Koury & Arian
[2021] FamCA 420
•25 June 2021
FAMILY COURT OF AUSTRALIA
Koury & Arian [2021] FamCA 420
File number(s): SYC 562 of 2018 Judgment of: BERMAN J Date of judgment: 25 June 2021 Catchwords: FAMILY LAW – PROPERTY SETTLEMENT – Just and equitable – Contributions – Add backs – Gifts - Future needs – Where the relationship of the parties is of 30 years duration – Where the parties disagree as to their separate contributions – Where the parties disagree on the treatment of their legal fees and other liabilities – Where the parties disagree on their interest in the husband’s company – Where money from the husband’s company was used for the family during the relationship – Where the husband’s company is his alter ego – Where the husband has made significant financial contributions post-separation – Where monies provided by the wife’s parents were a gift to her alone – Consideration of purported loans between the husband and his brother – Where the husband has the ability to earn significantly more income than the wife – Where it is just and equitable for orders to be made.
FAMILY LAW – PROPERTY – Value of property – Expert evidence – Where the parties are in dispute as to the valuation of the former matrimonial home – Where there is no challenge to the methodology adopted by the valuer – Where the valuer did not give sufficient weight to a comparable property.
Legislation: Family Law Act 1975 (Cth) ss 75(2), 79 Cases cited: Bevan & Bevan (2013) FLC 93-545
Chorn & Hopkins (2004) FLC 93-204
Commonwealth v Milledge (1953) 90 CLR 157
Foda & Foda (1997) FLC 92-753
Lenehan & Lenehan (1987) FLC 91-814
Pellegrino & Pellegrino (1997) FLC 92-789
Stanford & Stanford (2012) 247 CLR 108
Number of paragraphs: 306 Date of hearing: 26 – 28 October 2020 Place: Adelaide Counsel for the Applicant: Mr Campton SC Solicitor for the Applicant: Mills Oakley Lawyers Counsel for the Respondent: Mr Upton Solicitor for the Respondent: PPCS Lawyers ORDERS
SYC 562 of 2018 BETWEEN: MS KOURY
Applicant
AND: MR ARIAN
Respondent
ORDER MADE BY:
BERMAN J
DATE OF ORDER:
25 JUNE 2021
THE COURT ORDERS THAT:
1.That within four (4) calendar months of the date of these orders, the wife do pay to the husband the settlement sum of THREE HUNDRED AND FORTY SIX THOUSAND THREE HUNDRED AND EIGHTEEN DOLLARS ($346,318).
2.That contemporaneously with the payment by the wife to the husband of the settlement sum, the husband do transfer to the wife the whole of his right, title and interest in the property situate at and known as 2 B Street, Suburb C in the State of New South Wales being all of the land comprised in folio identifier … (“the Suburb C property”).
3.That the parties cause the mortgage to the National Australian Bank being mortgage number …40 secured against the Suburb C property to be removed and for the purpose of this order:
(a)The wife shall refinance the portion of the mortgage referable to the Suburb C property being the National Australia Bank portfolio loan sub-account ending …04 into her sole name and the parties shall assign to the wife the National Australia Bank offset account ending …87; and
(b)The husband shall refinance the portion of the mortgage referable to the property and the car space of D Street, Suburb E in the State of New South Wales being all of the land comprised in folio identifiers … and … (“the D Street property”), being the National Australia Bank portfolio loan sub-account ending …24 into his sole name and the parties shall assign to the husband the National Australia Bank offset account ending …05.
4.That pending compliance with orders 1, 2 and 3 hereof:
(a)The wife shall be solely liable for all mortgage repayments (for the portion of the mortgage referable to the Suburb C property being the National Australia Bank portfolio loan sub-account ending …04), rates and outgoings in respect of the Suburb C property and shall indemnify the husband against any and all such liabilities.
(b)The husband shall be solely liable for all mortgage repayments (for the portion of the mortgage referable to the D Street property being the National Australia Bank portfolio loan sub-account ending …24), rates and outgoings in respect of the D Street property and shall indemnify the wife against any and all such liabilities.
5.That in the event the husband fails or neglects to comply with orders requiring the refinance of the portion of the National Australia Bank loan referable to the D Street property within four (4) months of the date of these orders, the husband and the wife shall do all things necessary to list the D Street property for sale by private treaty with a real estate agent agreed and failing agreement with a real estate agent nominated by the President for the time being of the New South Wales division of the Australian Property Institute or his/her nominee on the application of either party and to sell the D Street property for the best price reasonably obtainable as soon as practicable and to distribute the proceeds of such sale as follows:
(a)In payment of real estate agent’s commission and expenses on the sale;
(b)In payment of proper legal costs and disbursements of each of the parties of and incidental to the sale;
(c)In discharge of the portion of the mortgage referable to the D Street property;
(d)In adjustment of rates, levies and taxes on the D Street property; and
(e)In payment of the balance then remaining to the husband.
6.That if the parties are unable to agree as to the listing price or sale price of the D Street property then they shall appoint a valuer nominated by the President for the time being of the New South Wales division of the Australian Property Institute or his/her nominee on the application of either party to determine the value of the D Street property and:
(a)In the case of the listing price of the D Street property shall list the D Street property for sale at a price not more than 10 per cent higher than the value so determined; and
(b)In the case of the sale price shall accept any offer to purchase the D Street property at that price or higher.
7.That in the event a valuer is appointed by the parties pursuant to the preceding orders then the parties shall pay the costs thereby incurred in equal shares.
8.That in the event that contracts for the sale of the D Street property by private treaty have not been exchanged within three (3) months of the D Street property being listed for sale, then the husband and the wife shall thereupon do all things as may be necessary to list the D Street property for sale by auction with a real estate agent agreed and failing agreement with a real estate agent nominated by the President for the time being of the New South Wales Division of the Australian Property Institute or his/her nominee on the application of either party upon the following terms and conditions:
(a)The auction shall take place within six (6) weeks or as soon as practicable, whichever is the later;
(b)The reserve price shall be as agreed between the parties and failing agreement as determined by the auctioneer;
(c)Both parties shall attend at the auction and in the event that the D Street property is passed in they shall negotiate with the highest bidder and shall accept any offer to purchase the D Street property at not less than 90 per cent of the reserve price;
(d)That in the event the D Street property does not sell at auction or does not sell by private treaty within two (2) weeks after the date of the auction then the parties shall relist the D Street property for sale by auction at intervals of no more than six (6) weeks upon the same terms and conditions as set out herein until the D Street property is sold; and
(e)That upon the D Street property being sold at auction the parties shall distribute the proceeds of such sale as follows:
(i)In payment of real estate agent’s commission and expenses on the sale;
(ii)In payment of proper legal costs and disbursements of each of the parties of and incidental to the sale;
(iii)In discharge of the portion of the mortgage referable to the D Street property being the National Australia Bank portfolio loan sub-account ending …24;
(iv)In adjustment of rates, levies and taxes on the D Street property; and
(v)In payment of the balance then remaining to the husband.
9.That in the event that the wife fails or neglects to pay the husband the said settlement sum or is not able to refinance the portion of the National Australia Bank Loan referable to the Suburb C property within four (4) months of the date of these orders then the husband and wife shall forthwith do all things to list the Suburb C property for sale by private treaty with a real estate agent agreed and failing agreement with a real estate agent nominated by the President for the time being of the New South Wales division of the Australian Property Institute or his/her nominee on the application of either party and to sell the Suburb C property for the best price reasonably obtainable as soon as practicable and to distribute the proceeds of such sale as follows:
(a)In payment of the real estate agent’s commission and expenses on the sale;
(b)In payment of proper legal costs and disbursements of each of the parties of and incidental to the sale;
(c)In discharge of the portion of the mortgage referable to the Suburb C property, being the National Australia Bank portfolio loan sub-account ending …04;
(d)In adjustment of rates, levies and taxes on the Suburb C property;
(e)In payment to the husband of the outstanding settlement sum together with default interest to be determined by reference to the Family Law Rules 2004 (Cth) and Regulations to be calculated as and from the expiration of four (4) calendar months from the date of these orders; and
(f)In payment of the balance then remaining to the wife.
10.That if the parties are unable to agree as to the listing price or sale price of the Suburb C property then they shall appoint a valuer nominated by the President for the time being of the New South Wales division of the Australian Property Institute or his/her nominee on the application of either party to determine the value of the Suburb C property and:
(a)In the case of the listing of the Suburb C property shall list the property for sale at a price not more than 10 per cent higher than the value so determined; and
(b)In the case of the sale price shall accept any offer to purchase the Suburb C property at that price or higher.
11.That in the event that a valuer is appointed by the parties pursuant to the preceding order then the parties shall pay the costs thereby incurred in equal shares.
12.That in the event that the contract for sale of the Suburb C property by private treaty have not been exchanged within three (3) months of the Suburb C property being listed for sale, then the husband and the wife shall thereupon do all such things as may be necessary to list the Suburb C property for sale by auction with a real estate agent agreed and failing agreement with a real estate agent nominated by the President for the time being of the New South Wales division of the Australian Property Institute or his/her nominee on the application of either party upon the following terms and conditions:
(a)The auction shall take place within six (6) weeks or as soon as practicable, whichever is the later;
(b)The reserve price shall be as agreed between the parties and failing agreement as determined by the auctioneer;
(c)Both parties shall attend at the auction and in the event that the Suburb C property is passed in they shall negotiate with the highest bidder and shall accept any offer to purchase the Suburb C property at no less than 90 per cent of the reserve price;
(d)That in the event that the Suburb C property does not sell at auction or does not sell by private treaty within two (2) weeks after the date of the auction then the parties shall relist the Suburb C property for sale by auction at intervals of no more than six (6) weeks upon the same terms and conditions as set out herein until the Suburb C property is sold; and
(e)That upon the Suburb C property being sold at auction the parties shall distribute the proceeds of such sale as follows:
(i)In payment of real estate agent’s commission and expenses on the sale;
(ii)In payment of proper legal costs and disbursements of each of the parties and incidental to the sale;
(iii)In discharge of the portion of the mortgage referable to the Suburb C property, being the National Australia Bank portfolio loan sub-account ending …04;
(iv)In payment to the husband of the outstanding settlement sum together with default interest to be determined by reference to the Family Law Rules 2004 (Cth) and Regulations to be calculated from the expiration of four (4) calendar months from the date of these orders;
(v)In payment of rates, levies and taxes on the Suburb C property; and
(vi)In payment of the balance then remaining to the wife.
13.That in respect of the entity F Pty Ltd ACN … (“F Company”) forthwith and in any event within seven (7) days of the date of these orders:
(a)The wife shall do all things and sign all such documents as prepared by the husband as may be necessary to transfer to the husband her ten (10) A Class shares in F Company;
(b)The wife shall assign to the husband any contended loan due by the parties, or either of the parties, to F Company; and
(c)The husband shall be responsible for and pay any taxation or revenue impost arising from the wife being a shareholder or otherwise receiving the benefit of funds either directly or indirectly from F Company, and the husband shall indemnify the wife and keep her indemnified against all such other liabilities.
14.That within seven (7) days of these orders the husband shall do all acts and things and sign all documents necessary so as to cause the joint National Australia Bank account number …81 to be transferred into the wife’s sole name and the wife shall retain the balance of the said account.
15.That the husband shall retain all right, title and interest to the exclusion of the wife in the D Street property and the husband shall thereafter indemnify the wife of all liabilities in respect of the said property now and in the future.
16.That as between the husband and the wife and subject to the within orders, the husband and wife shall each respectively retain all interest in and entitlement to:
(a)All personal property now in his/her respective possession or control;
(b)All shares, debentures, units in unit trusts, bank, building society or credit union accounts standing in his/her sole name respectively; and
(c)All interests in life insurance policies and superannuation funds standing in his/her sole name respectively.
17.That each party shall be solely liable as between each of them to all liabilities in their separate name including but not limited to their separate credit card liabilities, the wife’s personal loan to the National Australia Bank and G Finance and the husband’s contended liability to H Pty Ltd.
18.That each party shall do all acts and things and sign all documents necessary to give effect to these orders.
19.That in the event that either party fails to execute any deed, document or instrument necessary to give effect to these orders, then a Registrar of the Family Court of Australia be appointed pursuant to section 106A of the Family Law Act 1975 (Cth) to execute such deed, document or instrument in the name of the said party and to do all acts and things necessary to give validity and operation to the deed, document or instrument upon the Registrar being provided with verification of such failure by way of affidavit.
Note: The form of the order is subject to the entry in the Court’s records.
Note: This copy of the Court’s Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to 17.02 Family Law Rules 2004 (Cth).
IT IS NOTED that publication of this judgment by this Court under the pseudonym Koury & Arian has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
BERMAN J
By Initiating Application filed 31 January 2018, a Case Outline filed 21 October 2020 and a draft Minute of Order being exhibit “3” in the proceedings, Ms Koury (“the wife”) seeks orders for settlement of property, summarised as follows:
(a)That the husband transfer to the wife his interest in the property situate at 2 B Street, Suburb C in the State of New South Wales, being the land comprised in folio identifier … (“the Suburb C property”).
(b)That contemporaneously with the transfer of the husband’s interest in the Suburb C property, the mortgage to National Australia Bank (“NAB”) identified as mortgage number …40 secured against the Suburb C property be discharged in the following manner:
(i)The wife shall refinance the portion of the mortgage pursuant to the NAB portfolio loan sub-account ending …04 into her sole name and the parties shall assign to the wife the NAB offset account ending …87.
(ii)The husband shall refinance the portion of the mortgage referable to the property situate and the carpark space of D Street, Suburb E in the State of New South Wales, being the land comprised in folio identifiers … and … (“the D Street property”), being the NAB portfolio loan sub-account ending …24 into his sole name and the parties shall assign to the husband the NAB offset account ending …05.
(c)That the husband pay to the wife the settlement sum of $150,000.
(d)That in default of the husband paying the settlement sum or refinancing the portion of the mortgage secured over the Suburb C property referrable to the D Street property, the said D Street property shall be sold by private treaty with a real estate agent as agreed, upon such terms and conditions that will achieve the best price reasonably obtainable.
(e)That the wife shall do all things and sign all such documents as necessary to transfer to the husband her ten A class shares in F Pty Ltd ACN … (“F Company”) and shall assign to the husband any contended loan due by the parties or either of them to F Company provided that the husband shall indemnify the wife and keep her indemnified in respect of any taxation or revenue imposed or any other liability arising from the wife being a shareholder or otherwise receiving a benefit of funds from F Company.
(f)That as between the husband and the wife and subject to the orders, they shall each respectfully retain all interest in and entitlement to:
(i)all personal property now in his/her respectful possession or control;
(ii)all shares, debentures, units in unit trusts, bank, building society or credit union accounts standing in his/her sole name respectively; and
(iii)all interests in life insurance policies and superannuation funds standing in his/her sole name respectively.
(g)That the parties shall each indemnify the other and retain sole liability for all liabilities held in their separate names.
Whilst not the subject of clear delineation, on the wife's asset pool it appears by reference to the outline document that the wife considers the contributions of the parties should be considered as to 52/48 per cent in her favour and seeks a s 75(2) adjustment of 2.5 - 3 per cent.
By his Amended Response to Initiating Application filed 25 October 2020, his Case Outline filed 21 October 2020 and exhibit "4" being the husband's proposed Minute of Order, Mr Arian ("the husband") seeks orders summarised as follows:
(a)That the husband transfer his interest in the Suburb C property to the wife.
(b)Contemporaneously with the transfer of the husband’s interest in the Suburb C property, the parties shall do all things necessary to refinance the whole of the indebtedness to the NAB in respect of the loan owing to the NAB over the Suburb C property into the name of the wife solely.
(c)That from the date of the final orders for property settlement the wife indemnify the husband and keep him so indemnified against:
(i)all or any expenses or outgoings associated with the Suburb C property;
(ii)any mortgage payments, council rates, taxes, charges and insurance in relation to the Suburb C property; and
(iii)against all claims, demands, proceedings and judgement in respect of the Suburb C property of whatsoever nature and kind.
(d)That the husband be declared to have the sole right, title and the whole of the interest in the D Street property and the wife shall relinquish any right, title, claim and/or interest in respect of same.
(e)That from the date of the final orders for property settlement the husband shall pay as they fall due, all regular instalments in respect of council rates, water rates, insurance and any other expenses or outgoings in respect of the D Street property.
(f)That the husband indemnifies the wife and shall keep her indemnified against:
(i)all or any expenses or outgoings associated with the office associated with the D Street Property;
(ii)any municipal and council rates, taxes, charges and insurance in relation to the D Street property; and
(iii)against all claims, demands, proceedings and judgements in respect of the D Street property of whatsoever nature and kind.
(g)That the husband shall retain free to the exclusion of the wife any interest or entitlement that he may have in F Company and the husband and the wife shall do all things necessary to ensure that the wife:
(i)is provided within 18 days of the date of the order all documentation that she shall execute in order to transfer any shareholdings in the company to the husband;
(ii)is removed from the company in all capacity; and
(iii)complete any reasonable document, deed or instrument required to give effect to this order.
(h)That subject to the payment of the settlement sum the husband shall indemnify the wife and keep her indemnified in relation to any liability in the past, present and future in respect of F Company.
(i)That the husband shall retain to the exclusion of the wife any interest or entitlement that he may have in the trust known as the Arian Family Trust and the parties shall do all things necessary to ensure that the wife:
(i)is removed from the Arian Family Trust; and
(ii)completes any reasonable document, deed or instrument required to give effect to this order.
(j)That the husband shall indemnify the wife and keep her so indemnified in respect of all or any liability howsoever existing or arising (past, present and future) that may have been incurred or will be incurred by the wife as a result of any involvement by her with the Arian Family Trust.
(k)That each party shall be entitled to each of their own superannuation entitlements free of claim by the other.
(l)That each party shall retain to the exclusion of the other party all items of personalty in their separate possession as at the date of the order.
(m)That within 30 days of the final order the wife pay to the husband the settlement sum of $471,304.
(n)In default of the wife being able to refinance the Suburb C property and or making payment of the said settlement sum to the husband as provided in the orders then the husband and wife shall do all things necessary to cause the Suburb C property to be listed for sale upon such terms and conditions as the parties may agree.
By reference to the husband's outline document, the orders sought by the husband are predicated upon an adjustment of the parties interest as to 52/48 per cent in favour of the husband. The husband contends that his contribution should be recognised as superior to that of the wife and a consideration of s 75(2) factors would support a further adjustment in his favour.
SHORT CHRONOLOGY
…1959 Date of birth of the husband …1964 Date of birth of the wife …1990 Date of marriage 2007/2008 Date of separation but with the parties living separately and apart in the Suburb C property 2013 Date of final physical separation of the parties with the husband taking up residence in his mother’s home BACKGROUND
The husband is 61 years of age and the wife is 56 years of age.
The parties met in or about 1983 or 1984.
In 1986 the parties purchased a 50 per cent interest with Mr & Mrs K in a property at L Street, M Town ("the M Town property") for $38,500. The wife considers that each of the parties contributed $10,000 from their separate savings whereas the husband asserts that he paid for their one half share.
The M Town property was sold in 1987 and it is likely that some of the proceeds of sale were used by the husband to purchase a flat in Suburb N ("the Suburb N property") for $65,000.
In 1988 the wife commenced employment as an education professional. She maintains that occupation to the present date. At the commencement of the relationship the husband held a bachelor's degree and worked as a professional in New South Wales and then Western Australia.
In early 1988 the wife purchased a block of land in Suburb O, New South Wales ("the Suburb O property") for $68,000 funded by way of a secured loan in the sum $57,500. The wife recollects that the balance of the purchase price came from her savings and money provided by her parents. The husband acknowledges that the wife became the registered proprietor of the Suburb O property but says that this occurred because the wife's parents did not approve of him and his relationship with the wife and he considered that to place the Suburb O property in her name would be an act of good faith. The husband contends that he paid the deposit and arranged the finance for the purchase. The husband acknowledges that the wife paid the mortgage repayments up to the time of marriage but that thereafter the husband's income supported the loan repayments.
In December 1988 the wife became a tenant in common in equal shares with her father and brother in respect of a property at P Street, Suburb Q ("the Suburb Q property").
The parties were married in 1990. Relevant to the competing claims of the parties is the extent of their separate contributions at the commencement of cohabitation. The wife brings to account her interest in the Suburb O property, a one third interest in the Suburb Q property and a one quarter interest in the M Town property. The husband brings to account his one quarter interest in the M Town property, the Suburb N property and his personal savings.
Following the marriage, the parties lived with the husband's mother for about 18 months. During this time the Suburb N property was sold for $110,000 resulting in net sale proceeds of about $55,000. In September 1991, the M Town property was sold for $55,000 with the proceeds being divided between the four registered proprietors.
The parties commenced the planning for the construction of a house on the Suburb O property. The building commenced in 1991 and was project managed by the husband. The construction costs were funded by savings, proceeds of the sale of the Suburb N property and bank finance.
The parties differ as to the circumstances surrounding the construction of the Suburb O property.
The parties are not able to agree the extent to which each of them and members of their extended family undertook aspects of the home construction. The husband's recollection is that he prepared and poured the concrete foundations, undertook significant carpentry for walls and floors and was involved in a significant degree in both first and second fixing of the internal fit out. He considers that whilst there was a contribution by members of the wife's family it should be considered as minor whereas the wife contends that her father and brother worked on the construction site every weekend until the house was completed without charge.
In June 1991 the Suburb Q property was sold although the wife does not recollect whether she received any proceeds from the sale.
The parties took up occupation in the Suburb O property from early 1992.
The parties are not agreed as to the status of the wife's interest in a property purchased with her parents and brother at R Street, S Town, New South Wales ("the S Town property").
The property was the subject of subdivision with the three town houses constructed thereon being sold by 1996. Even though the wife held a one quarter interest as a tenant in common, she contends that her parents paid for the purchase and development of the S Town property and retained all of the net proceeds of sale at the conclusion of the development. The husband asserts that he knew nothing of the wife's interest in the S Town development.
In August 1994, the husband and Mr T purchased property at U Street, Suburb V, New South Wales ("the Suburb V property") for $522,000.
In November 1996, F Company was incorporated and commenced trading in 1997 as a company that provided project management and consulting services. Initially the company traded from the Suburb O property.
Between April and August 1996, the Suburb V property was subdivided and sold at a loss which was shared equally between the husband and Mr T.
In June 1997 the parties, the husband's mother, sister and her husband purchased a property at W Street, Suburb X, New South Wales ("the Suburb X property") for $271,000. The property was transferred to the husband's mother in 2002. The wife recollects that from 1997 to the date of transfer she and the husband paid the mortgage payments, in addition to stamp duty and other costs. She estimates that the total payments made on behalf of the husband's mother was about $75,000 which sum or other lesser amount was not repaid to the parties upon transfer.
In October 2002 the parties sold the Suburb O property for $495,000. The net proceeds of sale were about $350,000.
In June 2001, the parties purchased vacant land at Y Street, Suburb Z, New South Wales ("the Suburb Z property") for $340,000, funded by secured borrowings.
From October 2002 to May 2006 the parties resided in rental accommodation. The husband contends that the rent was paid in the sum of $1,600 per month from the accounts of F Company. It is an aspect of the husband's case that the rental payments for the relevant period and a range of other household and other expenses came from F Company without contribution from the wife.
In mid-2003, the husband and an unrelated entity AA Pty Ltd ("AA Pty Ltd") purchased one half of D Street, Suburb E, New South Wales for $993,135. The purchase price was funded by secured bank loan. The D Street property was subdivided with AA Pty Ltd retaining one portion and the husband the other. Thereafter the retained portion became the office from which F Company operated. It is not controversial that the company should be considered as the alter ego of the husband. This is conceded by the husband even though members of the family are shareholders.
In 2004, the wife recollects that her parents gifted to her the sum of $150,000 which was used to reduce the general mortgage liabilities of the parties.
In December 2005, the husband caused the incorporation of J Pty Ltd with the intention that it be the trustee of the Arian Family Trust. The husband is the sole appointor, sole director/secretary and shareholder of the trustee company. Whilst the Arian Family Trust is also the alter ego of the husband, it does not appear that it has traded nor does it appear to hold assets of value.
In 2006 the parties purchased the Suburb C property for $850,000. A deposit of $85,000 was paid and the parties took the opportunity to obtain a bank loan of $1.155 million in order to consolidate liabilities arising from the Suburb Z, Suburb C and D Street properties.
Again, the parties are not agreed as to the extent of their separate involvement in the renovation and improvements to the Suburb C property. The husband seeks to be given credit for what he considers was significant construction and other work undertaken to the property which he considers was to the value of about $80,000 and came from F Company funds.
In 2006 the wife says that the parties provided the sum of $204,000 to the husband's brother. The husband denies the existence of the loan.
In August/September 2007, the parties sold the Suburb Z property for $475,000. The proceeds of sale were used to reduce outstanding mortgage liabilities.
The parties are not agreed as to the date of separation. The wife considers that the parties commenced to live separately under the one roof in the Suburb C property from 2007 whereas the husband considers that the separation occurred in September 2008.
The husband recollects that there was an oral agreement at the date he considers best represents the date of separation, at which time the parties agreed that he would live with his mother during the week and return to the Suburb C property on weekends. He contends the agreement also covered his payment of all expenditure associated with the Suburb C property and the support of the children in their curricular and extra-curricular activities.
The wife suffered an adverse health event which rendered her unable to continue her employment from January 2014 to October 2015. Thereafter, the wife was able to support herself by working part-time but she concedes that the husband provided her with a credit card for family expenses and groceries. In addition, the wife had the advantage of a redundancy payment in 2010 of $18,471 of which $10,000 was transferred to the husband's account upon his request.
It appears that the wife concedes that the husband paid utility bills, council rates, water rates and a raft of other household expenses until March 2018 when he ceased paying utilities and indicated he would contribute 60 per cent of the total loan repayments. The parties remained in conflict as to the extent to which the husband should pay the repayments in respect of the D Street property and the wife in respect of the Suburb C property. The issue was ultimately resolved by a consent order in November 2019 wherein the husband agreed to pay $2,449.18 per month and the wife pay $984.70 per month. The consent order is likely reflective of the portion of the loan that relates to the D Street and Suburb C properties.
On 31 January 2018, the wife filed an Initiating Application seeking orders for property settlement. Thereafter the parties remained in conflict, in particular in relation to a demand by the husband via F Company seeking that the wife repay the company the sum of $229,935.
The proceedings were listed for trial on 26, 27 and 28 October 2020.
DOCUMENTS RELIED UPON
The wife relies upon the following documents:
(a)Initiating Application filed 31 January 2018;
(b)Trial affidavit of the wife filed 15 July 2020;
(c)Financial Statement of the wife filed 15 July 2020;
(d)Affidavit of Ms B Koury (“the wife’s mother”) filed 15 July 2020;
(e)Affidavit of the wife filed 9 October 2020; and
(f)Affidavit of Mr C Koury (“the wife’s brother”) filed 9 October 2020.
The wife's mother was not required to give evidence or be the subject of cross-examination. Her affidavit was read into evidence.
The husband relies upon the following documents:
(a)Amended Response to Initiating Application filed 25 October 2020;
(b)Trial affidavit of the husband filed 13 July 2020;
(c)Affidavit of Dr BB filed 8 July 2020;
(d)Affidavit of Dr CC filed 13 July 2020; and
(e)Affidavit of the husband filed 2 October 2020.
In addition to the evidence to be led by each of the parties, the following expert evidence was relied upon;
(a)Affidavit of Mr DD (valuer of the Suburb C and D Street properties) filed 15 October 2020; and
(b)Affidavit of Mr EE (annexing a report of FF Accountants as to the value of the husband’s interest in F Company) filed 21 October 2021.
LEGAL COSTS OF THE PARTIES
The parties' schedule of costs statements comprise exhibit "1" in the proceedings.
As at the date of trial, together with an estimate as to the cost of the final hearing, the total estimate of costs of the wife stand in the sum of $372,992.70. As at 26 October 2020, the wife's legal fees and disbursements have been met from her own resources to the sum of $18,878.47 and litigation funding to the sum of $268,546.01.
The total estimated costs of the husband to the conclusion of hearing is in the sum of $434,171.28.
The husband has paid the sum of $344,536.
It is a regrettable observation that the likely total fees of the parties will exceed $800,000. The deleterious impact of the cost of litigation is brought into stark focus when considered against the net total assets, including superannuation, of between about $2.6 million (husband's estimate) and about $3 million (wife's estimate).
BALANCE SHEET
Counsel jointly tendered a final balance sheet (exhibit "2") which sets out the assets and liabilities that each party considered are relevant to the proceedings. The parties were able to agree the following assets:
(a)Inherent value to the husband in F Company $0;
(b)Husband's loan to F Company $92;
(c)Husband's annual leave entitlements with F Company $0;
(d)Husband's long service leave entitlements with F Company $0;
(e)D Street, New South Wales (Husband) $915,000;
(f)Joint NAB account ending #...66;
(g)Joint NAB account ending #...90 - $4854;
(h)Funds in husband's NAB and CBA accounts $3,127;
(i)Jointly held GG Company shares (234 shares at $4.76) $1,113;
(j)Husband's GG Company shares and HH Company shares $5,000;
(k)Wife's GG Company shares (766 shares at $4.76) $3,646; and
(l)Wife's HH Company shares (400 shares at $2.80) $1,120.
The parties were not able to agree the following:
(a)The parties' interest in F Company;
(b)The value of the Suburb C property;
(c)Loan payable by Mr D Arian and Ms F Arian; and
(d)Add backs arising from the payment by the husband of legal fees in the sum of $250,000 and by the wife in the sum of $287,424.
The parties are able to agree the following liabilities:
(a)NAB home loan secured over the Suburb C property $196,096;
(b)NAB loan for the D Street property $484,454; and
(c)NAB loan offset account ending …05 (husband's responsibility as per orders 18 November 2019) $32,864.
The parties are not able to agree the following liabilities:
(a)Status of the husband or the parties' liability to F Company by way of drawings of $524,166;
(b)Wife's loan from G Finance (formerly JJ Finance);
(c)Wife's tax liability for financial year ending 30 June 2017;
(d)Husband's loan from H Pty Ltd; and
(e)Wife's NAB personal loan.
The parties are agreed as to their separate superannuation interests as follows:
Wife
(a)Super Fund 1 account …68 $151,688;
(b)Super Fund 1 account …91 $43,411; and
(c)Super Fund 2 $47,591.
Husband
(a)Super Fund 3 $437,271.
IS IT JUST AND EQUITABLE TO PROCEED
In Stanford & Stanford (2012) 247 CLR 108 ("Stanford") the majority held:
It will be recalled that section 79(2) provides that “[t]he court shall not make an order under this section unless it is satisfied that, in all the circumstances, it is just and equitable to make the order”. Section 79(4) prescribes matters that must be taken into account in considering what order (if any) should be made under the section. The requirements of the two sub-sections are not to be conflated. In every case in which a property settlement order under s 79 is sought, it is necessary to satisfy the court that, in all the circumstances, is just and equitable to make the order.
36. The expression “just and equitable” is a qualitative description of a conclusion reached after examination of a range of potentially competing considerations. It does not admit of exhaustive definitions. It is not possible to chart its metes and bounds. …
(Footnotes omitted).
In Bevan & Bevan (2013) FLC 93-545 at [73] the Full Court considered that the decision of Stanford (supra) could be reduced to three fundamental propositions:
(1)The Court needs to consider the existing property interest of the parties and to identify those interests (by reference to common law and equity);
(2)The discretion must be exercised in accordance with legal principles and not in respect of any assumption that the parties' interests should be different of those determined by common law and equity; and
(3)Section 79(2) cannot be conflated by reference to matters in s 79(4).
The parties both consider that it is just and equitable for there to be an order of property settlement made pursuant to s 79 of the Family Law Act 1975 (Cth) ("the Act") where the legal and equitable interests in the property will need to be adjusted.
TREATMENT OF SUPERANNUATION
Each of the parties consider that there should be a single pool approach.
ISSUES IN DISPUTE
The parties are not agreed as to the valuation and treatment of assets and liabilities as set out in the joint balance sheet.
In particular, the parties are not agreed as to the following:
(a)The value of the Suburb C property;
(b)The value of the parties' interest in F Company with a challenge to the following matters arising from the single expert report from FF Accountants dated 16 October 2020:
(i)The extent of any underlying goodwill;
(ii)The extent to which the current liability to the Australian Taxation office ("ATO") should be brought to account; and
(iii)The treatment of the husband's debit loan account.
(c)Treatment of the legal fees paid by the parties;
(d)The extent to which loan funds purportedly borrowed from H Pty Ltd are liabilities that should be brought to account;
(e)The extent to which the Court should have regard to the sum of $204,000 purportedly loaned by the parties to the husband's brother;
(f)The weight to be given to the separate contributions of the parties;
(g)The extent of any adjustment in favour of either of the parties, having regard to their future income, earning capacity and financial circumstances.
EVIDENCE
The wife
The wife was asked to reconsider the extent to which she made a financial contribution to the purchase of the M Town property. The wife's contention is that she and the husband each contributed 25 per cent of the purchase price and costs. There was no mortgage. Her share was funded from her savings.
The husband does not accept that the wife made any financial contribution towards the purchase of M Town.
The wife conceded that her income was low given her employment in the hospitality industry. Whilst acknowledging the limitations of her income, she received significant additional money by reason of tips. She contrasts her superior income in hospitality to her first year of professional employment.
The wife accepts that at the time, the husband was working in Sydney and then ZZ Town, his income was likely to be higher than hers.
The wife did not accept the proposition that she did not receive any portion of the net proceeds of the sale of M Town in 1991 because she did not contribute to its purchase.
The wife considered the purchase of the Suburb O property. Both parties were present at the auction and upon their successful bid, a ten per cent deposit was required. The wife does not recollect who paid the deposit but agreed that the husband presented a bank cheque.
The wife was certain that she paid the mortgage repayments which appears to be supported by a copy of the wife's KK Bank passbook showing mortgage repayments. The wife could not remember when she stopped making payments.
It is uncontroversial that the husband purchased the Suburb N property prior to marriage, although the wife considers that there was little equity given that it was subject to a mortgage.
Following the marriage, the parties lived with the husband's mother for about 18 months. The wife became pregnant during this period. The wife contends that the parties paid a total of $75,000 for various expenses for and on behalf of the husband's mother however there are no documents that support the purported expenditure.
In her evidence, the wife emphasised that she considered she and the husband had worked cooperatively for the benefit of the family.
The wife maintained that during the marriage she and the husband had loaned $204,000 to the husband's brother Mr D Arian in two payments of $54,000 and $150,000.
The first sum was to assist the brother in his business cash flow and the second sum was provided in response to a further request.
The wife was challenged as to whether there were any documents which might substantiate, corroborate or even refer to the purported outstanding loans.
The parties separated in 2008. The husband contends that the parties reached an agreement that the husband would live with his mother during the week and at the former matrimonial home on weekends. The agreement also covered the husband continuing to pay all expenditure associated with maintaining the family and the family home. The wife conceded that there was an agreement in terms as stated by the husband but that when living in the family home the husband did not significantly assist with parental duties.
As discussed, the level of expenditure by the husband towards the upkeep of the family and in particular the expenses in relation to the curricular and extra-curricular activities of the children, both in their minority years and after they became adults, was not the subject of significant dispute by the wife. She agreed that between September 2008 and at least April 2018 the husband paid the majority of the outgoings. She also conceded that during the course of the marriage she had a supplementary credit card for her expenses.
Whilst the wife agrees that the extent of the husband's payment of various household and child related expenses is likely to be accurate, the wife seeks to bring to account a raft of financial gifts from her parents between 1988 and 2006. In particular, the wife relies upon a sum of $150,000 provided by the wife's parents in 2004. The wife recollects that the money was held in a NAB term deposit account and then later used to reduce outstanding liabilities.
The wife was challenged on her assertion that her parents had provided the money as a gift to her and not to both parties. The wife was vocal in her rejection of that proposition and refers to a similar sum of money being provided to her brother.
The wife was asked to consider the various schedules detailing the expenses paid by the husband in respect of paragraphs 83 - 156 of the husband's trial affidavit. Whilst the wife could not speak to each and every transaction as recorded by the husband, she generally accepted topics of expenditure.
I consider that the wife was a reliable witness.
The husband
The husband was challenged as to the source of funds used to pay his legal fees in the sum of $344,536. Of that sum $260,000 was withdrawn from F Company. A further sum of $100,000 was obtained by way of a loan from the husband's brother.
The husband was asked to consider paragraph 212 of his trial affidavit and restated his position that he did not lend his brother the sum of $204,000. He conceded that F Company did lend the sum of $30,000 to MM Pty Ltd ("MM Company") in about 1997. The loan to MM Company was repaid in full in 1997. The husband was asked to consider the financial statements for F Company for the year ended 30 June 2008. This set of financial statements was the subject of specific consideration by F Company and its accountants NN Company. who prepared the special purpose financial statements referred to in their compilation report to F Company dated 7 November 2012. The husband was aware of the documents and in his evidence conceded that the financial statements accurately recorded the financial circumstances of the company as at that date.
The husband was directed to a line item of expense being "rent on land and buildings $32,240"[1]. The husband confirmed that this was rent paid by F Company in respect of the D Street property. The husband further confirmed the line item relating to interest paid also referred to the D Street property. There was therefore an obvious inconsistency in F Company claiming as a business related expense both rent and interest on D Street.
[1] Affidavit of the husband filed 14 July 2020, annexure “F16”, page 80.
The husband agreed that these payments were also reflected in the husband's taxation return.
The receivables in the 2008 financial statements include the following:
(1)D Street - expenses $13,732;
(2)D Street - balance of purchase $391,576; and
(3)MM Pty Ltd - $87,500.
Senior counsel put to the husband that those loans do not properly reflect the manner in which the husband purchased his interest in the D Street property.
The husband was also asked as to whether the receivable from MM Company in the sum of $87,500 was still due and owing. The husband's position was that MM Company had repaid the loan of $30,000 in 1997 and in any event was liquidated and deregistered on 2 September 2004. The obvious inconsistency is that the loan in respect of MM Company still is recorded as a receivable and therefore an asset of F Company.
The husband conceded that there were inaccuracies in the preparation of the financial statements, in particular as to the receivables, but went further in his evidence and claimed that there was never a loan to MM Company of $87,500.
It was put to the husband that there were at least two loans to MM Company, the first being the sum of $30,000 and the second being the sum recorded in the 2008 financial statements of F Company for $87,500.
The relationship between the husband and his brother was the subject of further close scrutiny. The husband agreed that he was driving a European motor vehicle with a value of about $50,000 that had been provided by his brother. The husband attempted to minimise the benefit to him by his description of the motor vehicle as being an old car.
The husband agreed that he had purchased the D Street property for $993,135 with a loan from NAB.
Paragraph 46 of the wife's trial affidavit records that the husband's interest in the property was "79/195 or 40.5" per cent.
The husband's 40.5 per cent interest equates to $402,219.
The husband was asked to consider the reference to the purported purchase of the D Street property under the heading receivables for the 2014 to 2019 financial years. The figures as appear in the 2008 financial statements for F Company are unchanged by reference to each separate financial statement. In addition, the MM Company loan of $87,500 also appears in each financial statement.
The husband conceded that he and not F Company borrowed money from NAB to purchase the D Street property.
The order of 18 November 2019 required the husband to be personally responsible for the monthly instalment of $2,449.18, being the component of the loan secured over the Suburb C property that is attributable to the purchase of D Street.
The husband was also asked whether he agreed that the payment required to be made by him was interest only.
The husband claims interest on his personal tax returns and it also appears in the accounts of F Company.
The husband was unable to identify where it was recorded in the accounts of F Company that he had borrowed money to purchase D Street.
Ultimately, the husband conceded that the financial statements may have incorrectly recorded the details in respect of the purchase of D Street and he considered that if there was an error in the financial statements and accounts then it was an error made by the accountants.
Again, by reference to the expenses for the 2014 and 2015 financial years, the financial accounts of F Company record a rental expense of $50,822.33 (2015 financial year) which could only be justified as a valid expense in circumstances where F Company was not the owner of the relevant interest in the D Street property.
The financial statements for the financial years ending 2015 to 2018 inclusive record a loan to LL Pty Ltd. The entity is associated with the husband's brother. When questioned, the husband conceded that it was not really a loan.
Page 10 of exhibit "5" describes the breakdown of the receivables as they purportedly existed in the 2015 financial statements. Of note under the heading of "other loans" is the sum of $96,000. It appears to be comprised of the MM Company loan of $87,500 and the further sum of $8,500 being the LL Pty Ltd loan.
At page 17 of the exhibit under the heading of "Expenses", the husband paid himself dividends and directors fees. At the bottom of that page is an expense of $87,500 recorded as "Loss on Liquidation". It was put to the husband that the loan from MM Company must have been real otherwise it was impermissible for there to be a deduction sought for the full amount of $87,500.
In the 2017 financial year, F Company listed under the heading of "Expenses" the following:
(a)Provision for unpaid leave $72,457.53
(b)Provision for unpaid long service leave $28,058.03
(c)Provision for unpaid overtime $295,996.16
Total $396,511.72
No provision for leave, long service leave or overtime was recorded in any previous year. The husband agreed that he was the recipient of leave, long service leave and overtime entitlements.
In the same year, page 21 of exhibit "5" reveals that the provision for leave and overtime totalled $396,511.72 in circumstances where the BAS for September, December, March and June 2017 in the sum of $119,060 remained unpaid. In addition, the husband withdrew dividends totalling $104,400 in circumstances where there was money due to the ATO.
In the 2017 financial year, F Company distributed a dividend to the wife of $35,354.
The husband agreed that as a result, the wife received an ATO notice of reassessment requiring tax to be paid.
The husband was asked to confirm that the motor vehicle expenses, totalling approximately $21,877 in the 2019 financial year, related to a motor vehicle driven by the husband or his daughters.
On page 34 of exhibit "5" and under the heading of "Receivables", a transaction is described as "Loan - 2019 legal fees $51,349.62." The husband accepted that the legal fees had nothing to do with his brother or F Company. The implication is that the legal fees relate to the husband's involvement in the current proceedings.
During the same period, the financial statements reveal that tax remained unpaid for the 2018 and 2019 financial years in the total sum of $82,153. The issue for the husband was why some or all of the taxation liability had not been paid by the husband in circumstances where he appeared to direct funds to other non-business related purposes.
The husband has not paid tax since 2017.
The husband was not able to adequately explain the basis upon which LL Pty Ltd (the husband's brother's entity) provided funds to F Company in the sum of $49,823.
Whilst the husband did not agree to the extent of monies provided by the wife's parents in the sum of $190,000, he did concede the sum of $142,000 which whilst not applied to the Suburb O property was initially placed in a term deposit as at 1 June 2005 and was then subsequently applied against outstanding liabilities.
The contention between the parties is whether the money provided by the wife's parents was gifted to the wife or to the parties. The husband accepted that the wife's parents did not like him. Consequent upon this and the husband's admission in paragraph 73 of his trial affidavit filed 14 July 2020, namely that:
save for the contribution of a gift Ms Koury received from her parents, I exclusively made the repayments on the Loan and paid the outgoings associated with the former matrimonial home.
I find that on the balance of probabilities, monies that are found to have been provided by the wife’s parents were on the basis of a gift to the wife and not to both parties.
Paragraphs 138 to 144 of the wife's trial affidavit refer to a formal letter of demand being forwarded by the husband's solicitors to her on 3 December 2018, seeking the repayment of an alleged loan in the sum of $229,935.50 to F Company. The wife disputed that there was any loan owing or that she was in any way indebted to F Company.
The husband accepted that he had given instructions to pursue the repayment by the wife of the alleged loan to F Company.
The 2017 financial statements for F Company do not disclose as an asset any outstanding loan to the wife. The husband's evidence as to the intent behind the threatened litigation was unconvincing.
The parties are not agreed as to whether any monies were given to or gifted to the husband's brother. Paragraph 68 of the wife's trial affidavit refers to an assertion by her that in or about 2006 the parties sought that the husband's brother repay the sum of $40,000. It is her recollection that for a period of about two weeks there was no response to their request but eventually the husband's brother admitted that he was not in a financial position to repay any of the money provided.
The husband denied that any money had been provided nor was there any request for repayment in 2006 or at any other time. The husband's evidence is that the content of paragraph 68 is a fiction.
The husband was asked to consider his financial statement filed 23 April 2018. At item 50, the husband claims that he owes F Company the sum of $60,000. No loan is disclosed in favour of the husband's brother or his company H Pty Ltd.
Item 53 of the husband's financial statement filed 24 January 2019 discloses a loan from the husband's brother in the sum of $17,354. The husband explains the basis of the money loaned from his brother in paragraphs 222 to 226 of his trial affidavit. In summary, the husband allegedly borrowed money from his brother for legal fees. His brother agreed that he would allow the husband access to the bank accounts of H Pty Ltd which allowed the husband the ability to make transfers either into the accounts of F Company or to make withdrawals to pay outstanding debt amounts and invoices.
Item 53 of the husband's financial statement filed 15 July 2020 shows the loan from the husband's brother in the sum of $266,208.75. That figure increased to $430,562.75 as at the filing of the husband's financial statement on 2 October 2020.
It was put to the husband that he did not receive the money personally and that monies provided went into F Company. The husband conceded that this was correct.
The husband was not able to explain why the liability to the husband's brother and or H Pty Ltd increased by $164,354, being the difference between $266,208 and $430,520.
The husband was also asked if he had a co-tenant in the rental property he was residing in at Suburb OO. The husband agreed Mr PP was the co-tenant. The husband had known Mr PP for some 18 years. It was put to the husband that he had not formerly disclosed the involvement of Mr PP who was paying rent. No financial documents pertaining to the husband's personal circumstances disclose Mr PP's involvement.
The husband's evidence in respect of the financial arrangements with his brother and his brother's company H Pty Ltd was unsatisfactory. The husband was evasive and did not adequately explain the inconsistencies in the details contained in his various financial statements but of greater significance is the residual uncertainty as to the ongoing financial relationship with his brother.
The husband's evidence was generally considered to be unreliable.
Mr DD
Mr DD prepared a valuation of the Suburb C property dated 2 September 2020. The valuation is annexed to the affidavit of Mr DD filed 15 October 2020. Mr DD considers that at the time of inspection, there was market uncertainty. He qualifies his report at section 4 of his valuation in the following terms:
The market is being impacted by the uncertainty caused by the COVID-19 pandemic. As at the date of valuation I consider that there is market uncertainty resulting in significant valuation uncertainty.
This valuation is therefor reported on the basis of ‘significant valuation uncertainty’. As a result, less certainty exists than normal and a higher degree of caution should be attached to my valuation than normally would be the case. Given the unknown future impact that COVID-19 might have on markets, I recommend that the user(s) of this report review this valuation periodically.
At section 5 of his report, Mr DD described the location of the property in the following terms:
The subject property is a street fronted allotment of land located on the southern side of B Street at Suburb C, between its intersections with QQ Street to the west and SS Street to the east.
The subject property is situated within an established residential area at Suburb C and is surrounded by other single residential dwellings as well as being in close proximity to Location RR and golf course.
The subject property is located approximately 2.9 kilometres south west of the Suburb C Railway Station and shopping districts and by road some 17.8 kilometres from the Sydney General Post Office.
The total land dimension and area of the Suburb C property is 651.3 m2. The property fronts onto B Street and is one property removed from TT Street. The Suburb C property is within an R2 low density residential zone.
At section 12 of his report, Mr DD sets out the objectives of the zone as follows:
•To provide for the housing needs of the community within a low-density residential environment.
•To enable other land users that provide facilities or services to meet the day to day needs of residents.
•To ensure that the development of housing does not adversely impact the heritage significance of adjacent heritage items and conservation areas.
The highest and best use of the property is considered to be its current use.
Mr DD described the dwelling erected on the Suburb C property as a single-storey dwelling constructed in the 1930's.
Subject to any unknown structural defects or issues, Mr DD considered that the dwelling was structurally stable although Mr DD did note that the bathrooms had been renovated at an earlier time and were now dated and considered that there were matters of obvious defects, namely:
·Mould on the walls and ceilings of all three bedrooms, the main lounge and family room area;
·Water damage to the ceiling in the main lounge area; and
·The range hood in the kitchen was disconnected with the kitchen also needing a splash back.
The challenge to the valuation of the Suburb C property by Mr DD centres upon the weight that he gave to the sale of comparable properties and also properties that the wife considered were comparable but which Mr DD did not bring to account.
Mr DD adopted a direct comparison methodology of valuation.
As is readily apparent, this requires a valuer to consider sales of properties which are potentially comparable to the subject property and to place a value on the subject property after bringing to account any differences or significant similarities.
The following is a list of the comparable sales as considered applicable by Mr DD:
Address Date Purchase Price Land Size (m2) Zone 4 B Street, Suburb C 3/2020 $1,700,000 651.3 R2 Improvements: Single storey full brick home with a formal lounge/dining area with ornate ceilings, sunroom and second living area. Two good sized bedrooms, main has built-ins[.] Detached studio/retreat adjoins the garage. Gated side driveway to access rear carport. These improvements [have] since been demolished.
Comparison Analysis: Similar position, similar aged building. Smaller overall accommodation. Sold as land value. Inferior presentation. Overall this sale is inferior and supports a value range of $2,150,000 to $2,200,000.[2]
[2] Affidavit of Mr DD filed 15 October 2020, annexure “A”, page 18.
Address Date Purchase Price Land Size (m2) Zone UU Street, Suburb C 3/2020 $2,100,000 720 R2 Improvements: Single storey full brick, original freestanding solid brick residence offers a 15.24m street frontage with a deep rear garden. Open living and dining areas, tidy kitchen and large rear sunroom. Three double-sized bedrooms plus a sunroom/study at the front. A tandem garage and workshop plus additional off-street parking.
Comparison Analysis: Similar position, similar location, similar aged building structure. Similar overall accommodation. Older style bathroom and kitchen. Overall this sale is inferior and supports a value range of $2,150,000 - $2,200,000.[3]
[3] Ibid, page 19.
Address Date Purchase Price Land Size (m2) Zone VV Street, Suburb C 7/2020 $2,380,000 626 R2 Improvements: Single storey full brick house featuring 3 bedrooms with the master bedroom having a sun room area, 2 bathrooms, new kitchen with gas cooking, open-plan lounge and dining area, high ceilings and timber floors throughout, fully functional alarm system, single lock-up garage.
Comparison Analysis: Superior location away from the noise of WW Street, similar age, appeal and overall accommodation, similar accommodation size. Superior presentation and overall considered to be slightly superior. This sale is superior and supports a value range of $2,150,000 to $2,200,000.[4]
[4] Ibid, page 20.
Address Date Purchase Price Land Size (m2) Zone 3 XX Street, Suburb C 6/2020 $2,476,800 711 R2 Improvements: Similar aged single storey classic full brick home featuring large sunny rear yard, 3 bedrooms with two having built-in robes, spacious floor plan with separate dining/lounge and living areas, timber floors, original fireplaces, high ceilings, original bathroom and 2nd w/c. LED lighting, single lock-up garage with auto gates.
Comparison Analysis: Superior location with a larger allotment size. Similar age, appeal, overall accommodation and access. Overall this sale is superior and supports a value range of $2,150,000 to $2,200,000.[5]
[5] Ibid, page 21.
Address Date Purchase Price Land Size (m2) Zone 5 XX Street, Suburb C 6/2020 $2,410,000 711 R2 Improvements: 1930s style single storey brick house featuring separate lounge and dining areas, 3 bedrooms with built-in robes in all, internal laundry, 1 bathroom with additional w/c, spacious family room with timber flooring throughout, double garage positioned at the back of the block.
Comparison Analysis: Superior location and slightly larger allotment size. Similar age, appeal, overall accommodation and access. Superior parking facilities with double garage when the subject property has a single. Overall this sale is superior and supports a value range of $2,150,000 to $2,200,000.[6]
[6] Ibid, page 22.
Address Date Purchase Price Land Size (m2) Zone 7 XX Street, Suburb C 3/2020 $2,600,000 720 R2 Improvements: 1930s style full brick bungalow with formal and casual living areas, 3 bedrooms, home office plus a family room with French doors. Original bathroom, laundry and kitchen amenities. Lock up garage plus storage.
Comparison Analysis: Superior location, age and slightly larger allotment size. Similar appeal and overall accommodation, superior position. Overall this sale is superior and supports a value range of $2,150,000 to $2,200,000.[7]
[7] Ibid, page 23.
Address Date Purchase Price Land Size (m2) Zone YY Street, Suburb C 7/2020 $2,060,000 689 R2 Improvements: 1930s style brick home with upper level 1980s style additions. Offers 4 bedrooms, upper level master suite with private casual living room, built in robes and ensuite. Open plan formal/informal living zones, modern Caesar stone gas kitchen, 2 updated bathrooms, covered outdoor entertaining area and WC. Single car detached garage.
Comparison Analysis: Similar location. Slightly inferior position on YY Street. Similar allotment size. Larger overall accommodation is in a similar presentation/condition. Overall this sale is inferior and supports a value range of $2,150,000 to $2,200,000.[8]
[8] Ibid, page 24.
The methodology adopted by the valuer was to give careful consideration to the similarities and differences in respect of the seven properties that he considered were appropriate for a direct comparison methodology and following an analysis of the market movements of value, Mr DD considered that a fair market value for the Suburb C property was $2,175,000.
The weight that Mr DD gave to the comparable properties in determining the value of the Suburb C property was the subject of challenge by senior counsel for the wife.
It was put to Mr DD that he did not mention and or bring to account that a short distance from the subject property was WW Street which is a six lane highway.
The recognised traffic noise has been considered as a significant issue and warranted the erection of a 5-7 metre noise wall to separate the nearby properties from WW Street.
Mr DD was asked to consider the extent of the mould and damage to the Suburb C property as identified in the pictures commencing at page 14 of the valuation report.
The foundation for the questions asked arise from communication dated 15 October 2020 from the wife's solicitors to Mr DD, asking him to concede that the subject property should be considered to be in poor condition for the reasons as set out in paragraph 1.b of the correspondence. [9]
[9] See Exhibit “7”, page 1.
The condition of the Suburb C property was sought to be contrasted with the comparable properties as identified by Mr DD. YY Street, UU Street and 4 B Street were all considered to be inferior to the subject property.
By letter dated 19 October 2020,[10] Mr DD responded to the questions asked by the wife's solicitors and confirmed his position as set out in section 17 of the report which he considered detailed the most obvious defects and would not appear to be structural in nature.
[10] Ibid, page 4.
Mr DD considered that his valuation was competently prepared and justified by considering the comparable sales and the current market conditions.
It seems that the primary comparable sale was the property at 4 B Street which sold for $1,700,000 in circumstances where the purchaser considered that it was land value only. The valuer agreed that prior to demolition, the property was well presented and similar in terms of position, building age and accommodation.
The import of the challenge to Mr DD arises from his assessment that the property at 4 B Street was inferior. Presumably it was inferior because the original accommodation was smaller in size and was ultimately sold for land value only.
The clear contention of senior counsel's questions was that if a similar property was sold for $1,700,000 why would the subject property be worth more.
Mr DD conceded that the property was of the same land size and frontage as the subject property but considered that it was still inferior. The implication is that there is value in the dwelling and improvements with the sale price of 4 B Street to not be truly representative of value. The sale price may be an anomaly.
Mr DD considered that the Suburb C property was superior in terms of the floor plan, the layout of the bedrooms and the bathroom together with a small renovated kitchen.
Mr DD conceded that he only inquired as to the most recent sales and did not bring to account sales that were more than a year before the date of inspection.
Mr DD rejected 6 B Street, Suburb C sold on 17 December 2019 as a comparable property. The significant difference is that the floor plan is 40 m2 smaller than the Suburb C property.
The property at 8 B Street, Suburb C was not considered because it was sold more than a year ago.
Whilst the property at YY Street was a comparable dwelling, Mr DD considered it was inferior by reason of its location.
Mr DD did agree that there may be a 5 per cent variation which in this case would amount to about $110,000.
The Court has an obligation to determine valuation issues that are in dispute.
The manner in which the Court is required to discharge its responsibility is set out by the Full Court in Lenehan & Lenehan (1987) FLC 91-814 at 76,142:
A trial Judge, as part of his ultimate responsibility under sec. 79 or otherwise, is normally required to determine a number of issues. Some of those issues may properly attract the evidence of expert witnesses. In appropriate circumstances their opinions are admissible to assist in the determination of such an issue. It is the responsibility of the trial Judge to take into account the opinions of such witnesses; however the ultimate duty of the Judge is to determine the issue on the whole of the material before him including such opinions. The expert evidence is called to enable the Judge to form his own independent judgment on the matter by application of the appropriate principles.
In Commonwealth v Milledge (1953) 90 CLR 157 at 162 the High Court considered that the correct approach in order to determine a valuation dispute should be:
by a [common sense] endeavour, after consideration of all of the material before the court, to fix a sum satisfactory to the mind of the court as representing the value contained in the land …
There is no challenge to the methodology adopted by Mr DD. It was considered appropriate that the valuation approach be by way of a consideration of comparable sales. It is then a matter of professional expertise and ultimately common sense that distils the essential element of each comparable sale and how that matches or differs from the subject property.
The gravamen of the challenge to the valuation outcome appears to rest heavily upon an explanation as to why the property at 4 B Street having been sold for $1,700,000 would not be reflected in the value of the Suburb C property. If anything, senior counsel for the wife argues that the Suburb C property has an inferior position in that it is closer by two allotments to WW Street.
What is brought to account by the valuer are not just matters relating to comparable sales but also the state of the market.
In the correspondence dated 15 October 2020, Mr DD was asked to consider the following:
…
2. Do you accept that the comparable properties (with the exception of YY Street, Suburb C) identified in your Report were:
a. Built between 1970 and 1985?
b. Reasonably to very well maintained inside and out;
c. did not have visible mould, visible water damage or large cracks in the ceilings and cornices;
d. had completed renovations or well-maintained original features/rooms;
e. are full brick;
f. have functional/usable garages; and
g. have functional/usable/covered outdoor areas.[11]
[11] Exhibit “7”, page 2.
Mr DD confirmed the extent of his reliance on the comparable sales in paragraph 3 of his letter in response dated 19 October 2020:
3. I have placed reliance on these sales, as I believe, notwithstanding their condition as at the date of sale, these properties would be regarded as being land value or “entry level” properties in the Suburb C market. It has been my experience that properties of this nature are well sought after, by prospective purchasers, more so for their demolition value, to enable purchasers to construct high end custom style dwellings.[12]
[12] Exhibit “7”, page 4.
Mr DD then provided an extract from the Australian Property monitor website to demonstrate the growth in properties for the time period 2019 to 2020.
It is not a matter for me to take judicial notice of what may be said of the current Sydney property market.
There is little evidence presented of applicable market forces and it could not be said that the comparable properties would necessarily reflect the state of the market either at the time of inspection or at some other later time.
I am also reminded of the qualification expressed by Mr DD as to the uncertainty in the market as a result of the impact of COVID-19.
Mr DD did concede that there could well be validity in bringing to account a 5 per cent variation.
The exercise is difficult but doing the best that I can, I consider that weight should be given to the concessions made by Mr DD in favour of the potential for a lower value to be attributed to the Suburb C property.
Paragraph 7 of the wife's letter to Mr DD dated 15 October 2020 asserts that the current market value of the Suburb C property should be in the range of $1,800,000 to $1,900,000.
I have given careful consideration to each of the comparable sales which Mr DD brought to account, together with the assistance that might be provided by the additional properties as tendered by the wife's senior counsel forming "exhibit "8".
I place weight on the sale of the property at 4 B Street, Suburb C and consider that whilst the dwelling (before it was demolished) was considered by Mr DD to be inferior, that in of itself does not explain a difference of more than $400,000. I am also mindful of the concessions made by Mr DD as to the assertion that the Suburb C property was in poor condition in the following terms:
1. a) …
b)Section 17 of my report deals with defects. I have reported on the most obvious defects and the ones, in which my opinion impact the overall valuation. Please note that I am not a structural expert, however in my opinion as a licenced builder, the defects you noted in your letter, do not appear to be structural. I would highly recommend you seek the (jointly instructed) expert opinion of a qualified building engineer/consultant, who may be able to quantify the cause and cost to remedy any structural defects. I would be happy further consider any findings of any expert engaged.[13]
[13] Exhibit “7”, page 4.
I consider that at the conclusion of the cross examination of Mr DD, he conceded that there could well be validity in bringing to account a 5 per cent variation.
In addition, Mr DD did not give sufficient weight to the sale of 4 B Street. Even though it might well have been an anomaly, it is not irrelevant.
The exercise is difficult but doing the best that I can, it is reasonable that I give weight to the sale of 4 B Street and to the concessions made by Mr DD which favour of a lower value to be attributed to the Suburb C property by the sum of $210,000.
I find that the appropriate value of the Suburb C property should be $1,965,000.
Mr EE
Mr EE holds the qualification of a chartered accountant and has been a member of the Institute of Chartered Accountants in Australia since 1996.
He has been employed in various forensic accounting positions and is currently employed with FF Accountants Pty Ltd.
His range of professional expertise is significant and he has long experience in the valuation of the interests of parties in private companies, trusts, businesses and professional practices. He has given evidence and undertaken numerous valuations for family law matters. There is no challenge to the expertise of Mr EE and accordingly he is to be considered as a single expert.
His initial instructions were to value the interests of the parties in F Company. He subsequently received instructions to conduct his valuation without consideration as to whether there is any goodwill component. His report dated 16 October 2020 is annexed to his affidavit filed 21 October 2020.
Mr EE considered the shareholding of the company and correctly observed that A, B and C class shares held by the wife and the children of the parties are dividend only shares and accordingly do not give the holders voting rights.
F Company is a provider of expert consulting services principally to assist in litigation.
The practice of F Company operates from the D Street premises and it was noted that there is a lease agreement which provides for tenancy of the D Street property until 2026.
The husband is the only employee and is therefore responsible for the provision of expert services together with bookkeeping, administration and managerial oversight.
Mr EE considered the most appropriate method of valuation for a business that provides professional consultancy services to be a capitalisation of future maintainable super profits.
Having considered the profit and loss statements for the period 30 June 2017 to 30 June 2019, Mr EE determined that taking into account appropriate remuneration for the services performed by the husband, there was no “super profit” being generated and accordingly the method of valuation is a net asset backing approach.
Mr EE has valued F Company as at 30 June 2019 in the sum of $218,000. Because of the method of shareholding, he has attributed 100 per cent of the value to the husband.
Schedule “D1” to his report of 16 October 2020 sets out an adjusted balance sheet based upon the financial statements as at 30 June 2019.
The current assets total $230,963. This sum includes a loan to the husband on account of his legal fees in the sum of $51,350.
Mr EE refers to this item and considers that if it remains as an asset of F Company then an equivalent amount should be recorded as a liability of the husband. Whilst in an accounting sense I do not disagree with the accuracy of the treatment, in the circumstances of this case, to offset the asset in the balance sheet by an equivalent liability of the husband has the effect of converting part of the husband’s legal fees into a joint liability.
I have regard to the legal fees of the parties and in respect of this item, I consider that it should remain as an asset on the company but not be treated as a liability. In effect, the proportion of the husband’s legal fees of $51,350 will be added back.
I propose to bring to account the total current assets of F Company at $230,963.
The total of non-current assets is in the sum of $481,191. This sum is primarily comprised of items under the heading of loans to the husband and wife in respect of the D Street purchase.
The parties are agreed that the outstanding NAB home loan secured over the Suburb C property is in the sum of $196,096. The NAB loan for the D Street property is $484,454.
It is a more accurate reflection of the current circumstances that I do not bring to account the book entries in respect of the D Street property but retain the following non-current assets:
·Plant and equipment $2,190
·Motor vehicles $19,130
Total $21,320
The total assets is in the sum of $252,283.
The current liabilities (at least as at 30 June 2019) total $443,874. The liability items contain a provision for the husband’s leave of $79,450 and long service leave of $30,615. Mr EE considers that if those amounts remain as liabilities then there should be a corresponding amount added back to the assets of the husband.
I prefer to exclude the items of leave and long service leave leaving a balance of total current liabilities of $333,809.
The non-current liabilities reflect a loan to LL Pty Ltd of $49,824. This loan is a purported liability in favour of the husband’s brother.
A careful consideration of the financial statements displays a confused picture in respect of the financial interrelationship between the husband, his brother and LL Pty Ltd.
The financial involvement of the husband and his brother was the focus of strong challenge.
The husband’s brother was not called to give evidence. I do not draw an adverse inference from the husband’s decision not to call his brother but I consider that if he had been called his evidence was unlikely to assist and support the husband’s case where relevant.
Moreover, the unsecured loan from LL Pty Ltd to F Company arose for the first time in the 2019 financial year. I am not persuaded by any evidence presented by the husband that the circumstances of the purported loan should properly be considered as a genuine liability of F Company and therefore a liability that should be brought to account.
On that basis, as at 30 June 2019, the total liabilities are in the sum of $333,809 and when taken against the total assets there is a deficit of $81,526. The company continues to trade and as such it is not appropriate to attribute a negative value. I determine that the value of the husband’s interest is zero.
ADD-BACK OF LEGAL FEES
As discussed, the wife has paid $18,878.47 from her own resources and $268,546.01 from litigation funding. It could not be said that either of the sources from which legal fees have been paid are derived from the property of the parties.
The husband has paid legal fees in the sum of $344,536.
I am not able to determine the source from which the husband's legal fees have been paid other than the amount referred to as having been borrowed by the husband from F Company.
The husband contends that he borrowed money from his brother and or H Pty Ltd.
The husband's evidence as to the financial interrelationship with his brother was at best unconvincing.
No documents were tendered in support of the purported terms of the loan arrangements between the husband and his brother to the effect that:
(a)The sum was repayable from the proceeds of the proceedings; and
(b)An agreement would be entered into to provide security over the D Street property for the amount purportedly loaned.
In the absence of adequate explanation, there is a significant sum pertaining to the monies paid by the husband for his legal fees that is not able to be attributed to a particular source.
In Chorn & Hopkins (2004) FLC 93-204 the Full Court considered two earlier Full Court decisions:
24We will refer again later in these reasons to the decision in Townsend, but we would in the present context draw attention to the following observations by later Full Courts:
2.11 There seems to be no appropriate basis for notionally adding back moneys that existed at separation but which have been subsequently spent on meeting reasonably incurred necessary living expenses. Neither the Family Law Act nor the case law require that parties go into a state of suspended economic animation once their marriage breaks down pending the resolution of their financial arrangements. Parties are entitled to continue to provide for their own support. Whether any expenditure so incurred is reasonable or extravagant is a matter that can be determined by the trial Judge.
…
46Whilst not seeking to place a fetter upon the exercise of discretion of a trial judge in individual cases, it seems to us that the concept of adding monies reasonably disposed of back into the pool ought to be the exception rather than the rule. The parties are entitled to reasonably conduct their affairs post-separation in a manner that is consistent with properly getting on with their lives.
(Citations omitted)
By leaving the husband's loan for legal fees in the sum of $51,350 as part of the current assets of F Company this has the effect of adding that sum back into the pool.
LOANS OWING BY THE HUSBAND TO F COMPANY
The husband contends that $524,166 is owed by him to F Company. The wife considers that if monies are properly owed as asserted by the husband then it must be referable to the D Street property.
The husband disagrees with the description and contends that it is a joint liability representing monies borrowed for the benefit of the family.
According to the husband, the parties are indebted to NAB for amounts in respect of the Suburb C and D Street properties and in addition the further sum of $524,166.
The wife does not accept the husband's proposition that the sum should be considered as a joint matrimonial liability.
It is difficult to ascertain the basis upon which the husband seeks to bring to account a purported joint liability of $524,166. If it is not money that can be traced to the acquisition of the D Street property then it can only be in regard to the husband's assertion that post-separation he continued to pay expenses and outgoings for and on behalf of the family.
The financial statements for F Company do not reflect an outstanding liability by reason of a debit loan account.
The Full Court considered the appropriate treatment of a debit loan account in the decision of Foda & Foda (1997) FLC 92-753. The Full Court determined that the company that had provided funds for the benefit of the husband and indirectly the wife, was the alter ego of the husband and as such the transactions between the parties and the company should be disregarded.
I have given consideration to the evidence of Mr EE and have further adjusted the balance sheet to reflect the appropriate treatment of assets and liabilities, but in particular liabilities arising from loan transactions between each of the parties and F Company.
I do not propose to bring to account the sum sought by the husband.
G FINANCE LOAN
The wife was required to borrow money in order to pay a proportion of her legal fees.
Of monies borrowed, the wife contends that a significant proportion was applied towards payment of legal fees however there was a balance that was applied for repairs to the Suburb C property, a reduction of a NAB loan and to supplement the wife's day to day income.
I do not consider that I am able to bring to account the sum of $315,546 as sought by the wife but it appears to be a concession on the part of the husband that the sum of $40,000 should properly represent a liability for the wife. It seems to me that the proportion of the liability incurred to fund repairs to the Suburb C property, in the sum of $5,500, and the reduction of the NAB loan account ending 5504 in the total sum of $15,314 should be brought to account.
WIFE’S TAX LIABILITY FOR FINANCIAL YEAR ENDING 30 JUNE 2017
The wife's contention is that without her knowledge the husband recorded a dividend paid by F Company to the wife for the 2017 taxation year. Accordingly, the wife received an amended assessment.
The husband denies that the wife had no knowledge but it seems that the tax liability that arose from the dividend declaration is agreed in the sum of $4,057.
The wife's knowledge of the declared dividend is irrelevant. It is apparent from the evidence of Mr EE that the shares held by the wife were principally to enable dividends to be declared in her favour and thereby minimise personal income tax by sharing profit of F Company.
I propose to bring the amount of $4,057 into account.
HUSBAND’S TAX LIABILITY
The husband has a tax liability to the ATO of $15,351. The wife does not accept both the quantum of the liability and in particular given the access by the husband to the income generated by F Company on a cash basis there is no adequate explanation nor accounting which suggests the husband was not able to pay the tax as assessed.
There is an absence of evidence that would enable a careful analysis to be undertaken to establish that monies that potentially were available to the payment of the husband's personal income tax were utilised preferentially in favour of the ongoing payments of household expenses for the family. I do not consider that I am able to include the husband's tax liability as a liability in the balance sheet.
LOAN FROM H PTY LTD
The husband's contention is that after the proportion of legal fees are removed there is outstanding to the husband's brother the sum of $76,026.75.
The husband contends that he received a total advance from his brother in the sum of $430,562.75 and following the deduction of legal fees paid in the sum of $354,536, the balance is $76,026.75.
The wife does not accept the extent of the purported advance from the husband's brother.
The evidence presented by the husband is scant. The husband has well understood that the wife does not accept that there is any clear and well defined financial arrangement between the husband and his brother, in terms of monies provided and the terms and conditions upon which it is to be repaid.
There has not been any documents tendered by the husband to support the monies provided by the husband's brother or his company H Pty Ltd. It is open for me to find that if the husband's brother had been called to give evidence he would not have assisted the husband's case.
Given the liability is purportedly as between the husband and his brother, I am not convinced of either the nature and or the quantum of the purported liability.
I do not propose to bring the sum as asserted by the husband to account.
NAB PERSONAL LOAN
The wife seeks to bring to account a personal loan with NAB of $36,462. The liability appears at item 50 of the wife's Financial Statement filed 15 July 2020.
The evidence as to the purpose and manner in which the liability was incurred is scant.
I consider that it is likely the personal loan relates to post-separation expenditure.
I do not consider that there is enough information which will enable me to determine that there is an appropriate nexus between the outstanding balance of the personal loan to NAB and the financial circumstances of the parties. Accordingly, I do not propose to bring to account the NAB personal loan.
ADJUSTED PROPERTY POOL
The adjusted property pool is as follows:
ASSET OWNERSHIP VALUE F Company Husband $0 Loan to F Company Husband $92 D Street Property Husband $915,000 Suburb C Property Joint $1,965,000 NAB account ending …81 Joint $166 Nab account ending …22 Joint $4,790 Funds in NAB & CBA accounts Husband $3,127 GG Company shares (234 shares at $4.76) Joint $1,113 GG Company shares & HH Company shares Husband $5,000 GG Company shares (766 shares at $4.76) Wife $3,646 HH Company shares (400 at $2.80) Wife $1,120 TOTAL $2,899,054
LIABILITY OWNERSHIP VALUE NAB HOME LOAN SECURED OVER THE SUBURB C PROPERTY JOINT $196,096 NAB LOAN FOR D STREET PROPERTY JOINT $484,454 NAB OFFSET ACCOUNT ENDING 6105 – D STREET JOINT $32,864 G FINANCE LOAN - NAB WIFE $15,314 TAX LIABILITY FOR YEAR ENDED 30 JUNE 2017 WIFE $4,057 TOTAL $732,785
SUPERANNUATION OWNERSHIP VALUE 1. SUPER FUND 1 ACCOUNT NO. …68 WIFE $151,688 2. SUPER FUND 1 ACCOUNT NO. …91 WIFE $43,411 3. SUPER FUND 2 MEMBER NO. …45 WIFE $47,591 4. SUPER FUND 3 ACCOUNT NO. …93 HUSBAND $437,221 TOTAL $679,911 NET POOL INCLUDING SUPERANNUATION $2,846,180 THE HUSBAND’S BROTHER
The wife asserts that prior to separation she and the husband provided the husband's brother Mr D Arian with a total sum of $204,000, comprising $54,000 being the first tranche which was loaned to assist the husband's brother with cash flow for his business and then a further sum of $150,000 to further assist in the business.
The wife highlights the husband's evidence that during the course of the proceedings he alleged that his brother had provided him with a total amount of $430,562.75 of which $354,536 was used to pay the husband's legal fees.
The financial relationship between the husband and his brother is at best uncertain. The financial statements for F Company provide an inconsistent history of money purportedly provided by the husband's brother to the husband's company and the converse, namely the financial statements recording monies owed by the husband's brother to F Company.
As considered, the husband's evidence as to the financial interrelationship with his brother was wholly unsatisfactory.
In a broad sense, where the evidence of the wife and the husband conflict I prefer the evidence of the wife unless there is other evidence that would tend to support the husband's evidence.
It is also a relevant consideration that even if monies were provided as asserted by the wife, any contractual obligation on the husband's brother to repay the money may well be statute barred.
I am not able to speculate as to the extent of the relationship between the husband and his brother but it is obviously close, if for no other reason than the apparent preparedness on the part of the husband's brother to provide the husband with substantial funds for legal fees and other expenses.
There is also the evidence of surprising access by the husband directly to the accounts of his brother's company.
I am not able to find on the balance of probabilities, the quantum of money provided by the parties to the husband's brother and the circumstances upon which there was a reasonable expectation of it being repaid. I am satisfied however, that some monies were provided either directly by the parties or via F Company as demonstrated by the financial statements.
I propose to deal with the potential for the husband to be advantaged either by the direct repayment by his brother albeit in circumstances where he may not be obliged to repay any funds or by other accommodation that is likely to be made. I have an option to consider the issue of monies provided to the husband's brother either by way of a contribution factor or a factor pursuant to s 75(2)(o) of the Act. I prefer to bring to account the financial relationship between the husband and his brother and the potential for benefit to the husband as a s 75(2)(o) factor. I also bring to account the uncertainty of the purported liability to the husband's brother for the money provided for the husband's legal fees.
CONTRIBUTIONS OF THE PARTIES
I am required to consider the direct and indirect financial and non-financial contributions made by or on behalf of the parties to the acquisition, conservation or improvement of the property (s 79(4)(a)-(b) of the Act), and the contributions made by the parties to the welfare of the family in their capacity as parent or homemaker (s 79(4)(c) of the Act).
The parties were in employment during the period of cohabitation, however the wife’s opportunity to take up employment was subservient to her role as a homemaker.
The wife considers that given the evidence, the length of the marriage and the duties and roles undertaken by each of the parties during cohabitation, contributions should be considered as 52/48 per cent in her favour.
For his part, the husband considers that weight should be given to his superior financial contribution throughout the marriage and post-separation. The husband submits that his contributions to the property of the marriage and the welfare of the family should be considered as superior to the contributions of the wife.
The parties are not agreed as to the circumstances surrounding the purchase of the M Town property in 1986. The wife asserts that each of the parties contributed $10,000 from their savings whereas the husband asserts that he paid for their one half share of the property.
I am not able to make a determination but in circumstances where the evidence of the parties is in conflict, I prefer the evidence of the wife.
The M Town property was sold in 1987 and I have found that it is likely some of the proceeds of sale were used by the husband to purchase the Suburb N property for $65,000.
In 1988 the wife purchased the Suburb O property for $68,000 funded by a secured loan of $57,000. There was a modest balance by way of deposit and costs of purchase, the source of which is not agreed.
The husband concedes that the wife paid the mortgage repayments up to the time of marriage but that thereafter it was the husband’s income that supported the loan repayments.
The parties were married in 1990. The husband moved out of the former matrimonial home in 2013.
The husband argues that between 2008 and 2013 he made a significant and direct financial contribution to the property of the parties by paying mortgage repayments on the Suburb C property and the D Street property and by way of significant direct financial contribution to the welfare of the family.
The husband estimates that his post-separation contributions total about $1.5 million dollars. The husband’s calculations are based in part upon the tables contained in paragraphs 123-167 inclusive of his trial affidavit.
Notwithstanding the date of separation, the husband concedes that whilst the marriage lasted for 18 years, the relationship between the parties spanned more than 30 years.
The husband does not seek to challenge a finding that the contributions of the parties during the 18 years of marriage should be other than equal. The focus of the husband is upon the post-separation period.
The wife does not necessarily agree with the schedule of payments as recorded by the husband but it is not controversial that after 2013 the husband continued to pay for the majority of the household expenses of the wife and the children until about 2018/2019 when the wife paid those expenses without contribution by the husband.
The husband concedes that the wife’s contribution as a homemaker should be given weight but that as the children became older he contends that the homemaker contribution of the wife lessened.
The husband acknowledges that the wife’s parents were generous towards the parties and gifted money during the course of the marriage.
Over a period from 1988 to the date of separation the wife considers that she received about $200,000 from her parents. The most significant sum was a gift of $150,000 in 2004 when the wife’s parents sold their holiday house. It is not contested that the wife’s brother also received a similar amount. The husband generally argues that either the amount of the gift from the wife’s parents should be considered as insignificant or alternatively that it was a gift to the parties jointly.
The husband acknowledges that the wife’s parents did not favour the parties’ relationship and marriage. The husband considered that he needed to prove himself as a worthy partner to the wife before he could gain the wife’s parent’s acceptance.
I have given careful consideration to the evidence of each of the parties in respect of the status of gifts provided by the wife’s parents.
In considering the evidence, I find that the relationship between the wife and her parents was the basis for the generosity of her parents. In respect of the significant sum of $150,000, in determining that the gift was specifically to the wife and not to the parties jointly I bring to account that the wife’s brother received a similar amount. Unlike the decision of Chisholm J in Pellegrino & Pellegrino (1997) FLC 92-789, I consider that the monies provided generally by the wife’s parents, but in particular the sum of $150,000, should be considered as a contribution made for and on behalf of the wife.[14]
[14] See Gosper & Gosper (1987) FLC 91-818 and Kessey & Kessey (1994) FLC 92-495
The parties are not agreed as to whether the sum of $204,000 was loaned to the husband’s brother Mr D Arian. There is scant evidence as to the existence of that loan.
The financial statements of F Company provide significant uncertainty as to the status of monies allegedly loaned to the husband’s brother. The husband conceded that the financial statements reflect monies outstanding but does not consider that they are relevant. The husband’s evidence was unconvincing as to the financial relationship with his brother.
Moreover, the husband’s evidence of him having free and unrestrained access to the financial resources of his brother’s company strained credibility.
Whilst the failure by the husband to call evidence from his brother does not enable an adverse inference to be drawn, I am entitled to consider that the husband’s brother’s evidence may not have been of assistance to the husband.
Equally, even if monies were provided to the husband’s brother as alleged by the wife, a loan may now be statute barred and not able to be recovered.[15]
[15] See Ogilvie v Adams [1981] VR 1041
The relationship between the parties is of 30 years duration.
The Court must consider all of the contributions made by each of the parties from the commencement of their relationship until the hearing. The next step is to give such weight to those contributions as may be considered appropriate.
Whilst there is a concession by the wife that money from F Company was used to pay household and family expenses over a long period of time, the company is to be seen as the alter ego of the husband.
The success of F Company was as a result of the husband’s hard work made possible by the wife’s contribution as homemaker. It is not suggested that the husband resented the wife caring for the children and providing a secure home base enabling the husband to work.
I bring to account the contributions of the parties. I am to find that the wife’s contribution should be considered as superior. Accordingly, I find that the parties’ contributions should be considered to 52/48 per cent in favour of the wife. Based on the pool as calculated each percentage point equates to $28,460. The differential value of 2 percentage points is about $114,000. I find the adjustment for contribution to be just and equitable.
SECTION 75(2) ADJUSTMENTS
The wife seeks an adjustment of 2.5-3 per cent albeit on her view of the pool of assets. In particular she considers that her income, estimated to be about $100,000 per annum from the positon as an education professional on a temporary engagement contract, should be compared to the income of the husband of about $200,000 per annum together with other benefits from his involvement with F Company.
The husband counters the wife’s position by reference to his age being 60 years and certain health issues which will impact upon his ability to maintain an income.
The husband also argues that his future financial circumstances will be adversely affected by the debts of the company, including a substantial debt to the ATO. If the husband is not able to work then given he is the only fee earner for F Company, the company will not be able to pay its debts as and when they fall due which may impact upon the husband.
The husband relies on evidence from Dr CC who last saw him in 2015.
The husband’s General Practitioner Dr BB has diagnosed the husband with diabetes and sleep apnoea.
The medical evidence falls short of establishing that the husband’s ability to continue his profession as a consulting professional is compromised by reason of his co-morbidities.
It is an unfortunate outcome of the proceedings that the financial circumstances of the parties may be substantially affected by the legal fees they have incurred. The size of the pool and the circumstances of each of the parties does not readily justify the extent of their separate legal fees and disbursements. There is however scant evidence as to the husband’s obligation to repay his brother $200,000 advanced by him or his company for legal fees. There is no uncertainty that the wife will be required to repay the G Finance loan. The impact on her will cause significant hardship.
The wife seeks to bring to account the potential for the husband to receive a substantial inheritance upon the eventual passing of his mother. Whilst it is uncontroversial that the husband’s mother is over the age of 90, there is no evidence as to her testamentary intention and for the extent of her estate. I am not able to make some arbitrary determination as to her longevity.
I consider that the evidence presented by the wife falls short of enabling the Court to consider the husband’s relationship with his mother and the potential for an inheritance upon her death to be a factor able to be brought to account.
I am mindful that a negative value has been attributed to the husband’s interest in F Company. The valuation approach was an asset backing methodology.
I am cognisant of the husband’s concession that F Company is his alter ego. The husband has a significant ability to earn a substantial income. Whilst not a pre-eminent feature of Mr EE’s valuation report, he does comment on the appropriateness of the wage paid to the husband as set out in the financial statements of the company.
I consider that weight should be given to the husband’s ability to earn significantly more than the wife. The disparity of income is a relevant factor. Whilst the age of the parties is not ignored as a factor, the evidence supports a finding that the husband will continue to generate an income for the foreseeable future.
An adjustment of 6 per cent in favour of the wife is appropriate. In doing so I am mindful that a percentage adjustment must be underpinned by a dollar value that is meaningful.
CONCLUSION
The total of the pool including superannuation is $2,846,180. The wife’s entitlement is 58 per cent which equates the sum of $1,650,784.
The wife seeks to retain the following:
·Suburb C property $1,965,000
·GG Company shares $113
·GG Company shares $3,646
·HH Company shares $1,120
TOTAL $1,969,879
·Superannuation $242,690
TOTAL PROPERTY/SUPERANNUATION $2,212,569
The wife will maintain the following liabilities:
·Mortgage on the Suburb C property $196,096
·G Finance loan $15,314
·Income tax $4,057
TOTAL LIABILITIES $215,467
NET PROPERTY RETAINED $1,997,102
LESS WIFE’S ENTITLEMENT $1,650,784
WIFE TO PAY $346,318
Given the financial circumstances of the parties and the potential complexity of separating the liability arising from the D Street property secured over the Suburb C property, it is likely that a timely settlement may be difficult. I propose to give the wife four calendar months to make arrangements for the payment of the settlement sum and the refinancing of the existing liability secured over the Suburb C property.
The parties are generally in agreement as to the method and manner by which the Suburb C and the D Street properties are to be sold in default of each of the parties' ability to refinance.
I make orders as appear at the commencement of these reasons.
I certify that the preceding three hundred and six (306) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Berman. Associate:
Dated: 25 June 2021
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Family Law
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Property Law
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