Keach & Keach
[2011] FamCA 192
•9 March 2011
FAMILY COURT OF AUSTRALIA
| KEACH & KEACH AND ORS | [2011] FamCA 192 |
| FAMILY LAW - PROPERTY – Trust– where the husband is a potential beneficiary of a trust – whether the assets of the trust should be included in the asset pool – whether the trust is a “sham” and the husband is the true owner of the assets of the trust FAMILY LAW - PROPERTY – assets and liabilities to be included in the pool – add backs FAMILY LAW - PROPERTY SETTLEMENT – alteration of property interests – contributions – where the contributions of the husband and wife overall were equal – where an adjustment of 30 per cent in favour of the wife on account of s 75(2) factors is appropriate – net asset pool to be divided 80 per cent/20 per cent in favour of the wife – just and equitable – where the value of the assets that the wife would receive exceeds the value of the asset pool FAMILY LAW - SPOUSAL MAINTENANCE – application for spousal maintenance by the wife – where the wife has the capacity to obtain appropriate gainful employment but has chosen not to do so – where the husband cannot reasonably afford the amount sought by the wife FAMILY LAW - CHILD SUPPORT – where the wife seeks a departure order from an administrative assessment of child support and an order pursuant to s 124 of the Child Support (Assessment) Act 1989 (Cth) that the husband pay all of the costs of the children’s education – where no ground is established for a departure order – where there is no basis for an order to be made pursuant to s 124 |
| Family Law Act 1975 (Cth) ss 72, 74, 75 & 79 Child Support (Assessment) Act 1989 (Cth) s 117 & s 124 |
| A v A [2007] EWHC 99 (Fam) Ascot Investments v Harper (1991) 148 CLR 337 Baldwin & Baldwin [2010] FamCAFC 227 Chorn and Hopkins (2004) FLC 93-204 Equuscorp Pty Ltd v Glengallan Investments Pty Ltd (2004) 218 CLR 471 Essex & Essex (2009) FLC 93-243 Gollings and Scott (2007) FLC 93-319 Gould and Gould; Swire Investments Ltd (1993) FLC 92-434, In re Esteem Settlement [2003] JLR 188 JEL and DDF (2001) FLC 93-075 Marac Finance Ltd v Virtue [1981] 1 NZLR 586 Marker and Marker [1998] FamCA 42 Midland Bank PLC v Wyatt [1995] 1 FLR 696 Milankov and Milankov (2002) FLC 93-095 Official Assignee in Bankruptcy in the Property of Reynolds v Wilson and Harvey and Anor [2008] NZCA 122 Omacini and Omacini (2005) FLC 93-218 Phillips and Phillips (2002) FLC 93-104 Raftland Pty Ltd as Trustee of the Raftland Trust v Commissioner of Taxation (2008) 246 ALR 406 Shalson and Russo [2005] Ch 281 Sharrment Pty Ltd v The Official Trustee in Bankruptcy (1988) 82 ALR 530 Snook v London and West Riding Investments Ltd [1967] All ER 518 Turnbull and Turnbull (1991) FLC 92-258 Walters and Walters (1986) FLC 91-733 Waters and Jurek (1995) FLC 92-635 |
| APPLICANT: | Mr Keach (Junior) |
| RESPONDENT: | Ms J Keach |
| SECOND RESPONDENT: | J Pty Ltd (as Trustee of the Junior Trust) |
| THIRD RESPONDENT: | K Law Firm |
| FILE NUMBER: | SYF | 2181 | of | 2006 |
| DATE DELIVERED: | 9 March 2011 |
| PLACE DELIVERED: | Adelaide |
| PLACE HEARD: | Sydney and Adelaide |
| JUDGMENT OF: | Strickland J |
| HEARING DATE: | 21 – 25 September 2009 7 & 13 October 2009 1 March 2010 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | In person |
| COUNSEL FOR THE RESPONDENT: | Mr North SC with Mr Kearney |
| SOLICITOR FOR THE RESPONDENT: | Barkus Doolan Kelly |
| COUNSEL FOR THE SECOND RESPONDENT: | Mr Maiden SC with Mr Emmett |
| SOLICITOR FOR THE SECOND RESPONDENT: | Esplins Solicitors |
| COUNSEL FOR THE THIRD RESPONDENT: | N/A |
| SOLICITOR FOR THE THIRD RESPONDENT: | K Law Firm |
Orders
This matter be adjourned for further consideration and if possible for the making of final orders to 9:00am on Thursday 17 March 2011.
IT IS NOTED that publication of this judgment under the pseudonym Keach & Keach and Ors is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
| FAMILY COURT OF AUSTRALIA AT ADELAIDE |
File Number: SYF 2181 of 2006
| Mr Keach (Junior) |
Applicant
And
| Ms J Keach |
Respondent
And
| J Pty Ltd (as Trustee of the Junior Trust) |
Second Respondent
And
| K Law Firm |
Third Respondent
REASONS FOR JUDGMENT
Introduction
I have before me for determination competing applications for property settlement. The wife also seeks orders for spousal maintenance and orders with respect to child support, including a departure order.
The parties initially also sought parenting orders with respect to their two children. However, they were able to resolve the issues relating to the care of their children and at the commencement of the trial on 21 September 2009 I made final parenting orders by consent.
The husband seeks the following orders in his Amended Application for Final Orders filed on 12 August 2008:
13. By way of adjustive property Order[sic]:
13.1The husband do all acts and things necessary and sign all instruments, documents and writing required within 14 days to transfer to the wife 72,702 shares in [N Limited].
13.2The wife’s superannuation interests with the [S Superannuation Fund] shall be split to create a superannuation interest for the husband as follows: -
13.2.1Pursuant to Section 90MT(2) of the Act and Regulation 27 of the Family Law (Superannuation) Regulations the Court determines the amount in relation to the wife’s superannuation in the [S Superannuation Fund] is $75,284.00.
13.2.2Pursuant to Section 90MT(4) of the Act the Court allocates a base amount to the husband in respect of the wife’s superannuation interests in the [S Superannuation Fund] of $44,932.00.
13.2.3Pursuant to Section 90MT(1)(a) of the Act whenever a splittable payment becomes payable in respect of the wife’s superannuation in the [S Superannuation Fund] the husband is entitled to be paid an amount calculated in accordance with the Family Law Regulations where the base amount is $44,932.00 and there is a corresponding reduction in the entitlement of the wife at the time of the splittable payment.
13.2.4The operative time for the payment under this Order is 28 days after the date of the Order.
13.2.5The Trustee shall do all such acts and things and sign all documents as may be necessary, in accordance with the obligations set out under the Family Law Act 1975 and the Family Law (Superannuation) Regulations 2001 to calculate the entitlement to make payment to the husband in accordance with these Orders.
13.2.6The wife shall not give or grant to the Trustee of the [S Superannuation Fund] a binding death nomination in favour of a child which would have the effect of in any way reducing the value to the husband of the splittable order herein and in particular the base amount allocated to him and the wife and her legal personal representatives in the event of her death, do hereby indemnify and keep indemnified the husband in respect of any loss that may be suffered by him as the result of any failure by her to comply with this Order.
13.2.7The wife shall forthwith do all acts and things and sign all document necessary to cause and maintain the husband to be the nominated death beneficiary of her entitlement to a proportion of not less than 35% of the total value of her entitlement in the [S Superannuation Fund] until such date as there is a split of payments in favour of the husband pursuant to these Orders.
13.2.8That having been accorded procedural fairness in relation to the making of this Order, this Order binds the Trustee of the [S Superannuation Fund].
14. In the event that either party refuses or neglects to execute any deed or instrument in order to give validity and operation to these Orders, then a Registrar of this Court is hereby empowered pursuant to Section 106A of the Act to execute such deed or instrument in the name of the person who has so refused or neglected to comply.
15. That the wife’s Application for spousal maintenance be dismissed.
16. That the wife’s Application for a child support departure order be dismissed.
I note that at the time that this Amended Application was filed the husband was legally represented, but unfortunately at the time of the hearing, and in the lead up to it, he was unrepresented. In his undated written submissions provided at the conclusion of the hearing he sought the following orders:
9.1 Spousal Maintenance to discontinue once [R] has started school on the 2nd February 2010.
9.2 Child support is to be assessed according to the Child Support Act [sic] 1989 as it currently is and that education expenses are divided equally between us.
9.3 That the Net Assets at 72 of the Net Asset Calculation Table on Page 29 of this submission be divided equally between the parties as per the orders sought by the wife.
9.4 That the legal costs or liabilities incurred by each party incidental to these proceedings be paid for by each party that has incurred those costs.
The net assets, superannuation and financial resources set out at page 29 of his submissions was for him -$202,167 and for the wife $560,100. It is unclear to me how the husband proposes that these be “divided equally between the parties as per the orders sought by the wife”, and it is also unclear whether he was still seeking the orders set out in his Amended Application.
The wife, in her Further Amended Response to an Application for Final Orders filed on 3 September 2009, seeks the following relevant orders:
9. That the disposition by the husband to [K Law Firm] of any funds from or as a consequence of the sale by the husband of:
9.1 25,000 ordinary shares in [N Limited] on or about 27 March 2009;
9.22,568 ordinary shares in [N Limited] on or about 6 August 2009;
9.31,000 ordinary shares in [N Limited] on or about 7 August 2009; and
9.4 51,432 ordinary shares in [N Limited] on or about 10 August 2009.
be set aside pursuant to the provisions of section 106B of the Family Law Act, 1975.
10. To the extent that any of the said transactions were not undertaken for consideration at market value, the following instruments be set aside pursuant to the provisions of section 106B of the Family Law Act, 1975:
10.1 The instrument dated on or about 27 March 2009 whereby the husband has purported to dispose of 25,000 shares in [N Limited];
10.2 The instrument dated on or about 6 August 2009 whereby the husband has purported to dispose of 2,568 shares in [N Limited];
10.3 The instrument dated on or about 7 August 2009 whereby the husband has purported to dispose of 1,000 shares in [N Limited];
10.4 The instrument dated on or about 10 August 2009 whereby the husband has purported to dispose of 51,431 shares in [N Limited].
11. That leave be granted to the wife to file a further amended response upon receipt of particulars to the requests dated 21 and 25 August 2009 from the husband and the request dated 26 August 2009 from the second respondent.
12. That the husband pay or cause to be paid to the wife the sum of $2million within 7 days of the date of the making of these Orders.
13. If the husband does not comply with Order 12, then the second respondent shall do all things and sign all deeds, documents and instruments necessary to distribute to the husband from, and in his capacity as a beneficiary of, the [Junior Trust] the sum of $2million within 14 days of these Orders and:
13.1for the purposes of effecting the above payment, and to the extent necessary to do so, the second respondent shall do all things and sign all deeds, documents and instruments necessary to list for sale and sell the property known as and situate at [the M property] being the whole of the land contained in Folio Identifier […] together with the improvements erected on that land (“[the M property]”) in the following manner:
13.1.1list the [M property] for sale by public auction within 14 days of the date of this Order with such agent as the parties may agree to appoint and in default of agreement as to agent within 14 days of the date of this Order with such agent as the President of the Real Estate Institute of NSW shall appoint (“the agent”) and the costs of and incidental to such appointment to be borne by the husband as and when the same fall due;
13.1.2the reserve price for the purpose of such auction shall be such price as may be mutually agreed by the parties or, in the absence of agreement reached within 14 days prior to the date of the auction sale (the date of which auction shall be fixed by the agent), the reserve price shall be the price nominated by the fair market value thereof by a valuer appointed by the President for the time being of the NSW Division of the Australia Property Institute Incorporated (“the valuer”) and the costs of and incidental to such appointment and valuation to be borne by the husband as and when the same fall due;
13.1.3the husband and the second respondent shall each co-operate in every way with the agent including (without limiting the generality of the foregoing):
13.1.3.1making the key available to the agent;
13.1.3.2allowing inspection of the [M property] at all reasonable times requested by the agent;
13.1.3.3doing or saying nothing to hinder or prevent a sale being effected;
13.1.3.4ensuring the [M property] including the grounds are in neat and clean condition at the time of inspection by the agent and prospective purchasers; and
13.1.3.5signing all documents requested by the agent in relation to the listing for sale of the [M property] except a contract or agreement for sale which has not been authorised by the parties’ solicitors.
13.1.4if the bidding at the auction does not reach the reserve price the parties or such of them as attends the auction may negotiate with the highest bidders or any other interested person and effect a sale of the [M property] at a price which is not more than 10% below the reserve price, or at such other price as the parties agree upon in writing;
13.1.5if the [M property] remains unsold, the second respondent shall do all acts and things and sign all documents necessary to immediately relist the [M property] for sale by public auction again, on a date nominated by the agent and at such auction there shall be no reserve price unless otherwise agreed by the second respondent in writing;
13.1.6the parties shall instruct such solicitor as they agree upon to have the conduct of the sale on behalf of the parties or, in the absence of agreement reached within 14 days of this Order shall instruct such solicitor as may be appointed by the President for the time being of the Law Society of New South Wales (“the solicitor”) the costs of and incidental to such appointment to be borne equally by the parties as and when the same fall due;
13.1.7the second respondent shall execute a contract for sale in the form prepared by the solicitor having the conduct of the sale at the sale price;
13.1.8neither party may confer on any agent without the consent of the other party any right to any sole or exclusive agency in respect of the [M property] or to any commission;
13.2immediately upon receipt by the husband of payment from the second respondent in accordance with this Order, the husband shall pay all moneys so received by him to the Wife.
14. Except as otherwise provided by these Orders, as against the wife the husband is solely entitled to all other assets of whatsoever nature and kind presently in his name, ownership or possession and, as against the husband, the wife is the owner of all other assets presently in her name, ownership or possession.
15. That the husband pay or cause to be paid direct the wife or as the wife may from time to time direct in writing by way of spousal maintenance the sum of $1,350 per week, the first payment to be made within 7 days of the making of these Orders and monthly thereafter.
16. The spouse maintenance payable by the husband to the wife pursuant to Order 15 is to be varied on the review date each year commencing on 1 July 2010 to such sum as shall be determined by multiplying the spouse maintenance payable on the review date by the fraction N/B where “B” is the Consumer Price Index for Sydney (All Groups_ published by the Australian Bureau of Statistics (“CPI”) in respect of the quarter ended 12 months prior to the review date, namely 30 June, and “N” is the CPI in respect of the quarter year ending on the day immediately proceeding the review date.
17. That pursuant to section 117 of the Child Support (Assessment) Act, 1989, there be a departure from the administrative assessment of child support payable by the husband for the children as follows:
17.1for the period from the date of these Orders until the occurrence of a child support terminating event the annual rate of child support be set at $670 per week per child;
17.2the child support payable by the husband to the wife pursuant to this Order 17.1 is to be varied on the review date each year commencing on 1 July 2010 to such sum as shall be determined by multiplying the child support payable on the review date by the fraction N/B where “B” is CPI in respect of the quarter ended 12 months prior to the review date, namely 30 June, and “N” is the CPI in respect of the quarter year ending on the day immediately proceeding the review date.
18. That in addition to the child support payable pursuant to Order 17, pursuant to section 124 of the Child Support (Assessment) Act, 1989, the husband shall provide additional child support for the children by way of payment of all education expenses incurred by the wife in respect of each of the children and education expenses shall mean and include all tuition fees, excursion fees, coaching and tutoring fees, extra curricular activities, incidental sporting costs, the cost of school books, and the costs of school and sports uniforms.
19. That the husband pay the wife’s costs of and incidental to these proceedings. (Emphasis in original)
The wife did not pursue order 11, and in relation to orders 9 and 10 there was agreement that they should be adjourned until after delivery of my judgment. It was explained that the orders sought are in the nature of enforcement depending on what property settlement orders are made. The orders sought are against the husband’s former solicitors, and on 13 October 2009 the firm K Law Firm was joined by consent as a party, and the application so far as it sought those orders was adjourned, again by consent. As it happens, those applications now need to be dealt with one way or another prior to final orders being made. I explain the need for this in paragraphs 236 to 244 hereafter.
At the time of trial the second respondent J Pty Ltd (as Trustee of the Junior Trust) sought that the wife’s application against the second respondent be dismissed, that the wife pay the second respondent’s costs, and in default that Mr D, the wife’s father, pay the second respondent’s costs.
I also note that during the course of the proceedings orders were made in effect reserving questions of costs to the trial judge. For example, such orders were made on 16 May 2006 and 18 November 2008. I will leave what is to happen to these orders until after the delivery of this judgment.
Factual background
The husband was born in 1968 and is now aged 42 years.
On 21 December 1973 the Senior Trust was settled with Keach Nominees Pty Ltd as the trustee. The husband is a potential beneficiary of the trust.
The wife was born in 1977 and is now aged 33 years.
On 23 July 1981 the O1 Trust was established by deed. The O1 Trust is a discretionary family trust. C Holdings Pty Ltd is the trustee of the trust. The wife is a beneficiary of this trust.
On 15 November 1983 an amendment was made to the First Schedule of the Senior Trust deed to expand the definition of persons for whom the income and capital may be held to include companies or trusts to which they may be associated.
On 20 December 1985 the husband’s father, Mr Keach Senior, established four trusts in the names of each of his children, namely the Mr Keach (Junior) Trust (“the Junior Trust”), the K Keach Trust, the S Keach Trust and the W Keach Trust (“the children’s trusts”). Each trust was created by a separate trust deed. K Nominees was appointed the trustee of all four of the children’s trusts.
Clause 1(c) of the deed for the Junior Trust defines the beneficiaries of the trust as:
(i) The persons named or otherwise qualifying to be included in a class of persons (if any) referred to in the Schedule and issue of any such person and any charity or unincorporated association named in the Schedule.
(ii) Any such person, persons or company (including the Trustee of any other trust) as the Principal shall by notice in writing to the Trustee before the vesting day appoint to be beneficiaries for the purpose of this Deed …
The beneficiaries and residuary beneficiaries named in the Schedule to the deed were the husband, his sister K Keach, brothers S Keach and W Keach.
Clause 2 (a) of the deed provided:
Until the Vesting Day the Trustee may pay or apply the whole or any part of the income of the Trust Fund for or towards the maintenance, education, advancement or benefit of all or such one or more of the Beneficiaries [sic] to the exclusion of the other or others of them and in such shares as the Trustee in its absolute discretion may by Deed or by oral declaration recorded in the minutes of the Trustee determine provided however that any income not so paid or applied may by declaration recorded in the minutes of the Trustee made on or before the last day of each financial year be deemed to have been paid or applied for the maintenance, education, advancement, or benefit of such of the Beneficiaries and in such proportions as the Trustee may by notice in writing declare and in such event the Trustee shall credit such proportions of such income to the account of the respective Beneficiaries in the Books of Accounts of the Trustee and shall hold the same absolutely on behalf of each such Beneficiary.
On 19 September 1986 N Limited was incorporated. N Ltd is a publicly listed company effectively controlled by the husband’s father. N Ltd owns a number of hotels, including Hotel 1, Hotel 2, Hotel 3 and Hotel 4.
On 30 June 1988 the Senior Trust was appointed to the class of potential beneficiaries of the Junior Trust. The Senior Trust was also appointed as a potential beneficiary of the three other children’s trusts.
On 29 June 1990 O Pty Ltd was appointed to the class of potential beneficiaries of the Junior Trust. The husband’s father and step-mother were the sole directors and shareholders of this company.
On 1 July 1991 the wife became a member of the S Pension Fund. This is a self managed superannuation fund controlled by the wife’s father.
On 15 February 1993 the wife became a member of the S Superannuation Fund. This is also a self managed superannuation fund established and controlled by the wife’s father. C Holdings Pty Ltd is the trustee of this fund.
In 1994 the husband purchased a unit at W (“the W property”) with his sister K Keach for $310,000, with the husband and K Keach each borrowing $155,000 from their father to facilitate the purchase. The husband and K Keach initially resided in the property together.
On 8 June 1995 Keach Nominees Pty Ltd ACN … was incorporated. Mr Keach Senior, his wife Ms F Keach and Mr Keach Senior’s four children (including the husband) were named as directors of the company. Mr Keach Senior held five issued shares and his wife and each of the four children held one share each
On 9 June 1995 the husband was appointed as a director of Keach Nominees Pty Ltd.
According to the wife, the parties commenced cohabitation in 1996. The wife says that the parties lived at the husband’s unit at W for approximately 3 to 6 months before moving to reside in the licensee’s flat above Hotel 1. The husband asserts cohabitation did not commence until 1997, at the flat above the hotel.
In approximately March 1996 the husband and his sister sold the jointly owned unit at W for $430,000. The husband says he received approximately $215,000 from the sale. He says he did not repay his father at this time but rather advanced the funds to the Junior Trust. The husband says over the years he has received repayments of this loan, and that it was completely discharged by the time of trial. The husband says he drew down on the monies loaned to the Junior Trust to meet his legal fees, spousal maintenance commitments and living expenses.
In April 1996 the wife commenced casual employment at Hotel 1.
In 1997 the wife was allocated $15,000 from the O1 Trust. This was applied against the wife’s debit loan account.
For the financial year ended 30 June 1997 distributions were made from each of the children’s trusts to O Pty Ltd.
In 1998 the wife received a Jeep motor vehicle, a computer and $3,000 as gifts from her parents for her 21st birthday.
For the financial year ended 30 June 1998 distributions were made from the Junior Trust to W Keach.
On 12 August 1998 Keach Nominees Pty Ltd was appointed as the trustee of the Junior Trust. On 25 August 1998 Keach Nominees Pty ltd was also appointed as the trustee of the other three children’s trusts and the Senior Trust.
On 28 September 1998 the trust deed of the Junior Trust was amended as follows:
33.1Covenant 25 of the deed which gave the Trustee the power by deed to release and revoke any power/s conferred on the Trustee and allowed the Trustee to vary or amend any of the trusts or provisions contained in the Deed, upon conditions, was revoked.
33.2Covenant 8(xiii) was amended to give the Trustee the power to give any guarantee of or undertaking for the “payment or repayment of money or debts … of any person” or the “performance of any existing or future duties, undertakings, obligations or liabilities incurred or which may at any future time be incurred by any person” and to give any mortgage, charge or other security over the trust fund or any asset forming part of the Trust fund.
33.3Covenant 9 was amended with respect to the trustee’s power to appoint a person as the representative of the trustee to do acts in connection with the trustee’s powers.
33.4Finally, covenant 29 was inserted providing an indemnity to the trustee and an entitlement to reimbursement for money expended and debts incurred in the administration of the trust, provided the trustee has acted in good faith.
On 16 October 1998 a property at M (“the M property”) was purchased by Keach Nominees Pty Ltd, as trustee of the Junior Trust, for $920,000. The purchase was in part facilitated by way of a mortgage to the ANZ Bank. The property was rented out until July 2002, when the husband and wife commenced residing in this property.
For the financial year ended 30 June 1999 the husband was allocated $44,014 from the Junior Trust.
In 1999 the wife graduated from university with a Bachelor’s degree. Following her graduation the wife obtained employment in the education field for approximately 3 months.
On 11 November 1999 the husband’s father was appointed the Principal of the Junior Trust. The husband’s father was also appointed as Principal of the other three children’s trusts at this time.
The parties married in 1999.
Following the parties’ marriage the wife commenced employment on a full time basis at Hotel 4 in Sydney Suburb 1, working in the office with the husband’s sister K Keach. Throughout the parties’ marriage the husband worked as a hotel manager, primarily employed by N Ltd.
For the financial year ended 30 June 2000 the husband was allocated $40,150 from the Junior Trust.
On 22 June 2001 J Pty Ltd ACN … was appointed a beneficiary of the Junior Trust. The husband’s father and step-mother were the directors and only shareholders of J Pty Ltd.
For the financial year ended 30 June 2001 the husband was allocated $27,164 from the Senior Trust. A distribution was also made from each of the children’s trusts, including the Junior Trust, to J Pty Ltd.
On 3 July 2001 the ANZ loan facility in the name of Keach Nominees Pty Ltd on behalf of the Junior Trust in the amount of $636,137 was discharged. A loan was obtained from the Commonwealth Bank by Keach Nominees Pty Ltd guaranteed by the husband and his father.
On 2 November 2001, four companies, namely Company 1 ACN … , Company 2, Company 3 and Company 4 were incorporated. One beneficial share in each of the companies was held by Keach Nominees Pty Ltd. The husband’s father was the sole director of each the companies at the time of incorporation. Company 1, Company 2, Company 3 and Company 4 each hold shares in N Ltd.
On 3 November 2001 J Pty Ltd issued one share to each of Company 1, Company 2, Company 3 and Company 4.
For the financial year ended 30 June 2002 the husband was allocated/received a distribution of $43,459 from the Senior Trust.
On 17 April 2002 the husband was appointed a director of Company 1, the husband’s sister K Keach was appointed a director of Company 2, the husband’s brother W Keach was appointed a director of Company 3 and the husband’s brother S Keach was appointed a director of Company 4.
On 22 June 2002 Company 1 was appointed as a beneficiary of the Junior Trust. Also on this date, Company 2 was appointed as a beneficiary of the K Keach Trust, Company 4 was appointed as a beneficiary of the S Keach Trust and Company 3 was appointed as a beneficiary of the W Keach Trust.
For the financial year ended 30 June 2002 all distributions from the Junior Trust were made to Company 1. These distributions were in the amount of $65,301.
In approximately July 2002 the parties commenced residing in the M property, paying $800 (as asserted by the husband) or $960 (as asserted by the wife) per week rent. The parties had commenced to undertake renovations to the property following the vacation of the property by the previous tenants.
Between September 2002 and the time of separation the husband drew numerous cheques on the Junior Trust’s account in payment of his Visa account for expenses incurred in relation to the M property and for other expenses.
On 24 March 2003 the wife was appointed as a director of CC Pty Ltd. CC Pty Ltd is controlled by the wife’s father. The wife holds 10 redeemable preference shares in the company.
In the 2002/2003 financial year the husband is recorded as lending $264,167 to the Junior Trust.
On 20 June 2003 the husband was allocated $24,628 from the Junior Trust.
In 2003 the wife commenced to work for V Pty Ltd, a company incorporated on 5 September 2002, of which she was the sole director and shareholder. The wife did not receive a salary from the company but the company paid for some of her motor vehicle and living expenses. The company obtained wines from a company owned by the wife’s father and sold the products to hotels associated with the husband and his family. They were the company’s only customers.
On 7 July 2003 B Pty Ltd was incorporated by the husband and Mr B as co-shareholders and co-directors. On 10 January 2005 the company changed its name to R Pty Ltd ACN … . The company commenced operations as a vending machine operator. In May 2008 the operations of the business were sold. The husband still holds one of the three ordinary shares in the company.
On 6 August 2003 the husband was appointed a director of N Ltd.
In 2003 the wife’s grandmother died and the wife received an inheritance of $10,000. With the funds the wife purchased shares in publicly listed companies and deposited the remainder in an ING account she opened.
In November 2003 the parties’ son T was born and is now aged 7 years.
In March 2004 the wife returned to work at Hotel 4 two days a week.
For the financial year ended 30 June 2004 no allocations/distributions were made from the Junior Trust.
At the end of the 2003/2004 financial year the wife says that the husband gave her a handwritten bill for the wife’s share of the invoices and accounts referable to the M property.
In November 2004 the wife traded in her Jeep motor vehicle and purchased a Toyota registered in the name of V Pty Ltd under a hire purchase arrangement with Toyota Financial Services for $65,789.25, less the trade in of the Jeep for $8,800. The wife guaranteed the loan. The husband paid the wife $180 per week to apply towards the car payments, which were in the amount of $946.79 per month, with a final payment of $18,027.38 due on 24 November 2009.
In December 2004 the husband received a $10,000 cash bonus as a result of his employment. The wife also received bonuses of $3,000 from Hotel 1 and $3,000 from Hotel 4.
On 13 December 2004 the husband incorporated TT Pty Ltd ACN … . The husband is the sole director and shareholder of the company. The company is the trustee of the TL Family Trust, a discretionary trust established on 17 January 2005. TT Pty Ltd held 12,500 ordinary shares in I Pty Ltd.
In May 2005 the parties’ daughter R was born and is now aged 5 years.
On 9 June 2005 the husband was appointed a director of Keach Nominees Pty Ltd.
For the financial year ended 30 June 2005 the husband was allocated $18,601 from the Junior Trust.
In August 2005 the wife says the husband again gave her a handwritten “bill” for her share of the invoices and accounts referable to the M property. The wife says the husband requested payment on the basis that she carried on the business of V Pty Ltd from the property.
The wife returned to work after the birth of R in September 2005, for two days a week from 8:30am to 2:00pm.
The parties separated on 27 December 2005.
The wife ceased working at Hotel 4 in December 2005 after the parties’ separation.
Following separation the wife and the children lived with the wife’s parents for approximately 6 to 8 weeks.
In January 2006 TT Pty Ltd purchased a 25 per cent interest in I Pty Ltd for $20,000, borrowing the funds from Keach Nominees Pty Ltd.
On 2 February 2006 the husband filed an Application for Final Orders seeking parenting orders.
In February 2006 the wife and children commenced to reside in rental accommodation at H Street, Sydney Suburb 2. The wife’s rent was paid by her father.
The husband asserts on 15 February 2006 he received a Notice to vacate the M property. The husband thereafter commenced to reside in a property owned by N Ltd at M in Sydney.
On 16 February 2006 the husband caused $107,013.55 to be transferred from his account to the account of the Junior Trust. The husband asserts that this was paid into his account by mistake and should have been paid into the account of the Junior Trust in the first place.
On 24 February 2006 the wife filed a Response to an Application for Final Orders seeking orders with respect to parenting issues, property settlement, spousal maintenance and child support.
On 28 February 2006 the wife and her father entered into a loan agreement with respect to the father’s payment of her rent at the H Street, Sydney Suburb 2 property. The agreement provided that the wife’s father would lend funds to the wife on a monthly basis to meet the rental payments for a period of 18 months. It was stated that the wife was to repay her father upon receiving a property settlement from these proceedings. The wife also entered into a similar agreement with her father whereby he agreed to pay her legal costs and disbursements.
On 2 March 2006 the husband filed a Reply also seeking orders with respect to property settlement.
On 16 March 2006 the husband sold shares he held in Companies A, B, C and D for $6,220.05.
On 16 May 2006 orders were made by Judicial Registrar Loughnan, inter alia, providing for the husband to pay the wife $500.00 per week by way of interim spousal maintenance. The question of the responsibility for the costs of Keach Nominees Pty Ltd with respect to a subpoena issued to it was adjourned to the final hearing.
In June 2006 the wife ceased trading in V Pty Ltd.
For the financial year ended 30 June 2006, distributions for each of the children’s trusts were made only to the beneficiary whose name is borne by the respective trust, save that all distributions from the Junior Trust were made to the Senior Trust ($22,541.78).
Between November 2006 and July 2008 the wife sold various shares held by her in Hardman Resources, Tabcorp Holdings Ltd, BHP Billiton Ltd, Woolworths Ltd, National Australia Bank and Wesfarmers Ltd, receiving funds of $28,655.
On 28 November 2006 the husband filed an Amended Application for Final Orders, amending the parenting orders he sought.
On 19 December 2006 Keach Nominees Pty Ltd retired as Trustee of the Senior Trust and J Pty Ltd was appointed as the Trustee.
On 30 January 2007 the husband resigned as a director of I Pty Ltd. The shares held by TT Pty Ltd were sold for $15,500. The husband was paid $7,500 from these proceeds.
On or about 9 February 2007 the husband was removed, according to the husband without notice, as a director of Company 1.
On 8 March 2007 Keach Nominees Pty Ltd retired as Trustee of the Junior Trust. J Pty Ltd was appointed as Trustee of the Trust.
On 9 March 2007 the share in Company 1 was transferred to J Pty Ltd as trustee of the Junior Trust.
The parties’ divorce became final on 16 March 2007.
On 13 April 2007 the husband’s brothers W Keach and S Keach were issued one ordinary share each in J Pty Ltd.
On 14 April 2007 the wife and the children commenced residing in a property owned by the wife’s brother at F Street, Sydney Suburb 2. The wife signed a lease agreement with her brother for $450 rent per week, to be paid upon the wife receiving her property settlement.
On 27 April 2007 J Pty Ltd was recorded as the non-beneficial holder of the one issued share in each of Company 4, Company 3 and Company 1.
On 7 June 2007 the accountants for the husband’s father and the Junior Trust wrote to the husband advising that he owed his father $177,385.14 and the Junior Trust owed him $222,425.14.
For the financial year ended 30 June 2007 distributions for each of the children’s trusts were made only to the beneficiary whose name was borne by the respective trust, save that all distributions from the Junior Trust were made to the Senior Trust ($109,061.43).
On 21 September 2007 various interim procedural orders were made, including an order appointing a single expert witness to value the M property and orders for the parties to provide instructions for the preparation of a report in relation to the valuation of the corporate entities in which the husband has an interest.
On 21 September 2007 requests for correction were sent to ASIC advising that Keach Nominees Pty Ltd did not beneficially hold shares in Company 1, Company 4, Company 2 or Company 3.
On 17 March 2008 orders were made by Watts J by consent, inter alia, for the husband and wife to provide instructions to the single expert to prepare a report containing a valuation of the husband and wife’s interests in various entities.
For the financial year ended 30 June 2008 distributions for each of the children’s trusts were made only to the beneficiary whose name was borne by the respective trust (or a company in which only the beneficiary whose name is borne by the respective trust has an interest), save that all distributions from the Junior Trust were made to the Senior Trust.
On 12 August 2008 the husband filed an Amended Application for Final Orders seeking amended orders with respect to both parenting and property settlement issues.
On 2 September 2008 the wife filed an Amended Response to an Application for Final Orders amending the orders she sought with respect to both parenting and property settlement issues and joining J Pty Ltd (as trustee of the Junior Trust ACN … ) as the second respondent to the proceedings.
On 18 November 2008 various procedural orders were made, including for the preparation of an updated report of the M property. By consent, both parties were to equally pay the costs of this updated report, but the question of “how ultimately the costs are borne as between the parties” was reserved to the trial judge.
On 1 January 2009 a child support assessment was issued requiring the husband to pay child support at the rate of $298.59 per week for the period 1 January 2009 to 21 March 2010.
On 5 May 2009 Watts J noted that senior counsel for the second respondent had made an application seeking that the wife provide, by way of pleading, the basis of her claim against the second respondent. His Honour reserved his decision on this issue. His Honour recorded that the second respondent J Pty Ltd did not intend to make an application for summary dismissal as had been previously foreshadowed.
On 19 June 2009 Watts J dismissed the application of the second respondent seeking that the wife provide by way of pleading the particulars of the basis of her claim against the second respondent, noting a similar application had been sought and declined on 18 November 2008.
On 6, 9 and 10 August 2009 the husband sold a total of 55,000 shares held in N Ltd.
On 3 September 2009 the wife filed a Further Amended Response to an Application for Final Orders amending the orders sought with respect to financial issues and seeking orders that dispositions by the husband to K Law Firm of any funds from the sale of shares in N Ltd on specified dates be set aside pursuant to s 106B of the Family Law Act 1975 (Cth) (“the Act”), and in the event that certain transactions for the sale of shares in N Ltd were not undertaken for consideration at market value, then those instruments be set aside also pursuant to s 106B.
On 3 September 2009 the wife filed an Application in a Case seeking interim orders that the husband be restrained from transferring, disposing, assigning, alienating, mortgaging or otherwise dealing with any or all of the shares held by him in N Ltd without the written consent of the wife or order of the Court. The wife also sought that the husband be restrained from doing any act or thing or causing any person to do any act or thing to cause the withdrawal of any of the monies held by K Law Firm on behalf of the husband without the written consent of the wife or court order. She also sought an order that the husband be restrained from doing any act or thing or authorising any person to do any act or thing to cause any monies held in any account in his name or on his behalf, being monies received by the husband from the sale by him of shares in N Ltd from 1 January 2009 to date, to be dispersed, transferred or withdrawn without the written consent of the wife or court order.
On 11 September 2009 the second respondent filed an Application in a Case seeking that the wife provide security for the second respondent’s costs in the sum of $170,000 and that the proceedings be stayed as against the second respondent until such security is provided.
On 14 September 2009 the second respondent filed an Application in a Case seeking a review of a registrar’s order of 11 September 2009 that the application seeking security for costs be heard on 21 September 2009.
On 17 September 2009 Watts J made orders by consent setting aside the order of the registrar with respect to the listing of the application seeking security for costs. Watts J dismissed the second respondent’s application for security for costs and made orders for the second respondent to pay the wife’s costs on a party/party basis in relation to the applications of 11 and 14 September 2009.
On 21 September 2009 the trial in this matter commenced before me. As previously mentioned, I made final parenting orders by consent on this date. They provided, inter alia, for the parties to have equal shared parental responsibility in relation to major long term issues concerning the children, for the children to live with the wife and spend time with the husband. From Term 3 2010, the husband was to spend time with the children from after school Friday until the commencement of school on Monday in each alternate week and from after school Wednesday to the commencement of school Friday in the intervening week and for half of school holidays.
On 21 September 2009 an oral application was made by the second respondent seeking an adjournment on the basis of a suggested need for either a statement of claim or particulars of claim to be provided by the wife as against the second respondent. I dismissed that application (see Keach & Keach and Anor(No 2) [2009] FamCA 1374). I also made orders by consent restraining the husband from transferring, disposing of, assigning, alienating, mortgaging or otherwise dealing with any and all ordinary shares held by him in N Ltd without the written consent of the wife or order of the Court. The husband was also restrained from doing any act or thing or authorising any other person to do any act or thing to cause the withdrawal of any monies held by K Law Firm without the consent of the wife or order of the Court.
On 25 September 2009 the second respondent made an application to tender what was described as general ledgers of the loan accounts for the Junior Trust for the financial years ending 30 June 2000 to 30 June 2009 inclusive. I dismissed that application (see Keach & Keach and Anor (No 4) [2009] FamCA 1376). Also on 25 September 2009, counsel for the wife sought to tender a document extracted from subpoenaed material produced by the solicitor of the husband’s father. This was objected to on the grounds of relevance and legal professional privilege. This issue was adjourned for further consideration.
On 25 September 2009 the trial was adjourned part heard.
On 7 October 2009 I concluded that legal professional privilege with respect to the document sought to be tendered by the wife had been waived and that the document was relevant (see Keach & Keach and Anor (No 5) [2009] FamCA 1377). I thus permitted the wife to tender the document as an exhibit. Orders were also made for the parties to file written outlines of their final submissions.
On 13 November 2009 the matter came back before me for directions with respect to the issue of the orders sought by the wife against Mr K, the husband’s former solicitor, pursuant to s 106B of the Act. I made orders joining Mr K, trading as K Law firm, as a party to the proceedings in relation to the wife’s application seeking orders pursuant to s 106B and adjourned the paragraphs of the wife’s application seeking orders pursuant to s 106B to 24 November 2009.
On 24 November 2009 I listed the conclusion of the final hearing in this matter on 1 March 2010, with an estimate of two days.
On 17 February 2010 the husband filed an Application in a Case seeking an order to be able to access funds held in trust by K Law Firm to enable him to continue to pay $500 per week spousal maintenance to the wife. The wife, by her Response filed on 26 February 2010, sought that this application be dismissed.
On 1 March 2010 the husband’s Application in a Case filed 17 February 2010 was dismissed. I reserved judgment with respect to the final orders applications on this date.
The current circumstances of the parties
The husband
The husband continues to work for N Ltd as the Manager of Hotel 1 at M in Sydney and Hotel 4 at Sydney Suburb 1.
The husband is also studying part time. At the time of trial he was in his first year of those studies and he expected to complete his degree in 2014.
According to the husband’s financial statement filed on 16 September 2009 the husband’s average weekly income was $2,543 and his expenses were $3,416 per week. This expenditure includes the amount of child support the husband was assessed to pay for the period 1 January 2009 to 31 March 2010, namely $298.59 per week, but not any amount for spousal maintenance.
Pursuant to orders made on 16 May 2006 the husband also currently has an obligation to pay spousal maintenance to the wife of $500 per week.
Pursuant to the orders made by consent at the commencement of the trial in September 2009, the children spend time with the husband, from Term 3 2010, from after school Friday until the commencement of school on Monday in each alternate week and from after school Wednesday to the commencement of school Friday in the intervening week and for half of school holidays.
The wife
The wife is currently unemployed and is undertaking postgraduate studies at university full time by correspondence. At the time of trial she expected to complete her studies in mid 2011.
The wife lives with the children in a property owned by her brother at Sydney Suburb 2. She has entered an agreement with her brother to pay rent of $450 per week deferred until receipt of her property settlement.
Pursuant to the consent orders made the children primarily live with the wife and spend time with the husband, as outlined above.
According to the wife’s financial statement filed on 2 April 2009 her average weekly income was $1,251 (including child support payments and spousal maintenance received from the husband of $799 per week) and her total personal expenditure was $2,252 per week.
The issues in dispute
The primary issue here is whether the asset pool should comprise the assets of the Junior Trust, including in particular the house property at M. The wife says that it should on the basis that the Junior Trust, and the nature of the husband’s interest as contended for by each of the husband and the Second Respondent, are a ‘sham’”. Further, it is contended by the wife:
that the Trust structure, and that legal holding of the title of the [M property] is an artifice inconsistent with the reality established by the evidence – that is, that the Husband is in reality entitled to the property of the Trust, including the [M property].
Initially, the wife, further and in the alternative, submitted that each of her and the husband “have an equitable interest in the [M property]”, and that it is held by the Junior Trust on their behalf. However, that claim was abandoned.
A further alternative promoted by the wife is “that the contributions by the parties (or either of them) to the Trust throughout the course of the marriage represent settlements upon the Trust for the purpose of section 85A and, ultimately, for the benefit of the parties.” However, in his final address, the wife’s senior counsel conceded that that claim could not succeed given the current state of the law.
The husband and the second respondent deny that there is a sham and contend that there is no basis for including any of the assets of the Junior Trust in the asset pool. I observe that this issue is the only issue in dispute between the wife and the second respondent.
Other issues in dispute between the husband and the wife in relation to the asset pool are as follows:
137.1The value of the wife’s shares in CC Pty Ltd;
137.2The inclusion in the asset pool of the accounts held by the parties for the children;
137.3Whether the wife’s paid legal costs should be notionally added back to the asset pool;
137.4Whether the proceeds of the sale of shares by the husband and by the wife should be notionally added back to the asset pool;
137.5Whether an amount of $107,014 transferred by the husband to the Junior Trust after separation should be notionally added back to the asset pool;
137.6Whether the amount of $430,000 repaid to or on behalf of the husband by the Junior Trust should be notionally added back to the asset pool;
137.7Whether the husband in fact owed his father any money as at the date of separation, and in particular a sum of $177,385;
137.8Whether the wife has a debit loan account of $13,579 in the O1 Trust;
137.9Whether the wife’s HELP debt of $34,872 should be included in the liabilities;
137.10Whether an alleged CGT liability of the husband should be included in the liabilities.
In relation to the respective superannuation entitlements of the parties, I observe that both parties presented their cases on the basis that those entitlements should be included in the one asset pool with the non-superannuation assets. I consider that that is appropriate here and I will proceed on that basis.
The husband and the wife were at odds over the assessment of their respective contributions. For the wife’s part, the assessment is dependent on the findings in relation to the asset pool. In other words, if the assets of the Junior Trust are included as assets of the husband, then the assessment should be 70 per cent to the husband and 30 per cent to the wife. However, if those assets are not included then the assessment should be 50 per cent – 60 per cent to the wife and 40 per cent – 50 per cent to the husband.
The husband says that on the basis that the assets of the Junior Trust are not included in the pool of assets then the assessment should be 70 per cent to him and 30 per cent to the wife.
In relation to the application of s 75(2) of the Act, the wife says that if, as sought by her, the assets of the Junior Trust are included in the asset pool, and the contribution assessment is 70 per cent/ 30 per cent in the husband’s favour, then there should be a 10 per cent adjustment in her favour as a result of the relevant s 75(2) factors, including in particular the disparity in income and the circumstance of she being the primary caregiver to the children. However, if the assets of the Junior Trust are not included then the wife says that her entitlement should be adjusted to 90 per cent overall on the basis that the husband will have substantial resources available to him through the Junior Trust.
The husband’s position is that there should be an adjustment of 10 per cent in the wife’s favour, although he is unable to articulate the basis for that.
The principles to be applied to the issues in dispute
Property Settlement
The provisions of s 79 of the Act define the Court’s power and obligations in determining applications for property settlement. The Court has a discretion to make orders altering the interests of parties in property, provided the Court is satisfied that such orders are appropriate, just and equitable.
The Court is obliged by the provisions of s 79(4) of the Act to take into account the following matters:
144.1The financial and non-financial contributions made directly or indirectly by or on behalf of a party to the marriage or a child of the marriage to the acquisition, conservation or improvement of any of the property of the parties to the marriage or either of them (sub-paragraph (a) and (b));
144.2The contribution made by a party to the marriage to the welfare of the family, including any contribution made in the capacity of homemaker or parent (sub-paragraph (c));
144.3The effect of any proposed order upon the earning capacity of either party to the marriage (sub-paragraph (d));
144.4The matters referred to in s 75(2) so far as they are relevant (sub-paragraph (e));
144.5Any other order made under the Act affecting a party to a marriage or a child of the marriage (sub-paragraph (f));
144.6Any child support payable (sub-paragraph (g)).
Accordingly, in assessing the entitlement of each of the parties for property settlement, there is both a retrospective element relating to the contributions of each of the parties and a prospective element relating to matters referred to in s 75(2).
According to guidelines established through a series of leading decisions, the Court should determine the following matters on the evidence, that is:
146.1Firstly, the Court must determine the assets, liabilities and financial resources of the parties to the marriage.
146.2Secondly, the Court must consider all relevant contributions of each of the parties, and, where possible, the Court should assign an entitlement of each of the parties arising as a result of those contributions.
146.3Thirdly, the Court should then consider the prospective components of the claims of each of the parties arising as a result of the provisions of s 75(2). The Court should then identify what alteration, if any, should be made to the entitlement of each of the parties earlier assessed on account of contributions having regard to the relevant s 75(2) factors.
146.4Fourthly, the Court takes a step back and considers whether the proposed orders are just and equitable.
Spousal maintenance
The relevant sections of the Act in relation to spousal maintenance are as follows:
Section 72
(1) A party to a marriage is liable to maintain the other party, to the extent that the first‑mentioned party is reasonably able to do so, if, and only if, that other party is unable to support herself or himself adequately whether:
(a) by reason of having the care and control of a child of the marriage who has not attained the age of 18 years;
(b) by reason of age or physical or mental incapacity for appropriate gainful employment; or
(c) for any other adequate reason;
having regard to any relevant matter referred to in subsection 75(2).
(2) The liability under subsection (1) of a bankrupt party to a marriage to maintain the other party may be satisfied, in whole or in part, by way of the transfer of vested bankruptcy property in relation to the bankrupt party if the court makes an order under this Part for the transfer.
Section 74
(1) In proceedings with respect to the maintenance of a party to a marriage, the court may make such order as it considers proper for the provision of maintenance in accordance with this Part.
Section 75
(1) In exercising jurisdiction under section 74, the court shall take into account only the matters referred to in subsection (2).
(2) The matters to be so taken into account are:
(a) the age and state of health of each of the parties; and
(b) the income, property and financial resources of each of the parties and the physical and mental capacity of each of them for appropriate gainful employment; and
(c) whether either party has the care or control of a child of the marriage who has not attained the age of 18 years; and
(d) commitments of each of the parties that are necessary to enable the party to support:
(i) himself or herself; and
(ii) a child or another person that the party has a duty to maintain; and
(e) the responsibilities of either party to support any other person; and
(f) subject to subsection (3), the eligibility of either party for a pension, allowance or benefit under:
(i) any law of the Commonwealth, of a State or Territory or of another country; or
(ii) any superannuation fund or scheme, whether the fund or scheme was established, or operates, within or outside Australia;
and the rate of any such pension, allowance or benefit being paid to either party; and
(g) where the parties have separated or divorced, a standard of living that in all the circumstances is reasonable; and
(h) the extent to which the payment of maintenance to the party whose maintenance is under consideration would increase the earning capacity of that party by enabling that party to undertake a course of education or training or to establish himself or herself in a business or otherwise to obtain an adequate income; and
(ha) the effect of any proposed order on the ability of a creditor of a party to recover the creditor's debt, so far as that effect is relevant; and
(j) the extent to which the party whose maintenance is under consideration has contributed to the income, earning capacity, property and financial resources of the other party; and
(k) the duration of the marriage and the extent to which it has affected the earning capacity of the party whose maintenance is under consideration; and
(l) the need to protect a party who wishes to continue that party's role as a parent; and
(m) if either party is cohabiting with another person--the financial circumstances relating to the cohabitation; and
(n) the terms of any order made or proposed to be made under section 79 in relation to:
(i) the property of the parties; or
(ii) vested bankruptcy property in relation to a bankrupt party; and
(naa) the terms of any order or declaration made, or proposed to be made, under Part VIIIAB in relation to:
(i) a party to the marriage; or
(ii) a person who is a party to a de facto relationship with a party to the marriage; or
(iii) the property of a person covered by subparagraph (i) and of a person covered by subparagraph (ii), or of either of them; or
(iv) vested bankruptcy property in relation to a person covered by subparagraph (i) or (ii); and
(na) any child support under the Child Support (Assessment) Act 1989 that a party to the marriage has provided, is to provide, or might be liable to provide in the future, for a child of the marriage; and
(o) any fact or circumstance which, in the opinion of the court, the justice of the case requires to be taken into account; and
(p) the terms of any financial agreement that is binding on the parties to the marriage; and
(q) the terms of any Part VIIIAB financial agreement that is binding on a party to the marriage.
(3) In exercising its jurisdiction under section 74, a court shall disregard any entitlement of the party whose maintenance is under consideration to an income tested pension, allowance or benefit.
(4) In this section:
“party” means a party to the marriage concerned.
Child Support
The wife seeks a departure from the administrative assessment of child support pursuant to s 117 of the Child Support (Assessment) Act1989 (Cth). Section 117 provides:
Court may make departure order
(1) Where:
(a)application is made to a court having jurisdiction under this Act for an order under this Division in relation to a child in the special circumstances of the case; and
(b)the court is satisfied:
(i)that one or more of the grounds for departure mentioned in subsection (2) exists or exist; and
(ii)that it would be:
(A)just and equitable as regards the child, the carer entitled to child support and the liable parent; and
(B)otherwise proper;
to make a particular order under this Division;
the court may make the order.
Grounds for departure order
(2) For the purposes of subparagraph (1)(b)(i), the grounds for departure are as follows:
(a)that, in the special circumstances of the case, the capacity of either parent to provide financial support for the child is significantly reduced because of:
(i)the duty of the parent to maintain any other child or another person; or
(ii)special needs of any other child or another person that the parent has a duty to maintain; or
(iii)commitments of the parent necessary to enable the parent to support:
(A)himself or herself; or
(B)any other child or another person that the parent has a duty to maintain; or
(iv)high costs involved in enabling a parent to spend time with, or communicate with, any other child or another person that the parent has a duty to maintain;
(aa)that, in the special circumstances of the case, the capacity of either parent to provide financial support for the child is significantly reduced because of the responsibility of the parent to maintain a resident child of the parent (see subsection (10));
(b)that, in the special circumstances of the case, the costs of maintaining the child are significantly affected:
(i)because of high costs involved in enabling a parent to spend time with, or communicate with, the child; or
(ia)because of special needs of the child; or
(ib)because of high child care costs in relation to the child; or
(ii)because the child is being cared for, educated or trained in the manner that was expected by his or her parents;
(c)that, in the special circumstances of the case, application in relation to the child of the provisions of this Act relating to administrative assessment of child support would result in an unjust and inequitable determination of the level of financial support to be provided by the liable parent for the child:
(i)because of the income, earning capacity, property and financial resources of the child; or
(ia)because of the income, property and financial resources of either parent; or
(ib)because of the earning capacity of either parent; or
(ii)because of any payments, and any transfer or settlement of property, made or to be made (whether under this Act, the Family Law Act 1975 or otherwise) by the liable parent to the child, to the carer entitled to child support or to any other person for the benefit of the child.
The wife relies in particular on sub-ss (2)(a)(iii) and (iv), (2)(b)(i) and (ii) and (2)(c)(ia), (ib) and (ii).
The wife also seeks an order pursuant to s 124 of the Child Support (Assessment) Act that the husband shall provide additional child support for the children by way of payment of all education expenses of the children. Section 124 provides:
Orders for provision of child support otherwise than in form of periodic amounts paid to carer entitled to child support
(1) Where:
(a)a carer entitled to child support or a liable parent makes an application under paragraph 123(1)(a); and
(b)the court is satisfied that it would be:
(i)just and equitable as regards the child, the carer entitled to child support and the liable parent; and
(ii)otherwise proper;
to make an order that the liable parent provide child support for the child otherwise than in the form of periodic amounts paid to the carer entitled to child support;
the court may make the order.
(2) In determining the application, the court must have regard to:
(a)the administrative assessment in force in relation to the child, the carer entitled to child support and the liable parent; and
(aa)any determination in force under Part 6A (departure determinations) in relation to the child, the carer entitled to child support and the liable parent; and
(b)any order in force under Division 4 (departure orders) in relation to the child, the carer entitled to child support and the liable parent; and
(c)whether the carer entitled to child support is in receipt of an income tested pension, allowance or benefit or, if the carer entitled to child support is not in receipt of such a pension, allowance or benefit, whether the circumstances of the carer are such that, taking into account the effect of the order proposed to be made by the court, the carer would be unable to support himself or herself without an income tested pension, allowance or benefit.
(3) In determining whether it would be just and equitable as regards the child, the carer entitled to child support and the liable parent to make an order under subsection (1), the court must have regard to the matters mentioned in subsections 117(4), (6), (7), (7A) and (8).
(3A) In having regard to the earning capacity of a parent of the child under paragraph 117(4)(da), the court may determine that the parent’s earning capacity is greater than is reflected in his or her income for the purposes of this Act only if the court is satisfied as mentioned in subsection 117(7B).
(4) In determining whether it would be otherwise proper to make an order under subsection (1), the court must have regard to the matters mentioned in subsection 117(5).
(5) Subsections (2), (3), (3A) and (4) do not limit the matters to which the court may have regard.
The evidence
The husband, who was unrepresented, relied on his affidavits filed on 4 March 2009 and 21 September 2009, and his financial statements filed on 4 March 2009 and 16 September 2009. He gave evidence and was cross-examined.
The wife was represented by Mr North SC with Mr Kearney. She relied on her affidavits filed on 18 March 2009 and 3 September 2009, and her financial statement filed on 2 April 2009. In addition, the wife tendered a proof of evidence setting out her further evidence-in-chief pursuant to leave given on 23 September 2009. This proof of evidence was marked exhibit “W17”. She gave evidence and was cross-examined.
The wife also relied on the affidavit of her brother, Mr DD, filed on 2 April 2009 and the affidavits of her father, Mr D, filed on 2 April 2009 and 3 September 2009. Neither of these witnesses were required for cross-examination.
The second respondent was represented by Mr Maiden SC with Mr Emmett. The second respondent relied on the affidavit of the husband’s father, Mr Keach Senior, filed on 12 June 2009, the affidavit of the husband’s sister, K Keach, filed on 27 August 2009, the affidavit of Mr H filed on 16 September 2009 and the affidavit of Mr P filed on 18 September 2009. In addition, the second respondent relied upon the proof of evidence the husband’s father in relation to leave given on 25 September 2009. This proof of evidence was tendered and marked exhibit “OP1”.
The husband’s father and his sister gave evidence and were cross-examined. However, neither Mr H or Mr P were required for cross-examination.
In relation to expert evidence, the affidavits of Mr BB as to the value of the property at M filed on 7 February 2008 and 24 June 2009 were relied upon together with the affidavits of the accountant Mr G filed on 31 July 2008 and 3 April 2009. Neither of these experts were required for cross-examination by any party. However, with Mr G’s later affidavit, the husband’s father did take issue with some of his assumptions and conclusions in relation to the Junior Trust.
Although the husband was not represented, he had a reasonable understanding of the process and the issues involved. Generally he gave his evidence well, but when it came to anything to do with the Junior Trust and/or the house property at M, he was defensive to the point of being evasive. He was always at pains to distance himself from the Junior Trust and its assets, and in particular the M property, and in the process his evidence often became inconsistent and at times hard to follow. This was an inevitable consequence of the historical circumstance that there had not always been a strict division of roles in relation to the Junior Trust, and at times the public face of the husband in relation to the Junior Trust, and the property at M, were prima facie at odds with the strict legal position. For example, he referred to the house as “mine” or “ours”, meaning he and his wife’s, he described he and his wife as the landlords in lease documents, and he represented that he was the sole beneficiary of the Trust. Thus, it was when these issues and others of a like nature were put to him in cross-examination that he became defensive and sometimes evasive in his response. He lapsed into saying that he did not recall or that he did not know, when he would have been expected to have been able to answer the particular question.
Another example of his awkwardness when being cross-examined on crucial issues was his inability to explain why the demand from his father for repayment of a loan of $177,385, and the instructions by the husband to the Junior Trust to debit this from his loan account were dated the same day, and in the same font, and why the demand came at that particular time. Of course, concerns were aroused in any event because the husband failed to discover these documents, as was also the case with the documents relating to the transfer of $107,013.55 by the husband to the Junior Trust in February 2006 on the basis that it had been paid to the husband in error.
The husband also had a particular difficulty attempting to explain the inconsistency between the only document tendered to the Court in relation to his loan account with the Junior Trust (document 59 in exhibit W32) and his affidavit and oral evidence on this topic. It simply made no sense, and I will elaborate on this later in these reasons.
The husband’s father was generally an impressive witness. He was forthright and clear in his evidence in relation to the Junior Trust and its assets, including in particular the M property. There was no dispute that he controlled the four trusts, including the Junior Trust. He established them for investment purposes and he was the source of all of their assets, commencing with his shares in NN Ltd. He made no bones about it being his intention to keep the assets in the “family” and to ensure that his four children benefited through the trusts. He deliberately excluded the spouses of his children from the range of possible beneficiaries when establishing the trusts in 1985. He also conceded that a prime motivating factor since 1985 has been to “keep the property within the trusts as far away from the reach of the Family Court of Australia as possible”.
Significantly, the husband’s father’s evidence was consistent with the husband’s evidence in relation to the husband’s entitlement to and in the Junior Trust and its assets. However, at times he fell into the same trap as the husband, becoming defensive and somewhat difficult about aspects of the operation of the Trust and the husband’s involvement in the M property. It is quite apparent though that the husband only did and said things with the authority of, or under the direction of, his father as the person who controlled the Junior Trust. It must also not be forgotten that the husband was a director of the trustee company as well.
The husband’s sister was a creditworthy witness. She gave her evidence to the best of her recollection and her ability although, as with the husband and his father, she was always mindful of saying “the wrong thing” when it came to the operation of the trusts. At times that led to her being difficult and to obfuscate during cross-examination as well.
Turning to the wife, she obviously took the opposite stance to that of the husband, his father and his sister. She latched on to anything said or done by them which was suggestive of the trust structure not being as it seemed. She presented evidence of what the husband had said or put in writing to third parties about, particularly, the property at M. However, I consider that at times she has gilded the lily. For example, in her affidavit of evidence-in-chief she has set out direct quotes of what she claims was said at various times over many years between her, the husband and the husband’s father. It is beyond belief though that she could recall these conversations word for word, particularly when at the time they occurred there would have been no basis for her to record or note the same.
In many respects I simply do not believe her evidence. For example, as to her understanding of who owned the M property, I consider that she knew even before the purchase that the Junior Trust would be the purchaser and become the owner, and she was fully aware that that was in fact what happened. She was evasive when cross-examined about this topic and it was demonstrated that her claim in paragraph 182 of her affidavit of evidence-in-chief that she “did not hear [the husband] refer to the trust owning the [property at M] until after we separated” was not true.
I also reject her evidence that she was given to understand by the husband that the Junior Trust purchased the property for them. I find that she was fully aware at all times that the Junior Trust purchased the property as an investment.
The assets, liabilities and financial resources of the parties
At the commencement of cohabitation
There is of course a dispute as to when cohabitation commenced. The wife says 1996 and the husband says 1997. In this instance I do not know who to believe. The issue seems to be whether the parties were living together at the property at W that the husband owned with his sister before moving to live in the licensee’s flat at Hotel 1 in 1997. The consistent evidence of the husband was that they did not live together at the W property whereas the wife, in her affidavit material, deposed, in effect, that they were living together full time for about 3 to 6 months in 1996 at the W property. However, in cross-examination the wife revealed for the first time that she spent half her time at the W unit and half her time at her own home. I consider that this is inconsistent with what she deposed to in her affidavit material. On the other hand, there is the inconsistent evidence of the husband as to when the property at W was sold. In any event, I do not consider that anything turns on precisely when it was that the parties commenced cohabitation.
In 1996/1997 the husband had the following:
Assets $
88,000 shares in N Ltd NK
1 share in Keach Nominees Pty Ltd as Trustee of the
Junior Trust NK
Loan account with the Junior Trust NK
Household furniture and effects NK
Liabilities
Loan due to the husband’s father 155,991
Financial Resources
The husband was a potential beneficiary of the Junior Trust NK
The husband was a potential beneficiary of the Senior Trust NK
The wife had the following:
Assets
Mazda motor vehicle NK
Items of personalty NK
Superannuation entitlement in
S Pension Fund 40,921 - 55,392
Superannuation entitlement in
S Super Fund 23,864 - 32,296
Loan account with the O1 Trust NK
LiabilitiesNK
Financial Resources
The wife was a potential beneficiary of the O1 Trust NK
In relation to these assets, liabilities and financial resources I make the following comments:
169.1In relation to the husband’s loan account with the Junior Trust there is no documentary evidence of the state of the loan account as at 1996/1997. One version of the husband’s evidence is that in about March 1996 the property at W was sold and he received $215,000. He says that that was not used to repay what he claims he owed his father, but rather was lent to the Junior Trust and credited to his loan account. Beyond that even the husband’s evidence does not help me in tracing the immediate history of that loan account. The difficulty is the husband’s inconsistent evidence as to precisely when the property at W was sold.
169.2In relation to the loan due to the husband’s father, the wife challenges the genuineness of this liability, pointing to the lack of documentary evidence in support. However, I am satisfied that there was such a liability. The husband says it represents the amount that his father lent him to enable him to purchase the W property with his sister, to pay his university fees, and to meet his daily expenses including accommodation costs. The husband’s father corroborated the husband’s evidence and I accept their evidence in this instance despite the inadequacy in terms of any acceptable documentary evidence in support. It is logical that the husband would have needed a loan to purchase that property, and there is no evidence of any mortgage taken out for that purpose. Thus, it would seem understandable that the husband’s father would have lent that amount to the husband.
169.3As to the wife’s superannuation entitlements her evidence, which I accept, is that until these proceedings commenced she did not know of their existence. The funds are managed entirely by the wife’s father and she has made no contribution to them at any time.
169.4In relation to her loan account with the O1 Trust, again the wife only became aware of this following the institution of these proceedings, as with her being an eligible beneficiary of that trust. Her father also controls that trust. In any event, the wife’s evidence is that she has been allocated income from that trust and those allocations have been credited to her loan account, but there is no evidence of the state of the loan account as at 1996/1997. The wife has also learnt that the amount that her father paid for the rental of her unit before she commenced to live with the husband, and cash monies she received from him towards living expenses, were debited to that loan account.
At separation – 27 December 2005
The evidence does not allow me to set out in schedule form the totality of the assets, liabilities and financial resources of the parties at this time. However, it is important to record at least the following:
170.1The husband owned the following shares:
Company A – 270
Company B – 20,000
N Ltd – 132,000
Company C – 1,000
Company D – 20,000
170.2The wife also owned a number of shares with a total value of $36,040 (as at 22 February 2006).
170.3The husband’s credit loan account with the Junior Trust was between $413,317 (as at 30 June 2005) and $430,300 (as at 30 June 2006).
170.4The husband was indebted to his father in the sum of $175,495 (as at 30 June 2005).
170.5The wife had three accounts with the ANZ Bank, and an account with ING. The ING account was opened in July 2003 with a deposit of $6,000 being the balance of an inheritance received from her grandmother’s estate. At the time of separation there was approximately $7,800 in this account.
170.6The husband had a bank bill in the sum of $107,013.55 with W Pty Ltd which matured on 16 February 2006. This amount was transferred into the account of the Junior Trust by the husband on the basis of his claim that this investment had been incorrectly placed in his name and not the name of the Junior Trust initially. The wife challenges the bona fides of this claim but in this instance, again, I accept the evidence of the husband as corroborated by his father.
170.7The husband had an account at the ANZ Bank which had a credit balance of $34,000 at the date of separation.
170.8The husband maintained bank accounts for the children.
170.9The husband was still a potential beneficiary of the Junior Trust and the Senior Trust.
170.10The wife was still an eligible beneficiary of the O1 Trust.
I have no doubt that in the future the husband will continue to benefit from that Trust, including receiving allocations/distributions of income.
If any authority is needed for this finding, then I refer to the recent Full Court decisions of Essex & Essex (2009) FLC 93-243 and Baldwin & Baldwin [2010] FamCAFC 227. In those cases the Full Court held that the trusts involved represented financial resources to the husbands on the basis of the benefits/distributions received from the trusts in the past and the likelihood of receiving the same in the future.
The husband has submitted that the wife has a similar financial resource in the form of the O1 Trust of which she is a potential beneficiary. The evidence is that the wife was allocated income from this trust, with this being credited to her loan account. Subsequently, some of that money was used to pay her rent. As a date of the commencement of the relationship, and as at the date of the hearing, the wife had a credit loan account in that trust. However, the evidence in relation to this trust and the “interest” that the wife has in it was limited. Unlike the Junior Trust, it was not the subject of an attempt to include its assets in the property pool of the parties. Thus I am not in a position to make the same finding in relation to this trust as I am with the Junior Trust.
There is also the Senior Trust. The husband has been and remains a potential beneficiary. Indeed, he received distributions of $24,164 in the 2000/2001 financial year and $43,459 in the 2001/2002 financial year. However, this clearly is not in the same category as the Junior Trust and the evidence does not allow me to find that the husband will benefit from the trust in the future. Thus, although relevant, it does not per se lead to an adjustment in favour of the wife.
(c)whether either party has the care or control of a child of the marriage who has not obtained the age of 18 years;
As a result of the consent orders made on the first day of the hearing, the parties share the care of the two children of the marriage, with the wife though having more time with them than the husband. For instance, the husband has them with him for five nights out of every fourteen, and the wife has them for the balance of that time.
Thus, this factor requires an adjustment in the wife’s favour.
I also note that the wife seeks orders in these proceedings for departure from the current child support assessment, and for the payment by the husband of all of the education expenses of the children.
(f) … the eligibility of either party for a pension, allowance or benefit under:
(i) any law of the Commonwealth, of a State or Territory or of another country; or
(ii) any superannuation fund or scheme, whether the fund or scheme was established, or operates, within or outside Australia;
and the rate of any such pension, allowance or benefit being paid to either party;
At the time of the hearing the wife was receiving a parenting payment of $279 per week, Family Tax payments of $113 per week and an education benefit of $32 per week.
Until she commences work following the completion of her studies she will remain entitled to receive these government benefits.
The husband has no entitlement to any government benefits. He has full time employment in his father’s hotel business.
As to superannuation, each party has entitlements as referred to already, but there was no evidence as to the detail of these entitlements, save and except as to the gross value of the same.
There is no basis here for any adjustment to be made to the entitlement of either party.
(g)where the parties have separated or divorced, a standard of living that in all the circumstances is reasonable;
The husband submits that this is an important factor to be taken into account here, but I do not agree. The only point the husband makes is that the wife is allegedly living in a five bedroom home with views of Sydney Harbour owned by her brother and with the rent being deferred, whereas he is renting a two bedroom unit with a sunroom for $300 per week. In my view that says nothing about the standard of living that each of the parties should reasonably be able to enjoy. I do not accept that the husband cannot improve his standard of living if he chooses to.
(na)any child support under the Child Support (Assessment) Act 1989 that a party to the marriage has provided, is to provide, or might be liable to provide in the future, for a child of the marriage;
The husband has been paying child support pursuant to ongoing child support assessments. He will presumably continue to do so in the future, but of course the wife in these proceedings is seeking a departure order from the assessment in place at the time of the orders being made, and an order pursuant to s 124 of the Child Support (Assessment) Act. Thus there is no basis here for any adjustment to be made either way.
Conclusion on s 75(2) factors
The husband submits that there should be an adjustment of 10 per cent in the wife’s favour for s 75(2) factors. However, this presumably was on the basis of his submission that the contribution based entitlement of the parties should be assessed at 70 per cent/30 per cent in his favour. Thus I do not take it as a concession by the husband that there should be a 10 per cent adjustment regardless of the contribution assessment. I also observe that he did not elaborate as to why he said there should be this 10 per cent adjustment.
For the wife’s part, her counsel put that if the Trust assets were not included in the asset pool as assets of the husband or the husband and the wife, then the wife’s contribution based entitlement should be adjusted upward for the s 75(2) factors, such that overall her entitlement becomes 90 per cent. Thus, using my figures, that would entail a 40 per cent adjustment for the s 75(2) factors. The basis of that is that the husband has available to him a financial resource in the form of the Junior Trust and its assets.
I have found that the Trust and its assets represent a resource for the husband. I consider that he will receive income distributions/allocations in the future, and it is open to him to reside in the M property at a reduced rental if he chooses. However, he still does not control the Trust and thus whatever he is to receive is dependent on his father’s determination. Accordingly, I do not consider that a 40 per cent adjustment is warranted, but certainly a 30 per cent adjustment overall is appropriate to also take into account any disparity between the parties’ net asset positions, and the greater responsibility that the wife has for the children.
Section 79(4)(d), (f) and (g) of the Family Law Act 1975 (Cth)
Next, I am obliged to consider the effect of any proposed orders upon the earning capacity of either party (s 79(4)(d)); any other order made under the Act effecting a party to the marriage or a child of the marriage (s 79(4)(f)); and any child support under the Child Support (Assessment) Act 1989 that a party to the marriage is to provide or has provided to a child of the marriage (s 79(4)(g)).
In relation to the first matter, the evidence does not indicate that the earning capacity of either party will be effected by the proposed orders.
In relation to the second and third matters, I have already taken them into account and there is nothing further to be addressed.
Conclusion
The net assets of the parties should be divided 80 per cent to the wife and 20 per cent to the husband.
Just and equitable
Pursuant to s 79(2) of the Act the Court cannot make an order unless the Court is satisfied that in all the circumstances it is “just and equitable” to make the order. To assess that, I need to stand back and consider the practical effect of my proposed orders (Waters and Jurek (1995) FLC 92-635; JEL and DDF (2001) FLC 93-075; Phillips and Phillips (2002) FLC 93-104).
The net asset pool (including the superannuation assets) comprises a monetary equivalent of $967,105. Thus, the effect of my finding is that the husband is entitled to net assets to the value of $193,421. and the wife is entitled to net assets to the value of $773,684 .
The husband has had, currently has, and seeks to have the benefit of net assets totalling $628,572, calculated as follows:
$
Assets
52,000 N Ltd shares 91,000
TT Pty Ltd 8,000
R Pty Ltd 13,000
Keach Nominees Pty Ltd 1
51 TAB Corp shares 367
ANZ accounts 15,988
ANZ account (Tom’s account) 21,786
ANZ account (R’s account) 9,357
ANZ account (Club) 2,700
Household contents 62,585
Trust account of K Law Firm 39,682
Paid fees and disbursements 191,588
Proceeds of sale of shares:
80,000 N Ltd (Less amount paid
towards legal costs) 63,674
20,000 Company B 4,900
1,000 Company C 3,810
20,000 Company D 2,439
270 Company A 32
AMP superannuation entitlement 97,663
TOTAL 628,572
Liabilities Nil
Financial Resources
The husband is a potential beneficiary of the Junior Trust
and the Senior Trust NK
The wife has had, currently has, and seeks to have the benefit of net assets totalling $338,533, calculated as follows:
$
Assets
V Pty Ltd 24,000
CC Pty Ltd 10
236 BHP shares 10,252
257 Woolworths shares 7,409
Loan account – V Pty Ltd 49,041
ANZ account 811
ING account 94
ANZ account (for T) 606
ANZ account (for R) 605
ANZ account 402
Household contents 28,335
AMP custom superannuation entitlement 22,219
S pension fund entitlement 140,461
S superannuation fund entitlement 85,894
TOTAL 370,139
Liabilities
O1 Trust loan 13,579
Toyota Financial Services 18,027
TOTAL 31,606
Financial Resources
The wife is an eligible beneficiary of the O1 Trust NK
NET TOTAL 338,533
Thus, if the parties each retain their respective assets, superannuation entitlements and liabilities as identified the husband will have to pay to the wife the sum of $435,151. However, this creates an obvious problem in that an order to that effect would mean that the value of the assets that the wife would receive by way of property settlement, namely, $773,684, exceeds the value of the actual pool of assets by approximately $73,000. The difficulty is created by the circumstance that $266,443 of the asset pool comprises assets that have been notionally added back, namely, the husband’s paid legal fees and the proceeds of sale of a number of shares, and they no longer exist.
Although there is some difference of opinion as to whether or not such an order could be within power, the prevailing Full Court authorities by which I am bound all say that this Court cannot make orders under s 79 of the Act for the alteration of property interests that extends beyond the available assets of the parties (for example see Gollings and Scott (2007) FLC 93-319).
At first blush though, it might be thought that the majority decision in Milankov and Milankov (2002) FLC 93-095 might still allow the proposed order to be made in this case.
In Milankov the parties agreed that their paid legal costs should be notionally added back to the asset pool, and the effect of that was that under the order made by the trial judge the wife received $11,000 more than the actual property of the parties. The majority (Nicholson CJ and Buckley J) held that in the circumstances of that case it was not correct that the property pool was exceeded. The husband, having acceded to the adding back of the paid legal costs, could not argue that the trial judge should have made findings as to the size of the pool of assets that was any different to the concession made. Their Honours said this at 88,852:
32. Having regard to this factual context, we consider that any inability the husband had at the time of judgment to meet the orders made by her Honour was a direct consequence of his receipt of a pre-hearing distribution to meet his legal expenses. He has had the benefit of discharging the debt while enjoying a high income and “vastly superior” standard of living since early 1997. In our opinion, an order that these financial advantages should flow to the husband at the wife’s expense would not meet the requirement of s 79(2) — that “in all the circumstances, it is just and equitable to make the order”.
Significantly though, the majority made the point that there was no suggestion that the husband would have been required to borrow to satisfy the order, and as alternative bases for dismissing the appeal their Honours made inferences of fact from the evidence that given the husband’s financial circumstances he had the capacity to pay the $11,000, and their Honours found that the de minimis principle applied given the issue was only over that amount of money.
However, this case has been treated very much as an exception to the rule, and has been limited to its own facts (Gollings and Scott). In my view it cannot apply here to justify the proposed order. Although the husband agreed to the notional adding back of his paid legal costs, more importantly, given the amount involved, the husband would have to borrow to satisfy the order, and the authorities are clear that “there is no power to convert a capacity to borrow money into property” (Walters and Walters (1986) FLC 91-733 at 75,344).
This result brings into sharp relief the adjourned applications of the wife pursuant to s 106B of the Act. Either I fashion an order now that does not entail the wife receiving more than the actual property of the parties, or I hear and determine those s 106B applications. The latter was the course promoted by Kay J in dissent in Milankov.
It is unfortunate that that is the position reached, given what I was told at the start of the case about the purpose of adjourning the s 106B applications. In hindsight I should not have agreed to that course of action.
In any event, I now need to hear from the parties in order to determine how I should progress and finalise this aspect of this case.
Spousal Maintenance
The wife seeks an order that the husband pay her spousal maintenance of $1,350 per week. She says that, and using the terminology of the Act, she is unable to support herself adequately to the extent of $1,350 per week, and the husband is reasonably able to pay this amount.
As at the date of the hearing, and bearing in mind that her government benefits are means tested and thus cannot be taken into account (s 75(3)), when comparing the wife’s income with her expenditure she has a need for maintenance. However, I do not accept that it is a need that arises by “reason of her having the care and control of a child of the marriage” or her “age” or “incapacity for appropriate gainful employment”, or “for any other adequate reason” “having regard to any relevant matter referred to in subsection 75(2)”.
The wife placed the children in full time child care such that she has had the time to work, even on a casual or part time basis, but she has chosen not to. That remains the position, with the child R in day care from 8:00am to 6:00pm and at pre-school and the child T at school from 9:30am to 3:30pm each day. She has, of course, embarked on a course of study, but that is by correspondence, and her evidence is that she attends to that study at night and early morning.
I confirm my previous finding that the wife has had, and continues to have, the capacity to obtain appropriate gainful employment, but she has chosen not to.
She is about to complete her course of study and that will provide her with further qualifications to obtain employment. She will need to undertake a course of practical training for six months if she wants specific employment, but that is not the only option available to her.
It is suggested that the husband has not challenged the wife’s evidence on these topics, but I reject that submission. The husband’s position throughout the trial was that the wife could obtain employment if she wanted to. Certainly he did not cavil with her claimed expenditure, but that is not the issue here.
It is also the case that although the wife may be able to establish a need for $1,350 per week, the evidence is that the husband is not reasonably able to pay that amount to the wife. Indeed, he says he has only been able to pay the $500 per week interim spousal maintenance by using capital, namely, drawing down on his loan account with the Junior Trust and utilising the sale proceeds of shares.
The husband’s financial statement reveals a gross income of $2,543 per week, and expenditure of $3,416 per week (not including the interim spousal maintenance payment). However, when compared to his previous financial statement, there has been a reduction in income and an increase in expenditure. Further, his 2008/2009 income tax return reveals a gross income of $170,058 and a taxable income of $147,351 (see exhibit W6), clearly more than the amount deposed to in his financial statement as at 16 September 2009.
The husband explained part of this difference as being the change in his employment, namely, he now manages two hotels and not one. Further, he points out that the gross figure included a capital gain of $11,092.
The husband was also cross-examined on his credit card statements which revealed a greater level of expenditure than set out in his financial statement. He explained this on the basis that he was reimbursed some of the credit card expenditure by his employer.
I find that the husband’s evidence in relation to his income and expenditure since separation and as at the date of the hearing to be less than satisfactory, and I do not have a clear picture of his financial position. However, even looking at the figures from the best possible position for the wife, it is still not open to me to find that he can reasonably afford $1,350 per week for spousal maintenance. Indeed, there is a serious doubt as to whether he can afford $500 per week from his income.
The wife’s senior counsel submits that the husband’s income will be augmented by allocations/distributions from the Junior Trust sufficient to meet the spousal maintenance sought. However, the evidence simply does not enable me to make that finding.
Thus, the wife’s application for spousal maintenance must also fail on the ground that the husband cannot reasonably afford the amount sought.
Child support
The wife seeks a departure order from the current administrative assessment of child support such that instead of $299 per week the husband pays a total of $1,340 per week ($670 for each child). The wife also seeks an order pursuant to s 124 of the Child Support (Assessment) Act that the husband pay all of the costs of the children’s education.
In relation to the departure order, the wife relies on ss 117(2)(a)(iii) and (iv), 117(2)(b)(i) and (ii), 117(2)(c)(ia), (ib) and (ii) of the Child Support (Assessment) Act in support of that application. These sub-paragraphs identify the grounds of departure which it is said apply here. The Court has to be satisfied that one or more of these grounds exist as the first step in determining the wife’s application (s 117(1)(b)(i) of the Child Support (Assessment) Act). The other steps are whether it is “just and equitable” within the meaning of s 117(4) of the Child Support (Assessment) Act to make the order sought and whether it is “otherwise proper” to make that order.
In relation to the grounds for a departure order, I am not persuaded that s 117(2)(a)(iii), or (iv) apply. There is no evidence to enable me to find that in the special circumstances of the case the capacity of the wife to provide financial support for the children is significantly reduced because of her commitments necessary to enable her to support herself, or because of the high costs involved in enabling a parent to spend time with, or communicate with, any other child or another person that the parent has a duty to maintain.
I am aware, of course, of the wife’s expenses and in that way I am aware of her commitments necessary to enable her to support herself, but there has been no attempt, in either the evidence or submissions, to link that to any reduced capacity to financially support the children.
With the second aspect, there has been no suggestion in the evidence or in submissions that that is the case, and I am unable to find that it applies.
Similarly, I am not persuaded that ss 117(2)(b)(i) or (ii) apply. There is no evidence that in the special circumstances of the case, the costs of maintaining the children are significantly affected because of high costs involved in enabling one of the parents to spend time with, or communicate with, the children, or because the children are cared for, educated or trained in the manner that was expected by their parents. There was not even an attempt in submissions to make out any of these claims.
With ss 117(2)(c)(ia) and (ib), there is evidence that would permit consideration of these as grounds for departure, but I find that there is no basis in the evidence or in the submissions for s 117(2)(c)(ii) to apply.
Looking then at ss 117(2)(c)(ia) and (ib), the submission is that because of the husband’s income, property and financial resources, or his earning capacity, an administrative assessment of child support results in an unjust and inequitable determination of the level of financial support by the husband for the children.
In relation to the earning capacity of the husband, I presume that it is being suggested that because of the financial resource of the Junior Trust and its assets, and/or the husband’s alleged greater earning capacity when he completes his studies, that that justifies a departure order that would increase the child support from $299 per week to $1,340 per week. However, although I have found that that financial resource is of benefit to the husband, and, for example, there will be allocations/distributions of income to him in the future, it is not possible for me to make a finding as to what that will entail. Thus, it is not open to me to find that that results in a “unjust and inequitable determination of the level of financial support” of the children by the husband.
As to the husband’s earning capacity, once he completes his studies, there is simply no evidence as to what that capacity may be, and thus that cannot be the basis for a departure order.
In relation to the income, property and financial resources of the husband, the same problems arise insofar as the application is directed to the husband’s financial resources. That leaves his income and property. However, given my finding that the Trust’s assets cannot be considered the husband’s property, that leaves no room for the wife to succeed in an argument based on the husband’s property. With his income, I have already referred to the husband’s evidence on that topic, and although I found it less than satisfactory, particularly with the reduction that has occurred, I do not consider that it is open to find that his income is in fact such that it would found a departure order. The assessment current at the date of the hearing was based on an estimate of the husband’s income at $112,315. That assessment was issued on 7 January 2009. That is less than the income that he deposed to in his financial statement filed 16 September 2009, but I proceed on the basis that when the husband’s income tax return for the 2008/2009 financial year is lodged the assessment will be amended accordingly.
Thus, I find that there is no ground established for a departure order. In these circumstances, it is unnecessary to address the second and third steps in the process, and the wife’s application should be dismissed.
Turning to the application pursuant to s 124 of the Child Support (Assessment) Act, there is also no basis on the evidence or in the submissions for such an order to be made. Apart from anything else, as at the date of the hearing only one child was attending school, namely, T, and that school was V public school. The child R was attending preschool and it was the wife’s intention that she would start at V public school in 2010.
The wife has set out in her financial statement filed on 2 April 2009 what she says she expended at that time on “education expenses”, namely, $20 per week for the children. She also says that she expended $135 per week on “child minding and preschool”. However, there is no indication that that is what the wife is referring to as the expenses that she wants the husband to pay. There is also no breakdown of this expenditure and certainly nothing to match it with the items identified in her application, namely, “tuition fees, excursion fees, coaching and tutoring fees, extracurricular activities, and incidental sporting costs, the costs of school books, and the costs of school and sports uniforms.”
In the absence of proper evidence and a meaningful submission to support this application, I propose to dismiss it.
I note, of course, that the husband, in his undated written submission, suggested that an order could be made “that education expenses are divided equally between us”. However, that was not explored in the hearing, and outside of an order pursuant to s 124 of the Child Support (Assessment) Act it is not open to this Court to make such an order.
I certify that the preceding two hundred and seventy three (273) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Strickland delivered on 9 March 2011.
Legal Associate:
Date: 9 March 2011
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