of the husband’s receipt of the inheritance and its expenditure during the post-separation and pre-trial period as a matter more appropriately taken into account pursuant to s 75(2)(o) at the third step of the four step process. I will not include any amount notionally in the pool in respect of this issue.
Money alleged to have been withdrawn by the husband from the wife’s term deposits
In her affidavit evidence the wife asserts that in March 2006 she and the husband caused around $938,000 to be transferred into a bank account in her name with a bank in Indonesia. A little later, the Indonesian properties were purchased in the wife’s name for the equivalent of $600,000. The money to purchase those properties was taken from the Indonesian bank account with the balance being deposited into term deposits in her sole name with that same bank. The wife asserts that the husband had access to the term deposits and her savings account with the same bank by way of an ATM card that she had given him. The wife asserts she withdrew $196,647 of that money and caused it to be sent back to her in Australia in June 2007. She then asserts that the husband withdrew the remaining $141,000 from the term deposits “over time”, as well as another $45,000 from her savings account when he travelled to Indonesia.
The husband denies having withdrawn the money at all.
Mr Cooper, for the wife, submitted that I would accept the wife’s evidence and reject the husband’s denials. He submitted that I should then consider it a premature distribution of assets and notionally include the amount in the pool at this stage and treat it as partial property adjustment already received by the husband. His submission was that the husband was a witness of poor credit compared to the wife and that I would generally prefer her evidence over his.
Whilst I accept that the husband did not impress as a very credible witness overall, I cannot say that the wife’s credibility was such that I accept every piece of evidence that she gave where it conflicted with the husband’s. By comparison, I did consider the wife a more credible witness than the husband but I was not convinced that all of her evidence was completely truthful and that all of his was not. What troubled me about this particular part of the wife’s evidence was that she did not put into evidence any documents supporting her contentions about these accounts and the withdrawals from them, whereas she had been so meticulous about putting documents into evidence where she could. There is no evidence about the dates the money is alleged to have been withdrawn. There is no evidence about the amounts it is alleged to have been withdrawn in. There is no evidence about attempts to get documents and there is no evidence offering explanations for inability to be able to. Furthermore, given that she asserts having given the husband an ATM card with which he could access the money in those accounts, there is no evidence about what thought she had given to, or steps she had taken to prevent him accessing any of that money – something she might be expected to have considered if she did have that much money in Indonesian accounts that she knew he had access to after separation.
In the circumstances, I am not satisfied to the standard necessary to make a finding that the husband did withdraw that money as the wife alleges. Accordingly, I am far from satisfied that the circumstances justify notionally adding $186,000 to the pool and crediting it as property already received by the husband.
Funds withdrawn by the Husband from company and partnership accounts and rental received by the Husband for one of the real properties
Mr Cooper, for the wife, included an amount of $91,474 in his amended balance sheet (exhibit 2) that he contends should be notionally included in the “pool”. It is recorded at item 37 under the heading “Addbacks” and attributed to a miscellany of sources. In his oral submissions, Mr Cooper referred to parts of the wife’s affidavit evidence relevant to the issue. He referred to paragraphs 114, 189, 325 and 426 of the wife’s affidavit and submitted that the evidence in those paragraphs establishes that the husband received, to his sole benefit, a total of $91,474 from the various sources referred to in that time. He again submitted that the use of that money by the husband post-separation and pre-trial constitutes a premature distribution of assets justifying the notional inclusion of the total sum in the pool.
The wife’s evidence in paragraph 114 of her affidavit is that between mid-2006 and October 2009 the husband received the rent paid on the real property at Property E, C Street, Suburb A in amounts ranging from $1,200 to $2,000 per month. The description attributed to the amount included in item 37 of the amended balance sheet includes reference to the rent received by the husband on this property only between January 2009 and October 2009. No specific amount is actually attributed to that period but it must, on the evidence, be between $12,000 to $20,000.
In paragraph 189 of the wife’s affidavit, the wife asserts that the husband withdrew money from their company’s bank account at the Westpac Bank in various amounts over time in 2009 that added up to $58,000. Although he initially denied that he had withdrawn the money, when confronted with documentary evidence that he had, the husband did admit that he had withdrawn much, if not all, of the money.
In paragraph 325 of the wife’s affidavit, the wife asserts that the husband and another man, Mr Q, withdrew some $9,948 from a bank account they had established as a business partnership bank account for a business partnership they established that did not work out. Mr Cooper submits that amount is included in the $91,474 he submits should be notionally included in the pool.
In paragraph 426 of the wife’s affidavit, the wife asserts that the husband withdrew money from their joint Westpac bank account that added up to $12,500 in 2009. The husband admitted that he had withdrawn that money.
All those amounts add up to between $92,448 and $100,448.
There is no evidence that any of that money is represented in any of the parties’ or husband’s interests in existing property. The husband was not cross-examined in any meaningful way about how he spent that money. Although there is little doubt that he had access to a lot of money, much more than just that amount, in the post-separation period, I do not consider that it has been established that he spent the money in a way that can only be described as unreasonable or utterly wasteful, particularly having regard to the standard of living the parties had during their marriage. I do not consider it an exceptional circumstance that requires adding back to the pool but rather find it to be a factual circumstance to be taken into account at the adjustment third step pursuant to s 75(2)(o).
Funds received by the Husband from R Pty Ltd
At item 38 on his amended balance sheet (exhibit 2) Mr Cooper included the sum of $122,743 and also submitted that amount should notionally be included in the “pool”. The amount is described as “funds received by the husband from R Pty Ltd (dividends/consultancy fees paid to the Husband & interest owing to N Pty Ltd on loan paid to the Husband) July 2007 to October 2009”.
Mr Cooper referred, in his oral submissions, to the evidence of the wife at paragraphs 279 and 280 of her affidavit in support of this submission. There, the wife asserts the husband retained monthly interest payments received by N Pty Ltd from R Pty Ltd between the date of advance of the loan and October 2009 as well as the dividends or “consultancy fees” the company, R Pty Ltd paid to Alvin Pty Ltd as trustee for the Alvin Family Trust between the purchase of Building P and the end of October 2009. She said she did not know how much money in total the husband had received from the Building P investment though, or what he has done with the money he received.
Mr Cooper then referred to documents attached to the affidavit of the single accounting expert, Mr S, from page 497 of the annexures onwards. They are general ledger entry details for the company R Pty Ltd that reveal amounts of interest and dividends paid by that company to the husband and N Pty Ltd that the husband retained. Mr Cooper asserted they added up to the amount of $122,743 included at item 38 of his amended balance sheet.
At the end of discussion between Mr Cooper and me, Mr Cooper conceded that, if I accept that the husband received this amount, it is more appropriate to consider it at the contributions assessment stage of the process. That is what I will do, as I do accept that the husband received that money.
During his oral submissions, Mr Cooper abandoned the wife’s claims for notionally adding back amounts included in items 39, 40, 42, 43, 44, 46, 47, 48 and 49 (save for the $80,000 each received that is included in each of those last two items for payment of legal fees – already dealt with by me).
Further amount included in item 41 for funds received by husband from R Pty Ltd
At item 41 of his amended balance sheet, Mr Cooper included an amount of $15,996.16 that he said was a further amount received by the husband from R Pty Ltd being interest and dividends paid to N Pty Ltd between July 2010 and August 2011 retained by the husband. In paragraphs 284 to 289 of her trial affidavit the wife sets out her evidence about this. The amount is money determined to have been paid by R Pty Ltd to the husband in that time. Having abandoned other claimed “add backs”, Mr Cooper maintained the submission that this one should be added back to the pool.
However, as submitted by Mr Page QC for the husband, on the oral evidence given by Mr T, I am not satisfied that the amount has not already been included in calculating the balance of money said to be loaned by the company to the husband at that time. Mr T said that he believed the amounts referenced in that sum of $15,996.16 had been included in entries in the husband’s loan account with the company and, therefore, is actually a debt due to the company, R Pty Ltd. There is no evidence before me that proves to the contrary. Interestingly though, I observe that neither the husband nor the wife asserted that any liability of the husband owing to R Pty Ltd is to be taken into account in calculating the “pool” at this step in the proceedings. That is probably because previous loans from that company to its directors, including the husband, have been regularly forgiven on an annual basis by the directors at their meetings, as the evidence reveals. That is likely what happened to this particular loan to the husband that these payments to the husband were said to be part of. Nevertheless, I am not persuaded that justice and equity requires an amount of $15,996.16 to be added back to the pool in these circumstances in this case and I will not do that.
Amount of $6,193 withdrawn by husband from joint accounts held with St George Bank on 18 August 2011
Mr Cooper claimed this amount should be added back to the pool and treated as part property already received by the husband. In his oral submissions, Mr Page conceded that it should. Consequently, I will do so.
Other Liabilities claimed by wife in Mr Cooper’s amended Balance Sheet
In his oral submissions, Mr Cooper abandoned claims for other debts included in items 58 through to 60 and 64 through to 67 of his amended balance sheet to be included in calculating the “pool” at this step of the process.
Total of the Pool at the first Step of the four Step process
Including the $160,000 the parties agreed to notionally “add back” for the amounts each received to pay towards legal fees, as well as the $6,193 conceded for the husband as an appropriate “add back”, the net “pool”, without deducting any amount for potential CGT and realization costs, equals $8,260,353.07. I will move on to assess contributions and consider adjustment issues pursuant to s 79(4)(e) against this notional amount before returning to the issue of potential CGT and realization costs and how I will deal with them in the determination of just and equitable orders in this case.
The Contributions findings
Discussion of the evidence and findings
Commencement of Cohabitation and Final Separation
The wife deposed to meeting the husband in December 1998. The husband owned and operated a hospitality industry business in Suburb U in Sydney. The wife and her two children of her former marriage had just moved to Australia, having separated from her former husband in Indonesia. She and the children were living in a unit property owned by her former husband in Suburb U. The husband was living with his mother in nearby Suburb V.
The wife asserts that although she and the husband agreed to marry and did marry in April 2001, they did not actually start living together as a couple in the same residence until January 2003 when she and her children moved to the Gold Coast to reside with the husband at the property they had purchased at Property W, C Street, Subburb A. The wife asserts that she and the husband spent little time together before they took up residence together in January 2003, although they married in April 2001. In fact, she asserts that the husband moved from Sydney to live on the Gold Coast in January 2002 and lived there for a year by himself before she and her two children moved there to join him full-time.
In contrast, the husband asserts that they began living together in February 1999, soon after they met. He asserts that when they first met, the wife was in Australia pursuant to a Visitor’s Visa and that in October 2001, after they were married, the wife applied for permanent residency in Australia. The husband relies on a letter that was written by Migration Agents to the Australian Department of Immigration on behalf of the couple dated 18 October 2001, a copy of which is in evidence as Exhibit 7 in the proceedings as corroboration of his evidence about when the parties began living together.
On the first page of that letter, in details of the history of the relationship provided to the Department, it is asserted that the couple “began living together in February 1999”. The husband asserts that the wife’s unit was close by his business in Suburb U and it was convenient for him to simply go to that unit after his late nights at work. The wife asserts that the husband’s mother was not a well woman and that he used to go back to the place he shared with her to be there to look after her.
The wife relies on a letter that she received from solicitors who were acting for the husband in August 2009, a copy of which is in evidence and is exhibit 10. In that, the solicitors assert on behalf of the husband that the couple “met in 2000, married in 2002 in Sydney and commenced living together in 2003.” For the wife, it was submitted that that assertion must be presumed to have been based on instructions and that it can be, therefore, presumed to be correct. That submission though appears to disregard the fact that both the other facts asserted in the same sentence of the letter are clearly wrong, as those facts are now known.
Although, as I have said, the wife’s overall credibility generally impressed me more than the husband’s credibility, I nevertheless accept that the husband started “living with the wife” in early 1999 as was represented to the Department of Immigration by their migration agents. I do not accept that the solicitor’s letter of 2009 proves to the contrary. Having said that though, I hasten to point out that it is contributions that are considered pursuant to s 79(4) not merely time together.
I am satisfied that the husband did not spend all of the time between February 1999 and January 2002 with the wife in the Suburb U unit. I am satisfied that he returned to stay with his mother in Suburb V fairly frequently during that period.
As to the date of their final separation, the wife asserts it happened in November 2007 when she moved from Property W, C Street, Suburb A to her new home at Property D, C Street, Suburb A. She says the husband continued to live at Property W, C Street, Suburb A until it sold in May 2008 and then moved into a granny flat at the back of Property D, C Street, Suburb A without any reconciliation of their marriage before finally moving out in August 2009.
The husband asserts that they did not separate until the middle of 2009, but the letter (exhibit 10) that his solicitors wrote for him in August 2009 (the time he says separation finally occurred) asserted that separation occurred on a final basis in November 2007. Given that letter was written contemporaneously to the date the husband now asserts was the time of final separation, I cannot accept that the assertion that it contains, that the final separation took place in November 2007, which accords with the wife’s evidence, was wrong. On the balance of probabilities, I am satisfied that the final separation of the parties took place in November 2007.
Accordingly, I am satisfied that the parties lived together as a couple from early 1999 to late 2007, a total of around nine years. However, I accept the wife’s evidence that there were significant periods during those years that the couple was not actually together in the same home, particularly during almost the entire year of 2002 and for a lot of the time between early 1999 and January 2002.
Initial Contributions
At the commencement of the couple’s cohabitation, the husband had the hospitality industry business in Suburb U and a half interest in real property at X Street, Suburb Y on the Gold Coast that he owned jointly with his former wife. It was subject to a mortgage liability. He also owned vacant land at Town Z in Queensland. He also had a Toyota motor car and other personal possessions. He also asserts that he had $30,000 in cash.
The wife denies that the husband had $30,000 in cash. She asserts that he had a personal loan from the Westpac Bank of about $20,000 and also a credit card debt of about $4,000. She asserts that she assisted him with the repayment of these debts, making the repayments on the personal loan and paying $50 per month off his credit card debt.
I am satisfied that the wife’s account is more probably correct than the husband’s. She has included far greater detail in her affidavit about these matters, particularly as to her own initial contributions. She has also included the vacant land of the husband’s that he did not even include in his own evidentiary account. She would not have done that, in my view, if she was not genuinely trying to set out the facts as they were at the commencement of their relationship as best she could remember them.
The wife’s evidence of her own initial contributions, which, save for one matter that I will refer to, I accept as an accurate account, is that she had:
(i)The equal of approximately AUD$30,000 in a HSBC account in Indonesia;
(ii)Funds in a HSBC account in Sydney in an unknown amount;
(iii)A life insurance policy with the Great Eastern Life Assurance Company Limited that she surrendered in August 2000;
(iv)Funds in a Commonwealth Bank account in her son’s name in an unknown amount;
(v)Cash of about $100,000 that her former husband had given her that she kept in the Suburb U unit.
The wife asserts in paragraph 27(c) of her trial affidavit that she had a term deposit with Bank Danamon in Indonesia that in March 2002 had a balance of IDR 19,493,183,00 which converted to AUD$371,919. She exhibits to the affidavit two documents supporting this assertion. One is a copy of a page of a statement in respect of the account. The other is a page printed from an internet based currency converter done in 2011 on an historical basis (said to be as at March 2002) that she asserts her solicitors conducted “converting IDR19,493,183,00 to Australian Dollars”.
However, perusal of the first of the two documents reveals a figure that is an apparent balance listed as “19.493.183,00”. Without any further evidence of how that is to be understood, I have read it as IDR19,493,183.00 which on my own historical conversion calculation comes to AUD$3,719.19 rather than $371,919. Perusal of the document showing the currency conversion done by the solicitors for the wife reveals that they have entered IDR 1,949,318,300 as the Indonesian amount. That does not accord with my understanding of the IDR amount on the copy of the statement from the Bank. There is no evidence from the wife that explains the matter any other way. Further, there is no evidence from the wife as to doing something with AUD$371,919 equivalent in funds from Indonesia in or around March 2002. The wife was otherwise meticulous in her evidence about what she did with her money. Accordingly, I find that the wife had only the equivalent of $3,719 in that Indonesian bank account that she refers to in March 2002. I consider it most likely to be a mistake for the wife to assert that she had the equivalent of AUD$371,000 in a bank account in Indonesia at that time and that the mistake is attributable to her solicitors inputting wrong data into their historical conversion calculation when they converted the amount to Australian Dollars.
Financial Contributions during their cohabitation and the acquisition and sale of real properties
The wife transferred the equivalent of AUD$30,000 from the HSBC account in Indonesia into her Sydney HSBC account in April 1999. As at August 2000, that Sydney account had $234,991 balance in it. That did also include the cash she obtained on the surrender of her life insurance policy that same month in the sum of AUD$49,652. Accordingly, I am satisfied that the wife did have a substantial balance in that account already at the commencement of cohabitation or that she had received substantial amounts from her former husband between early 1999 and August 2000 (as she asserts she did).
The wife received more funds of just under AUD$50,000 from Indonesia in April 2001. At around the same time, 26 April 2001, the wife and her former husband, from whom she divorced in early 2001, effected a property settlement. The wife’s husband transferred all right, title and interest in the Suburb U unit to the wife, unencumbered. It was said to have a value of $700,000 at that time. She also retained all of the furniture and chattels in that unit. The wife also received the sum of AUD$1,067,000 from her former husband who, the parties agree, was a very wealthy man. I am satisfied that all of that money was contributed by the wife to the couple’s common purposes over time after she received it. Just in those two items alone, the wife brought in property and cash to the value of $1,767,000 early in the relationship.
A little later in 2001, the husband entered into a property settlement with his former wife. He retained all right, title and interest in the X Street, Suburb Y property at an agreed value of $270,000. It had a mortgage liability still attached to it that he retained sole responsibility for. He also retained his hospitality industry business in Sydney and the vacant land at Town Z. In return, he was obliged to pay his former wife the sum of $135,000.
The husband asserts he borrowed that amount from members of his family to pay out his wife. The wife asserts that is not true and that she provided all of the money the husband used to pay out his former wife. She has produced evidence showing that an amount of $60,000 and an amount of $50,000 were withdrawn from a term deposit of the parties around that time of mid-2001and asserts that the husband used that money plus $25,000 in cash to pay to his wife. I accept the wife’s evidence of that, particularly having seen copies of the documents showing the withdrawals that she annexes to her trial affidavit. Those withdrawals are not otherwise explained.
The husband sold the hospitality industry business in Suburb U in mid-2001, around the time of the property settlement with his former wife. He received $15,000 for its sale. He also sold his vacant block of land at Town Z in April 2004 for $18,500. I accept that those amounts were used by him for the common purposes of him and the wife.
Although there was conflicting evidence about this matter, I find that the husband opened a new Westpac loan account in July 2002, borrowing $300,000 against his Suburb Y property. He used just over $24,000 of that loan to discharge the existing mortgage debt on the property that was there when he acquired all right to the property in the property settlement with his wife. I am also satisfied that the balance of the money borrowed of around $275,000 was contributed by him to the couple’s common purposes.
In January 2003, the wife sold her Suburb U unit that she had received in the property settlement with her former husband. She sold it for $780,000. All of which was contributed to the couple’s common purpose of acquiring more property.
The couple purchased real property at Suburb AA in Queensland January 2002 for $350,000. I am satisfied the funds for its purchase came from the money the wife had received from her former husband in their property settlement. That property was rented out by the parties for the entire time they owned it and the rental income applied towards their living expenses. It was sold in October 2007.
The couple also bought a real property in Suburb BB in February 2002 for $329,000. It was also purchased using funds the wife had received from her property settlement with her former husband. It was ultimately sold in August 2004 for the sum of $600,000. The dwelling on the property had been demolished and the property was sold as vacant land after the couple had spent about $35,000 putting fill on the land to level out the block. All of the sale proceeds were contributed to the parties’ ongoing property acquisition purposes.
In March 2002, the couple purchased the real property at Property W, C Street, Suburb A for $495,000. The purchase money came from the balance of the money the wife had received in the property settlement with her former husband and from funds that she had at the commencement of cohabitation or had received from her former husband in the few years shortly after cohabitation commenced that had been invested by her and the husband.
The husband moved into the property after it was purchased whilst the wife and her children were living back in Sydney during 2002.
In December 2002, the real property at Property E, C Street, Suburb A was purchased by the parties for $515,000. The purchase money was sourced from the parties’ funds and additional borrowings.
The property was rented out from the time of its purchase. It remains one of the properties owned by the parties, albeit registered in the wife’s sole name. It is the rent received on this property that the wife asserts, and I accept, the husband received and used to his own benefit between the time of their separation and October 2009.
In early 2003, the couple purchased a retail property at BB Street, Suburb G for $1,900,000. They borrowed $1,200,000 from Westpac and the balance of the purchase price came from money the wife received from the sale of her Suburb U unit and other funds that they had accumulated in the previous years. They provided mortgages over all their existing properties, save for the Town Z land of the husband’s, as security for the borrowings.
The retail property was managed for them and provided them with income after its purchase. That income was used for their living expenses and to meet loan repayments on their various loans.
At around the same time as the couple purchased the retail property they purchased another real property at F Street, Suburb G on the Gold Coast. It was purchased for $581,000. It was purchased with borrowings of $550,000 and cash funds that they had available at the time. The property was rented until July 2010 when the husband moved in to it at a time after separation. It remains property in which they have an interest.
In mid-2004, the husband sold his X Street, Suburb Y property for $485,000. All of the sale proceeds were used to discharge debt secured by the property. Prior to its sale, the parties had caused some renovations to be done to the property. The money for those renovations, I accept, the wife sourced from money paid to her by her former husband at around that time to be used for the support of her two children.
In March 2004, through the company, N Pty Ltd, that they had incorporated, the parties purchased Building O at Southport for $5,500,000. Some of the deposit for the purchase was sourced from just under $50,000 paid to the wife by her former husband for the support of the children. The balance of the deposit and the balance of the purchase price was borrowed by the company with security over all of the properties of the parties being provided.
Between its purchase and September 2006, Mr T managed the building for the parties. The wife took over the management in September 2006 and has herself personally managed the building in the parties’ interests since that time. Income received was applied to the parties’ common purposes but it was from the company’s accounts that the husband withdrew funds and used them for his own benefit after separation.
Shortly after the purchase of Building O, the parties were involved in the purchase of Building P in Brisbane in partnership with interests associated with Mr T and another business partner. The company, R Pty Ltd was incorporated by the business partners and the parties hold their one-third interest through Alvin Pty Ltd as trustee for the Alvin Family Trust. The building was purchased by R Pty Ltd for $3,042,000, with all of that being borrowed funds secured in various ways by the parties and their business partners. The parties’ Suburb AA property and F Street, Suburb G property were provided as their share of the security offered. Refinancing later occurred and differing security arrangements now prevail.
The building has been managed by Mr T since its purchase, with the husband having received income from the investment to his sole benefit for a period after separation, as already referred to in these reasons. The parties then began to receive that in equal shares pursuant to interim orders made in these proceedings.
In 2006, properties were acquired in Indonesia by the parties. They are registered in the wife’s sole name as she remains an Indonesian citizen and the husband is not. The purchase was funded through borrowings.
In May 2006, the parties sold the Suburb G retail property for $3,100,000 and the net proceeds after costs of sale were all used to discharge debt the parties had at the time.
The wife asserts, and I accept, that her former husband also paid her more money in addition to all that already referred to in these reasons. She sets out four payments from May 2005 until June 2006 totalling $287,612 that she received from him for the support of their children. These funds, I accept, were all contributed by the wife to the parties’ common purposes.
In May 2007, the parties purchased another property at Property D, C Street, Suburb A for the sum of $1,835,000. It was registered in the wife’s sole name. It was funded using borrowings and other available cash funds. The wife moved into the property at the date of final separation and has lived there since then.
The parties subsequently sold their Suburb AA property in mid-2007 for $710,000. Almost all of the sale proceeds received after costs of sale were paid were applied towards debt reduction.
In early 2008, the parties also sold the property at Property W, C Street, Suburb A for $1,175,000. Again, after the costs of sale were paid, almost all of the remaining proceeds were used by the parties to reduce debt.
It can be seen from this factual history that the overwhelming bulk of financial contributions that came in from outside their relationship at the start of the parties’ relationship and during their relationship were contributions of the wife. The enormity of that disparity must be given appropriate weight in the contributions assessment.
The Parties’ contributions through income generation during their relationship
After their relationship commenced, the husband continued to operate his hospitality industry business in Suburb U. I accept the wife’s evidence that she worked with the husband at the business until the business was sold in mid-2001 and that she was not paid by the husband for that. Accordingly, whatever income the business generated during that time was a product partly of the unpaid work the wife was performing as well as the husband’s ownership and operation of it. There is little evidence of the level of income it was generating save for the wife’s assertion that it “did not make much of a profit”. However, given the existence of personal liabilities and credit card debt of the husband at the commencement of the relationship that I have accepted, and given the fact that the business sold for only $15,000 in mid-2001, it is more probable than not in my view that the business was not generating a lot of income. That such is probable, is also reflected in the evidence, that I accept, that the wife would pay the bills when she and the husband went out for dinner after their relationship commenced. On the balance of probabilities, I accept the wife’s evidence that the business did not make much of a profit.
Having found that the wife had access to significant amounts of cash at the time of meeting the husband and in the few years between that time and the property settlement with her former husband, I reject the husband’s evidence that he used to take the wife shopping between 1998 and 2001 and pay for her purchases and pay for her meals. I prefer the wife’s evidence on that issue.
After the hospitality industry business was sold, the only income the husband earned through the relationship until the parties’ separation, and then until the time of the trial, was from the investments the parties made in property, both residential and commercial.
The wife, however, went to work for a period of time as a shop assistant at a store on the Gold Coast for a few casual hours per week, contributing the small amount of income that she earned in that endeavour to the parties’ common purposes. Otherwise, the income she earned was also generated from the parties’ investments in property.
After Building O was purchased by the parties, the wife solely operated a company, I Pty Ltd, that operated a business services venture from a floor of the building until she ceased doing so in early 2008 when a government department took a lease to occupy the whole of that floor of the building. The business services venture traded at a loss for its first two years of operation but generated profits of $45,580 and $65,204 during the last two years of its operation.
After Building O was purchased, it was managed by Mr T. The husband, I accept, did liaise, on behalf of the couple, with Mr T during his time of management. From October 2006, the wife has managed Building O on behalf of N Pty Ltd with the assistance of a bookkeeper and external accountants. I accept the wife’s evidence that she has managed the building with little assistance from the husband from the time that she took over the building’s management. The husband did do some maintenance work, including painting of various parts of the building from time to time though, but most maintenance work, I am satisfied, has been organised by the wife using external contractors. The husband’s contributions to the generation of income from this building, I find, have been heavily outweighed by those of the wife.
Mr T has also been managing Building P on behalf of R Pty Ltd since it was purchased. I accept that the husband has generally been the one of the two parties to whom Mr T approaches when liaising with the parties in respect of their interest in the investment. However, on the evidence, it does not appear that there is a great deal that has to be done by the parties in respect of their investment and as has already been identified, the husband has retained to his own single benefit and use a substantial portion of the income that the parties’ investment in the building has generated in recent years and, as I have already indicated I would do, I take that into account at this contributions assessment stage as representing an even greater contribution by the wife.
Indeed, the evidence establishes that the husband has travelled to Indonesia on multiple occasions since the parties’ separation. During these times, the wife has, of course, remained in Australia managing Building O for the parties, continuing her contributions in the absence of the husband from the country.
I am satisfied that the wife’s direct contributions to the generation of income over the years since the commencement of their relationship significantly exceed those of the husband.
Direct Contributions of the parties
On the evidence, I am satisfied that the husband supported and assisted the wife in achieving property division with her former husband in 2001. I do not accept that the property division would not have been as productive for the wife without the husband’s involvement though. The evidence supports a finding that the wife’s former husband was reasonably generous in his support of the wife and their children after their separation. It is likely that the property division reflects that generosity and sense of responsibility I am satisfied he must have held.
I am equally satisfied that the wife supported and assisted the husband in achieving property division with his former wife at around that same time. As I have said, I reject the husband’s evidence that he borrowed from his own family to pay out his former wife and am satisfied that the money came from the wife’s money instead, thus easily facilitating the retention by the husband of his former matrimonial home.
I am satisfied that after the wife received her property settlement that the parties set a course of property investment and that the husband contributed significantly to the determination of this course and the selection of suitable properties to invest in. He became joint registered owner of most of the properties along with the wife. He was jointly responsible for debt the parties acquired in the course of their investment activities. His contributions in this regard certainly helped the parties locate and acquire the properties that they bought. There is disagreement between them as to who was responsible for particular purchases. I accept that the husband had a greater role to play in this field of their endeavours than the wife concedes, such that I am satisfied that the husband’s contributions in this regard actually exceeded those of the wife, but not by much.
Contributions of the parties to the welfare of the family
During the period that the parties were together whilst they all still lived in Sydney, the husband did assist the wife, from time to time, in caring for her two children of her previous marriage. The wife accepted that he sometimes took them to activities and that he sometimes looked after them when she was out.
I am satisfied that he assisted her to a similar extent when they lived together on the Gold Coast from the beginning of 2003 until the time of their separation in 2007.
In the same vein, the wife assisted in the care of the husband’s children of his former marriage whenever they stayed with the parties in one of their homes. It was suggested to the husband in cross-examination by Mr Cooper that this took place on three weekends in every four weekends. The husband denied that and asserted that their visits were irregular. At first, he said that they never came to stay with the parties when they were in Suburb U but stayed with him “in the shop”. He then conceded that they came and lived with the parties once. At one point, he said that it was no more than two times per year that they came to stay with them and, in reference to the period after the parties were living at the Gold Coast, the husband said that they did visit but they would “come and go but didn’t stay”.
I am satisfied that they did stay with the parties sometimes, probably more than the husband conceded but definitely not for three weekends out of every four. I am satisfied that the wife did provide assistance to the husband in respect of their care during those periods. That contribution made by her to caring for the husband’s children for whom she had no legal duty to provide care was not, I am satisfied, nearly as significant as the level of contribution made by the husband to caring for the wife’s children for whom he had no legal duty to provide care.
As none of these children are children of the marriage within the meaning of that term in s 79(4)( c) of the FLA, this difference in contribution made by the parties in respect of the other’s children will be taken into account by me at the adjustment stage of the assessment pursuant to s 75(2)(o) [12] rather than as part of the contributions assessment.
[12] See Robb & Robb (1995) FLC 92-555
I accept the wife’s evidence that she performed nearly all of the cooking, cleaning and household chores during the time that the parties lived together in the same household at Property W, C Street, Suburb A between January 2003 and November 2007. Whilst I am satisfied that the husband did some work around the house, I find it probable that he did not do as much as he asserts he did. I also accept the wife’s evidence that she managed the parties’ finances during their relationship and took care of paying the household bills. I accept that the wife has done that since separation also.
Whilst I am satisfied that both parties did make contributions to each other’s welfare, I am satisfied that the wife’s contributions to the couple’s welfare exceeded those of the husband.
Determining the notional percentage division as against the ‘pool’
I now move to the translation of those findings to a notional percentage division of the “pool” of $8,260,353.07 worth of net property interests, superannuation and notional “add backs”. Appropriate weight must, of course, be given to the significant direct financial contributions made by the wife, but care must also be taken to give proper weight to all of the parties’ contributions across all of the spheres of their marriage relationship. As is clear, I am quite satisfied that the totality of contributions made by the wife significantly exceeds the totality of the husband’s contributions and that must be reflected in the notional division now determined.
Mr Page for the husband, submitted that the notional division of the ‘pool’ at this step of the process should be 35% to the husband and 65% to the wife. In the Summary of Argument that was filed just before the trial by Mr Cooper for the wife, a notional division of 85/15 in favour of the wife was contended for.
Remembering that it is a discretionary determination and not a mathematical exercise, the findings I have made lead me to concluding that each party’s submission is wide of the appropriate mark. I consider that a notional division of 72.5/27.5 in favour of the wife more appropriately reflects what I have assessed were their contributions from the commencement of their relationship until the time of trial.
In real terms, that is a division that would see the wife receiving property, superannuation and notional ‘add backs” to the value of $5,988,755.98. It would see the husband receiving $2,271,597.09 of the pool. Each have had $80,000 in funds already to pay legal fees and the husband has also had $6,193 that he conceded is an ‘add back’ to his share.
Assessment of the Adjustment at the third Step having regard to the matters set out in s 75(2), in so far as they are relevant
The husband was 65 years of age at the time of the trial (now 67) and the wife was 43 years of age at that time (now 45). They agree they are each in good health.
The wife would receive a much larger share of the property interests of the parties on the basis of the notional division just determined as appropriate having regard to their respective contributions throughout the marriage.
Each of them is capable of continuing to manage the capital they will retain such that it provides them with a reasonable income into the future. The husband’s age compared to the wife’s age, in all likelihood, suggests that in reality he does not have the need for as large a capital base as the wife to ensure his financial needs for the rest of his life are adequately met.
There are no children of the parties’ marriage and the wife’s youngest child is now 18 years of age. At the time of the trial she was still living with the wife and studying on the Gold Coast. She will have recently reached adulthood but I expect the wife is still providing for her to some extent, along with her older brother who is also a young adult living independently on the Gold Coast. I do not have any reason to doubt that the generosity their father demonstrated towards them in the past will not continue to be shown in the future.
The husband has two young adult children of his own. I expect he does also provide for them to some extent, although the wife asserts that he does not support them.
The capital introduced by the wife to the marriage certainly provided the base from which the parties have been able to generate the current levels of capital they have, the division of which will provide each with income in the future.
I could not be satisfied that either party had re-partnered at the time of the trial, although there was some evidence suggesting the husband may have. I do not find though that he had.
I take into account pursuant to s 75(2)(o) at this stage of the process, as I indicated earlier that I would, the fact that the husband also received the inheritance from his later mother’s estate in the period shortly after separation. I am satisfied he retained all of that to his own use, whilst still receiving the parties’ income from the Building P investment. I also take into account, as I also indicated earlier that I would, the money that the husband withdrew from bank accounts of the parties and rental that he received on Property E, C Street, Suburb A after separation which totalled somewhere between $92,448 and $100,448.
Finally, I take into account my findings that the husband contributed more to the welfare of the wife’s two children of her former marriage than the wife did to the welfare of his two children of his former marriage.
After considering all of these matters, I am not convinced that there should be any further adjustment to the notional division determined as appropriate after the contributions assessment in order to achieve a result that is just and equitable in all the circumstances.
What orders should be made?
The wife asks for orders that provide her with virtually all of the parties’ interests in property and require her to pay the husband a cash amount. The husband asks for orders that allow him to keep the real property at F Street, Suburb G and the parties’ interest in Building P as well as a few other miscellaneous items. He also seeks to receive a cash payment from the wife.
The husband should, I determine, retain (or be notionally credited with having already received) the following:
1. Commonwealth Bank Complete Access Account – No …24 $2,425.39 2. Loan to Alvin Family Trust $20 3. His interest in the M Superannuation Fund (subject to payment by him back to the fund of $14,000 to be discussed below) $6,356 4. Add back of $80,000 he received to pay legal fees $80,000 5. Add back of money conceded by him $6,193 Sub-Total $94,999.39
Accordingly, he is entitled to receive further property and/or cash from the wife in lieu of property to the value of $2,176,602.70.
The husband asks to retain the real property at F Street, Suburb G agreed to be valued at $595,000 currently registered in the joint names of the parties. He has been living in that property since separation. I consider it appropriate and just and equitable for him to receive that property free of encumbrance other than any he must have in place to secure any liabilities for which he will have to remain liable.
A November 2011 title search in evidence reveals it is encumbered by a mortgage in favour of the Commonwealth Bank registered in January 2005, a caveat lodged by the wife in August 2011 and a writ lodged by Mr DD, a former solicitor of the husband, with a view to enforcing judgment obtained against the husband in the Magistrates Court for the amount of $55,308.55 for unpaid legal fees, interest and costs. In the determination of the orders to be made that provide for the husband to retain that property as his sole property, those matters will need to be appropriately addressed.
Retaining that real property would see the husband still entitled to receive property and/or cash in lieu of property to the value of $1,581,602.70.
The husband also seeks to retain the parties’ interest in Building P that they hold through the Alvin Family Trust that has been valued (exclusive of potential CGT and realisation costs) at $711,250.
I am of the view that it is most appropriate for the husband to retain that interest if he can. He has the relationships with the other business partners in that investment and the wife does not. He has had involvement in that investment through the relationships with those business partners that the wife has not. It will, however, be critical for him to be able to refinance any debt that exists in respect of that property currently secured by any of the remaining real properties that the wife is to retain. In my determination, the properties to be retained by the wife must be free of encumbrance that secures any debt relating to the Building P investment for orders giving effect to this division to be just and equitable. Only if the husband can achieve that will it be just and equitable and appropriate to make orders that otherwise facilitate his retaining the parties’ interest in that particular investment.
If that can be done, it is appropriate and just and equitable, in my view, for the wife to then pay to the husband the further sum of $870,352.70 to finalize property division between the parties. Of that sum, $14,000 is to be paid back into the M Superannuation Fund accounts by the husband to bring that superannuation fund back to compliance having regard to the fact, conceded by the husband, that he withdrew $14,000 out of it at some point in the past when he should not have. The Orders to be made should provide for that.
That would leave the wife with Property D and Property E, C Street, Suburb A, the Indonesian properties, the joint bank accounts (the husband to join with her in taking all necessary steps to close them or change them to accounts in her sole name), her own bank accounts, the shares in I Pty Ltd, $80,000 already received for legal fees, the liability in respect of the loan for the AB failed investment, the liabilities of the parties to the company N Pty Ltd, and the parties’ two shares in N Pty Ltd. Of course, indemnities in respect of the liabilities the wife will be retaining will also need to be given by the wife to the husband.
To retain Building O, as I consider appropriate, the wife will also need to receive the 100 shares in N Pty Ltd held on trust for the Alvin Family Trust by Alvin Pty Ltd. I consider it would be appropriate and just and equitable for those shares to become the wife’s and for her to retain sole ownership and control of N Pty Ltd. I consider it would be appropriate and just and equitable for the husband to retain the shares in Alvin Pty Ltd, the trustee of the Alvin Family Trust and for him to retain sole control of that trust to the exclusion of the wife. I consider it would be appropriate and just and equitable for the husband to also retain all of the shares in J Pty Ltd, another company of the parties, and sole control of the J Trust to the exclusion of the wife.
Capital Gains Tax and Realisation Costs
I have already discussed the expert evidence of the calculation of the estimated Capital Gains Tax liability and realisation costs in respect of Building O and Building P in the event that those buildings were to be sold. As I have already observed, Mr Cooper for the wife submitted that I should deduct those amounts from the gross value of the assets to determine the value of the property interests of the parties in this case. Mr Page for the husband submitted to the contrary, relying principally on the fact that neither party led any evidence at all about their intentions with respect to the buildings in the future if they acquire the interests that they seek to acquire. Mr Page submitted that, consequently, I could not find it likely that any of the buildings will be sold in the foreseeable future such as to make it appropriate to take estimated CGT liability and realisation costs into account.
At this point in time, I agree with Mr Page. There is no evidence before the Court that either building will be sold in the near future. Furthermore, there is no evidence before the Court that causes me to be satisfied that it is likely that either building will be required to be sold in the near future as a consequence of this decision. Accordingly, I am not convinced that I must take the estimated liability for CGT and realisation costs in respect of the parties’ interests in these two buildings into account at this point in my determination of these proceedings.
As I consider I have made clear, I currently propose making orders that the wife retains Building O through the corporate vehicle of N Pty Ltd and that the husband retain the parties’ one-third interest in Building P through the corporate and trust vehicles of Alvin Pty Ltd and the Alvin Family Trust. As already observed, that would require transfer of the 100 shares in N Pty Ltd currently held by Alvin Pty Ltd as trustee for the Alvin Family Trust to the wife.
At the conclusion of the trial, during his oral submissions, Mr Page handed up a schedule of property distribution as sought by the husband. At the foot of that document was the following:
On transfer of 100 shares in [N] Pty Ltd from [Alvin] Pty Ltd to the wife or at her direction there would be CGT payable. In order to get the discount a distribution of the shares would need to be made to the husband by the trust. The husband would then transfer the shares to the wife or at her direction. The roll-over provisions would avoid the incidence of CGT at that point.
That may well be the case. I am not aware of the wife’s position in respect of this issue. If the parties can agree that it is then, having regard to what I have said in respect of what I have determined would be a just and equitable property adjustment outcome, I would expect the parties to now be able to reach agreement as to the particular wording of the orders that the Court is to make to give effect to my determinations and stated intentions. The parties, I consider, are at least entitled to have the opportunity to jointly structure the terms of the orders the Court is to make to give effect to its determination in the manner that is most effective for them in all respects.
I will, on the publication of these reasons, give the parties time to reach agreement on the terms of the orders that are to be made to give effect to the determination embodied in these reasons. I will give the parties the opportunity to bring in an agreed minute of those terms to be made into orders once I am satisfied that they are appropriate and just and equitable in the light of my decision herein. Should no agreement as to the terms of the orders be able to be reached within the time given to the parties, I will hear further submissions from both parties as to the terms of the orders to be made to give effect to this decision.
The directions I make in this regard are set out at the commencement of these reasons.
I certify that the preceding one hundred and forty-five (145) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Forrest delivered on 26 July 2013.
Associate:
Date: 26 July 2013
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