Laska & Garvey
[2022] FedCFamC2F 1780
Federal Circuit and Family Court of Australia
(DIVISION 2)
Laska & Garvey [2022] FedCFamC2F 1780
File number(s): SYC 2667 of 2021 Judgment of: JUDGE ELDERSHAW Date of judgment: 22 December 2022 Catchwords: FAMILY LAW – PROPERTY – DE-FACTO RELATIONSHIP – INTERIM ORDERS – Where the Applicant seeks de-facto maintenance, lump sum property distribution and an order concerning the provision of a motor vehicle – Where the Respondent seeks the interim application be dismissed – Where neither party’s disclosure is satisfactory – Where the Applicant satisfies the threshold for maintenance – Where there is evidence of a financial resource which can meet any short fall – Where the Applicant has not discharged the onus that a lump sum would not prejudice the Respondent’s case on a final basis nor that the sum could be clawed back – Where the interim application be dismissed. Legislation: Family Law Act 1975 (Cth) ss 79A, 90SM, 90SN, 90SF Cases cited: In the Marriage of Weir (1992) 16 Fam LR 154
Medlow & Medlow (2016) 54 Fam LR 389; [2016] FamCAFC 34
Stanford v Stanford (2012) 247 CLR 108
Stein & Stein (2000) FLC 93-004; [2000] FamCA 102
Strahan & Strahan (Interim Property Orders) (2009) 42 Fam LR 203; [2009] FamCAFC 166
Division: Division 2 Family Law Number of paragraphs: 88 Date of hearing: 14 December 2022 Place: Sydney Counsel for the Applicant: Mr Fowler Solicitor for the Applicant: Watts McCray Lawyers Counsel for the Respondent: Mr Richardson SC Solicitor for the Respondent: Barkus Doolan Winning ORDERS
SYC 2667 of 2021 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN: MS LASKA
Applicant
AND: MR GARVEY
Respondent
order made by:
JUDGE ELDERSHAW
DATE OF ORDER:
22 December 2022
THE COURT ORDERS THAT:
Application in a Proceeding
1.The Applicant’s Application in a Proceeding filed 21 September 2022 be dismissed.
Case Management
2.Orders 12 (as to the Applicant), ‘12’ (as to the Respondent), 14 and 18 of the Orders made on 10 November 2022 be vacated.
3.By no later than 17 February 2023, the legal representative for the Applicant and the Respondent are to confer and prepare a Minute of Order relating to the updating of the valuation report into B Group and its related parties.
4.The matter is otherwise listed for case management hearing, with respect to the property aspect of the proceedings, before her Honour Judge Eldershaw on 20 February 2023 at 9.30 am to be conducted in person at the Sydney registry where an appearance will be required by and on behalf of all parties.
5.The Independent Children’s Lawyer is excused from attending on the next Court event.
Costs
6.In the event either party seeks costs of and incidental to the listing on 14 December 2022, such application shall be made by way of an Application in a Proceeding, accompanied by a supporting affidavit limited to 10 pages and five annexures and written submissions by no later than 4.00 pm on 3 February 2023.
7.Any party against whom costs are claimed is to file and serve a Response to the Application in a Proceeding, accompanied by a supporting affidavit limited to 10 pages and five annexures, and written submissions by no later than 4.00 pm on 17 February 2023.
8.Unless a party expressly seeks an oral hearing, any costs application will be determined by her Honour on the papers in Chambers.
Liberty to File Terms
9.The parties are otherwise at liberty to write to Chambers at [email protected] with proposed consent orders and to vacate the next Court event provided the Consent Orders are filed with Chambers containing:
(a)One scanned copy of the Orders signed and dated by all parties on each page;
(b)A clean, unprotected, word version of the Orders being sought, in exactly the same terms as the signed document; and
(c)For final property orders, a joint letter from all parties to the matter:
(i)Identifying the effect of any property orders, and why they are said to be just and equitable;
(ii)Confirming that procedural fairness has been afforded to any third party whose interests are affected by the Orders;
(iii)Identifying the jurisdictional basis for any child support departure order; and
(iv)Identifying how each party’s costs of, and incidental to, the proceedings are to be treated.
THE COURT NOTES THAT:
A.The parties are scheduled to attend a confidential Court based Dispute Resolution Conference with respect to the parenting application in February 2023.
B.On the next listing before Judge Eldershaw, her Honour will consider reinstating a timetable for filing of trial material having regard to such matters including the date on which the updated valuation report for B Group may be available, issuing of Specific Questions to the Expert, and engagement in alternative dispute resolution.
Note: The form of the order is subject to the entry in the Court’s records.
Note: This copy of the Court’s Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 10.14(b) Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 10.13 Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).
Section 121 of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish proceedings that identify persons, associated persons, or witnesses involved in family law proceedings.
IT IS NOTED that publication of this judgment by this Court under a pseudonym Laska & Garvey has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
JUDGE ELDERSHAW:
Introduction
These Reasons concern an interim financial application for de facto maintenance, lump sum property distribution and an order concerning the provision of a motor vehicle by the Applicant de facto, Ms Laska (“the Applicant”). The Respondent de facto is Mr Garvey (“the Respondent”).
The Applicant relies on her Amended Application in a Proceeding filed 8 December 2022, her affidavit filed 12 December 2022, her Financial Statement filed 21 September 2022 and the affidavit of Mr C filed 13 December 2022.
The Respondent relies on his Response to Initiating Application filed 9 July 2021, his Response to Application in a Proceeding filed 9 November 2022, his affidavit filed 7 December 2022, his Financial Statement filed 9 November 2022, the affidavit of Mr D filed 7 December 2022, the Orders of this Court made on 23 September 2022, and Exhibits R1, R2, R3 and R4.
Scope of the Interim Application
The Applicant filed an Application in a Proceeding on 21 September 2022 seeking urgent relief concerning accommodation (Orders 1 to 6); and an order about a motor vehicle, the discharge of Order 8 made on 2 March 2022, spousal maintenance, and a lump sum (Orders 7 to 10).
Urgent orders were made by a Senior Judicial Registrar on 23 September 2022 addressing Orders 1 to 6.
The matter was listed for case management on 10 November 2022 at which time orders were made for the balance of the relief contained in the Application in a Proceeding. No leave was granted for the Applicant to file an Amended Application in a Proceeding or further affidavit material.
The Applicant filed an Amended Application in a Proceeding on 8 December 2022, by which she expanded the relief sought. The Respondent contends, and I accept, cannot meet the expanded scope of the Amended Application in a Proceeding. The Court has proceeded to determine what remains of the 21 September 2022 Application. Leave was not granted for the Applicant to rely on the balance of her Amended Application in a Proceeding.
BACKGROUND
The Applicant was born in 1966 and is now 56 years of age.
The Respondent was born in 1971 and is almost 51 years of age.
The parties began living together in a de facto relationship in 1999. The Applicant contends a date of final separation of March 2020, whereas the Respondent asserts a date of 15 December 2019. Nothing turns on this.
The parties have six children.
Mr E, Mr F and Ms G are over 18 years of age. The Applicant deposes that Mr E lives with her. The Respondent deposes that Mr E lives independently. Mr F lives with the Respondent. Ms G lives with the Applicant.
X, Y and Z are 17, 15 and 14 years of age respectively. X will be in Year 12 in 2023 and is a weekly boarder at H School. Y will be in Year 10 in 2023 and attends the J School as a day student. Z will be in Year 9 in 2023 and also attends the J School, and will spend the first six months of 2023 at Town K. These children otherwise live with the Applicant.
It is common ground that neither party had any assets of significance at the start of the relationship.
The Respondent deposes that the Applicant was primarily responsible for homemaker and parenting contributions.
The Respondent did not receive any gifts or inheritances during the relationship. The Applicant deposes that she has contributed $2,467,641 to B Group and the family from sums provided by her parents. The Respondent concedes that the Applicant received gifts and inheritances although is uncertain of the sum.
On 9 July 2021, the Respondent filed a Response to an Application for Final Orders. He seeks to retain a property in New Zealand in specie and that each party otherwise retain all assets, superannuation and liabilities in their own name.
On 2 March 2022, by consent, the Court made the following orders:
That from the date of these Orders and up until mediation, the Respondent shall to do all acts and things necessary to cause the [B Group] to pay the Applicant $175,000 per annum, paid monthly and that:
(a) The Applicant shall be paid as a contractor and issue monthly invoices to the [B Group]; and
(b) These payments are in lieu of the weekly amounts that the Respondent was paying to and for the Applicant by agreement and that the [B Group] was paying in respect of her rental costs; and
(c) The Applicant shall be responsible for meeting her own rental costs.
The parties attended mediation in July 2022. Since then, the Respondent has caused B Group to continue to make the payments described in Order 8 of the 2 March 2022 Orders.
On 23 September 2022, orders were made by consent as to the payment of rent-related sums to the Applicant from B Group. The Court noted:
A It is NOTED that [L Pty Ltd] has a current debt to the Australian Taxation Office in the amount of $6,062,083.07 and that the Respondent asserts that the [B Group] does not have the funds available to pay that debt due.
B It is NOTED that Order 8 of the 2 March 2022 Orders provide for the Respondent to do all acts and things necessary to cause the [B Group] to pay the Applicant $175,000 per annum, paid monthly and that:
(a) The Applicant shall be paid as a contractor and issue monthly invoices to the [B Group]; and
(b) These payments are in lieu of the weekly amounts that the Respondent was paying to and for the Applicant by agreement and that the [B Group] was paying in respect of her rental costs; and
(c) The Applicant shall be responsible for meeting her own rental costs.
C. It is NOTED that the payments to the Applicant referred to in Notation B above shall continue to be paid, pending further order.
The Applicant has a National Australia Bank (“NAB”) account ending …79 in her sole name. The statement for the period 15 October 2022 to 8 December 2022 records deposits including:
(a)$2,500 on 27 October 2022 from B Group;
(b)$14,873 on 4 November 2022 from B Group;
(c)$6,000 on 6 December 2022 from the Respondent for rental bond; and
(d)$27,203 on 8 December 2022 from B Group.
As at 8 December 2022, the balance of the NAB account was $30,822.
assets of the parties
The principal assets of the parties are the B Group and its related entities, a residential property in New Zealand valued at about NZ$700,000, and the Respondent’s superannuation valued at about $84,880.
B Group
The Respondent operates B Holdings Pty Ltd (“B Holdings”), being the parent company of L Pty Ltd. M Pty Ltd and N Pty Ltd and O Pty Ltd (collectively “B Group”).
B Group is construction business.
A Single Expert valuation report was prepared with respect to the Respondent’s interest in B Group, and P Pty Ltd atf the Q Trust ; and the parties’ interests in the Q Trust and the Garvey Family Trust. The valuation was as of 30 June 2020. The report was released in draft on 26 July 2022.
By way of background, the Expert reported:
24. The Husband, as trustee for the [Garvey Family Trust], owns 10 ordinary shares (7.6% of total shares) in [B Holdings Pty Ltd], with the remaining 121 ordinary shares (92.4% of total shares) held by [P Pty Ltd], as trustee for the [Q Trust]3. [P Pty Ltd] is 100% owned by the Husband.
25.The [Q Trust] is a discretionary trust that was established on 15 April 2014. The appointor of the trust is [R Pte Ltd] (a subsidiary company of [B Holdings Pty Ltd]) and the settlor is [Ms S]. The Wife is the Named beneficiary of the trust, however I note that (inter alia) the Husband is listed as an eligible beneficiary and is entitled to distributions from the trust at the discretion of the trustee.
26.The [Garvey Family Trust] is a discretionary trust that was established on 10 November 2015. The appointor of the trust is [R Pte Ltd] (a subsidiary company of [B Holdings Pty Ltd]) and the settlor is [Ms S]. Both the Husband and the Wife are Named beneficiaries of the [Garvey Family Trust] however, there are other classes of eligible beneficiaries noted in the Schedule to the trust deed.
27.I have been instructed that there are no tax returns or financial reports prepared for either of the trusts or for [P Pty Ltd], which acts solely as the trustee for the [Q Trust] and does not otherwise operate. I have therefore assumed that both the [Q Trust] and the [Garvey Family Trust] operate as investment entities whose principal assets are the shares held in [B Holdings Pty Ltd].
2014 Voluntary Administration and Deed of Company Arrangement
On 1 August 2014, B Group was placed into Administration. The Respondent, in his capacity as Managing Director, completed a Report as to Affairs (“RATA”) in which he certified that:
(a)The assets were sundry debtors totalling $3,118,000 (from what appear to be related parties), cash of $382,000, plant and equipment of $521,000, related party loans owing to B Group of $527,000; and
(b)The liabilities were secured creditors of $1,588,000, employee claims of $208,773, an Australian Taxation Office (“ATO”) debt of $3,232,712, and other unsecured creditors of $1,410,287.
In response to Question 42 of the Questionnaire attached to the RATA, the Respondent certified that GST, PAYG Withholding, PAYG Instalments, Payroll Tax, WorkCover Levy and Sales Tax were not regularly remitted.
A Deed of Company Arrangement was entered for B Group, and was executed on or about 15 August 2014, pursuant to which the parties, other B Group entities, the T Family Trust, a self-managed superannuation fund, and Mr U were deferred creditors.
Value as at 30 June 2020
The report into the Respondent’s interest in B Group contains disclaimers which are specific to COVID-19:
10.On 11 March 2020, COVID-19 wsa declared a pandemic by the World health Organisation. It is a worldwide event and at the Valuation Date stage it wsa not possible, with any degree of accuracy or certainty to predict the economic and financial implications that would arise generally. Accordingly with respect to the valuation of the interest in the [B Group] as at 30 June 2020, the full extent of impact on value is not known.
11.The value assessed in this report seeks to value the Husband’s interest in the [B Group] as at 30 June 2020 and, as such, does factor in the financial performance and the impact of COVID-19 on the business post the Valuation Date, as the full impact was not known, nor could it be determined.
The Expert opined that the ultimate value of B Group is between $8,109,000 and $10,109,000 (midpoint $9,109,000). The difference between the high and low value of assessed equity relates to the multiple that has been applied to operating Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA). B Group was valued as a going concern.
As to the background of history and business activities of B Group, the Expert recorded:
31.The [B Group] was first incorporated in 2001 in New Zealand (NZ) as a business venture directed towards the [construction] market in Australia and NZ, and has since expanded across multiple sectors in the Asia Pacific region and the United States (US). In 2013, the Group relocated its head office from Australia to [Country V] in order to take advantage of the country’s favourable corporate tax regime, and to pursue lucrative contracts with commercial partners within the Asia Pacific region. However, as a result of local regulatory requirements and related compliance issues, the pipeline of high value work in the region did not eventuate as expected.
32.In 2014, following the default on a number of contract payments from the Group’s [Country W] partners, combined with a large commercial contract dispute related to a project in Australia, the Group entered into voluntary administration. Following the voluntary administration, the Group restructured and entered a conservative rebuild phase of the business, which involved dissolving its Asian headquarters and focusing primarily on the Australian and New Zealand markets. As at the Valuation Date, the group employed approximately 200 people across offices in [City AB], [City AC], [City AD], [City AE], Sydney, Brisbane, [City AF], [City AG] and [City AH, USA]. The directors of the Group are [Mr AJ] and the Husband, who is also the founder and Chief Executive Officer (CEO) of the Group
33. The Group’s customers comprise [primary industry], construction companies, in addition to [government] departments in the jurisdictions it operates within. Whilst a small proportion of revenue is generated from long term service based contracts, the Group’s services are primarily delivered on a one off basis, through contracts. There is a competitive tendering process for contracts, which typically contain terms that range between six months to three years, with no fixed minimum or guaranteed revenue. As a result, earnings can vary significantly from year to year, and it is difficult for management to forecast the financial performance of the Group with any accuracy.
As to the financial performance of B Group, the Expert summarised:
34. The consolidated financial performance of the Group for the four years ended 30 June 2020 (FY20) is summarised below:
[table removed due to identifying features unable to be anonymised]
As to B Group’s financial position as at 30 June 2019 and 30 June 2020, the Expert summarised:
36. The reported financial position of the Group as at 30 June 2019 and 30 June 2020 is summarised below:
[table removed due to identifying features unable to be anonymised]
With respect to B Group’s financial position, the Expert noted:
… I am instructed that the Group requires a cash balance of approximately $[2.1] million to maintain ongoing operations of the business, which reflects three months of operating expenses10. In respect of this, I note that the balance of $[1.4] million of cash held by the Group as at 30 June 2020 is less than the minimum level of cash required for working capital, resulting in a shortfall of approximately $[0.7] million
As to earnings, the Expert noted:
44.Based on the information provided by the Husband, I note the following particular issues that impact the earnings of the Group:
(a) around 80% of the revenue generated by the Group is from ad hoc contracts that are primarily the result of [works] that occur. Given the nature of work performed, the Group must maintain a minimum staff base and level of overheads in order to tender for contracts, and incurs significant recruitment costs when projects ramp up. As a result, the level of EBITDA and EBITDA margin achieved by the Group have been relatively volatile from year to year;
(b) the Group has faced increased competition each year since it commenced operations, with a new competitor entering the market on average every one to two years15. There has also been a number of global competitors entering the market recently, which are generally more able (and willing) to compete on price, resulting in further downward pressure on the Group’s margins; and
(c) the Group’s FY20 earnings were impacted by the outbreak of COVID-19, which resulted in significant disruption to the Australian and NZ operations. Within Australia several projects were delayed and state border closures impacted the ability to deploy staff across state borders. In NZ, the lockdown laws required all projects to come to an immediate halt which resulted in the Group’s entire NZ workforce being stood down. Projects in NZ began progressively returning to operation from May 2020, with several Australian projects delayed until the end of calendar year 2020 due to the prevailing border closures as at the Valuation Date.
In arriving at the enterprise value, the Expert opined:
59. On this basis the value of the Group’s core operating business (before net debt and surplus assets) is as follows:
[table removed due to identifying features unable to be anonymised]
As to net surplus and liabilities, the Expert opined:
60. As at 30 June 2020, the Group held net surplus assets of approximately $[0.5] million, comprised of term deposits.
61.I also note that, as outlined in paragraph [37] above, the Group held net related party receivables of approximately $[3.9] million, and a related party loan of $[0.8] million however I have been instructed as follows:
In summary: of the related party receivables/payables (current and non-current) relates to loans owing to or from New Zealand entities which are non-trading and the net receivable amount is not recoverable by the business. Our client suggests that the appropriate course of action would be to remove the net amount when calculating the asset base of the group.
Consequently, I have adopted $nil value for net related party receivables.
62.Whilst the dividend payable liability is considered surplus to ongoing operations of the Group, I note that the amounts are due to the [Q Trust] and the [Garvey Family Trust] , both of which are related parties (refer paragraphs [24 to 26] above). As the dividends remain unpaid, I have not included an adjustment to the equity value of the [B Group] for the liability as I consider its net impact on the trust’s interests in [B Group] to be $nil
The Respondent posed a series of Questions to the Expert to which she provided responses on 24 August 2022. It is clear that the Respondent wishes to test the opinion including the EBITDA multiple.
Shareholder Loans
Item 50 of the Respondent’s Financial Statement alleges a shareholder loan owed to B Group of $1,917,826, being half of the total loan. On the Respondent’s case, the shareholders’ loan account stands at $3,835,652 allocated equally between the parties. The Applicant’s Financial Statement does not record a shareholder’s loan.
The Expert has treated related party loans as irrecoverable by B Group, and applied a nil value.
Counsel for the Applicant submitted that the omission of the asset in B Group ought to correspond to the omission of the personal liability. I do not accept that submission. To do so would subvert the effect of Division 7A loan accounts which, if unpaid within the prescribed time, and absent franking credits, may attract a potential tax liability.
Current Tax Position
The ATO’s Accounts Summary for L Pty Ltd records an overdue sum of $6,150,188 and a debit balance of $6,321,090.
The Chief Financial Officer of B Group, Mr D, deposes that this debt relates to unpaid PAYG Withholding taxes between May 2020 and June 2022.
Going back a step, B Group’s tax liability as at 30 June 2020 was $253,000. Mr D deposes that as at 30 June 2020, the tax owed was $282,635. The basis of this difference is unclear. Nevertheless, the ATO debt was in the order of $253,000 to $282,000 as at 30 June 2020.
It is not clear why the principal tax liability increased to $2,738,016 as at 30 June 2021. Mr D offers no explanation. The Respondent deposes:
I understand that between May 2020 and June 2021,the Group’s tax debts totalled some $3 million. Between 18 November 2021 and 30 June 2022, another $2.586 million in tax debts was accrued including interest.
The evidence adduced in the Respondent’s case is unsatisfactory. The Respondent is a director of B Group, it is incumbent on him to inform himself of the basis of the tax position.
Mr D deposes that he intends to negotiate a Payment Plan with the ATO. Whether the ATO will agree to a Payment Plan, or on what terms, is unknown.
Expenses paid by B Group
The Respondent adduces an Excel spreadsheet which is said to record expenses paid by B Group for the period March 2022 to October 2022. These expenses total $280,695 and relate to rent, storage, and school fees at the J School, H School and at AK College in the United States.
non-disclosure
On the one hand, the Applicant contends that the Respondent has not made proper disclosure. She requested documents under cover of a letter dated 18 August 2022 which has been partially answered.
The Respondent adduces copies of covering emails between 25 June 2021 and 6 July 2021 which disclose material for the financial years ending 30 June 2017, 30 June 2018 and 30 June 2019; and PAYG statements for the financial years ending 30 June 2019 and 30 June 2020.
On 15 November 2022, the Applicant instructed her solicitor to send the following correspondence:
We await urgent documentation demonstrating the asserted [B Group] ATO debt of ~$6,300,000, and evidence of how this has accumulated since the valuation date of 30 June 2020, in the absence of your client’s disclosure.
On 16 November 2022, the Applicant instructed her solicitor to request the current Activity Statement for the ATO account summary ending #...60, noting that a document produced on 23 September 2022 revealed 5 out of 170 results found.
On the other hand, the Respondent contends that the Applicant has not made proper disclosure with respect to a family trust. The Trust Statement for Australian Family Lawyers, being the Applicant’s solicitors, records receipts to the Applicant’s transaction ledger described as “Received from Ms AL ATF Mr AM WILL TRUST T/AS LASKA (Drawer Ms Laska)” as follows:
(a)$30,000 on 26 July 2022 of $30,000;
(b)$10,000 on 15 September 2022;
(c)$15,733.50 on 11 October 2022;
(d)$21,560.20 on 22 November 2022;
(e)$22,000 on 25 November 2022; and
(f)$20,000 on 2 December 2022.
There does not appear to be dispute that the first time the Mr AM Will Trust was disclosed to the Respondent shortly before the hearing on 14 December 2022. Ms AL has not filed an affidavit, nor has the Trust Deed been disclosed.
Neither party’s disclosure is satisfactory.
Applicant’s accommodation
Until September 2022, the Applicant was living in rental accommodation at AN Street, Suburb AO at a cost of $7,000 per month. The Applicant deposes that she was evicted because the owner wanted possession of the property and the lease had expired. She deposes to difficulty securing alternate accommodation.
The Respondent contends the Applicant left the AN Street, Suburb AO property in a state that required significant rectification work, in that it had smashed windows, damaged walls, damaged doors, and was extremely unclean. The repairs were said to have cost $4,600.
Between August 2022 and November 2022, the Applicant has made multiple applications for rental premises in the range of $2,400 to $3,000 per week.
On 27 October 2022, the Respondent instructed his solicitor to write:
…subject to rent not being in an amount greater than previously advised, our client has no issue with guaranteeing your client’s lease.
lump sum
The Applicant invites the making of an order for a lump sum of $300,000, with the sum to be characterised at trial. I will not adopt that approach because juridical basis of an order must be articulated if its reasons are to be understood.
A lump sum, if ordered, would be an order pursuant to s 90SM of the Family Law Act 1975 (Cth) (“the Act”).
An order adjusting property interests can be made at any time during the proceedings. In Strahan & Strahan (Interim Property Orders) (2009) 42 Fam LR 203 (“Strahan”) at [132] the Full Court held:
In relation to the first stage, in our view, when considering whether to exercise the power under s 79 and s 80(1)(h) of the Act to make an interim property order the “overarching consideration” is the interests of justice. It is not necessary to establish compelling circumstances. All that is required is that in the circumstances it is appropriate to exercise the power. In exercising the wide and unfettered discretion conferred by the power to make such an order, regard should be had to the fact that the usual order pursuant to s 79 is a once and for all order made after a final hearing.
The Court must be satisfied that any property adjustment order is just and equitable in all the circumstances: Stanford v Stanford (2012) 247 CLR 108 at [35].
An interim order must be capable of being varied or reversed without resort to s 90SN/79A of the Act. In Strahan, the Full Court held at [136]:
As to the third matter identified at 79,930 by the Full Court in Harris, in discussion before us it was described as the “adjustment issue” or “claw-back issue”. It was submitted by senior counsel for the Applicant that it is relevant to consider whether an order would give the Applicant “more than they would be indubitably entitled to on a final hearing” or alternatively “would it give them so much that it could not be adjusted on a final hearing?” As we have observed the Full Court in Zschokke at 83,220-221 stressed the importance of consideration of the “adjustment issue” if the power in s 80(1)(h) of the Act is being exercised. We accept the submission and observe that this matter is relevant because the discretion conferred by the power in s 79 is to make such order as the Court considers appropriate provided it is just and equitable to make the order in circumstances where the power will not be exhausted by the interim order. As Bryant CJ and Coleman J observed in Gabel v Yardley at [69] and [72] the interim order must be capable of variation or reversal without resort to s 79A of the Act or appeal. As Finn J said at [126] the interim order must be “capable of alteration at any time prior to, or as part of, the final exercise of the s 79 power”.
The onus of proving that the sum can be varied or reversed rests with the Applicant: Medlow & Medlow (2016) 54 Fam LR 389 at 410. The lump sum sought by the Applicant would be expended on living expenses and legal fees.
The Applicant relies on the 2020 draft valuation of B Group which indicates a value of about $9 million. The effect of her argument is that $300,000 is a small percentage of this value. It is, when calculated, 0.33% of $9 million. She contends that the sum sought is clearly within her entitlement, even if it cannot be varied or reversed.
It would be difficult to imagine that after a 20 year relationship, six children and the Applicant’s capital contributions from her family that she would not be entitled to 0.33 per cent of the parties’ property. However, whatever distribution the Applicant finally receives must be translated into real terms. At present, it is not possible to predict the net position of the parties for the following reasons.
Firstly, L Pty Ltd is ostensibly subject to an overdue debt to the ATO of about $6 million. In relation to this:
(a)The Applicant invites the Court to ignore the ATO debt of about $6 million. I will not do so. The Applicant does not impugn the debt, but wishes to know more about it. Those are two different things. The existence of the debt is not reasonably capable of being doubted in the presence of an ATO Activity Statement that records its quantum.
(b)I must take into account the interests of creditors for the purpose of s 90SF(3)(i) of the Act;
(c)I could not be satisfied that the Order is just and equitable unless the alleged debt to the ATO is considered for the purpose of s 90SM(2) of the Act;
(d)Counsel of the Applicant submitted that even if the ATO debt is taken into account, the value of B Group would be about $3 million or $4 million, this being a deduction of the tax debt from the enterprise value. I do not necessarily accept this. The ATO debt of $6 million is as at December 2022. The enterprise value is a draft figure as at 30 June 2020. To superimpose a liability at one point in time to the valuer’s workings for a different point in time assumes that B Group has been in a state of suspended economic animation since 30 June 2020 in all respects other than its tax position; and
(e)There is no evidence as to whether the ATO will permit B Group to enter into a Payment Plan for the tax debt, or what terms of such a Plan may be.
Secondly, the draft valuation report attributes a value as at 30 June 2020 based on information for the financial years ending 30 June 2018, 30 June 2019 and 30 June 2020. Of the thirty six months from which financial data was taken, about four months were COVID-19 affected. The effects of COVID-19 on B Group in the financial years ending 30 June 2021 and 30 June 2022 are unknown, and could not be predicted by the Expert at the time of her report.
Thirdly, the activity of B Group is described to be based on ad-hoc projects. Further expert evidence is required to understand what that may have meant for B Group since 30 June 2020, having regard to economic forces other than COVID-19.
Fourthly, the parties have continued to draw on B Group for personal expenses such as rent, storage and school fees. The quantum, recoverability and tax implications of shareholder loan accounts needs to be verified. The Respondent’s Financial Statement suggests a total
Division 7A loan account of about $3.8 million as at 9 November 2022.
Counsel for the Applicant conceded that he could not point to a fund from which the lump sum could be paid. However, the lack of disclosure by the Respondent as to his financial position, and that of B Group, was identified as a basis on which the court could infer that it is within the Respondent’s capacity to pay the lump sum: In the Marriage of Weir (1992) 16 Fam LR 154 (“Weir”). I accept that the Respondent’s affidavit is unsatisfactory with respect to the particulars of B Group’s tax position. However, these proceedings are interlocutory in nature. Unlike in Weir, the evidence has not been tested and findings cannot be made.
As to the property in New Zealand, with a value of about $700,000, I have considered whether the property might be a source of equity for payment of the $300,000. On an interim basis, I could not reach that view because, for the reasons given, I cannot anticipate the net position of the parties as to be satisfied that the lump sum would not prejudice the final relief sought by the Respondent.
The Applicant has not discharged the onus that the sum would not prejudice the Respondent’s case on a final basis, nor demonstrated that the lump sum could be recovered.
spousal maintenance
Threshold
The Applicant satisfies the threshold for maintenance in that she has the care of a child or children of the parties.
What are the Applicant’s Reasonable Needs?
The Applicant’s asserted expenditure comprises of $2,400 per week for proposed rent and a further $880 per week in Part N expenses for herself.
Counsel for the Applicant invites the Court to take a “liberal approach” to the Part N expenses by including the minor children’s and the adult children’s expenses. Such a course would permeate error: Stein & Stein (2000) FLC 93-004. The expenses of the minor children are in the nature of child support. The expenses of the adult children would be in the nature of adult child maintenance.
Senior Counsel for the Respondent submits that about half of the weekly rental should be attributed to the Applicant’s own expenses. This was based on the reasoning that of the four or five occupants of the home, X is at boarding school during the school week, Z will spend extended time at Town K in 2023 and Mr E is able to contribute to his own costs as an adult.
In my view, a more reliable way to evaluate the Applicant’s reasonable rental is to refer to the actual monthly rent at AN Street, being a property from which the Applicant would not have vacated of her own accord. That property costs $7,000 per month, or $1,615 per week. On that basis, I find that the Applicant’s reasonable expenses are $2,495 per week. This equates to $129,740 per annum net.
Can the Applicant Meet her Own Needs?
The Applicant receives an annual gross income of $175,000 from B Group. This is $14,583 per month, or $3,365 per week. The Respondent has not taken any step to suggest that he would cause B Group to cease paying the monthly invoices that were first described in the Orders made on 2 March 2022. Notation C of the Orders made on 23 September 2022, Part O of the Respondent’s Financial Statement, and the letter dated 27 October 2022 are confirmatory in this regard
I take notice of the current marginal tax rates for Australian tax residents. Tax on $175,000 without any deductions would be about $49,000, leaving a net annual income of $126,000, or $2,423 per week. This produces a shortfall of $71.92 per week
On the evidence before me, the Applicant is the “drawer” of the Mr AM Will Trust. The transaction ledger for her solicitor’s trust account records $119,333 paid to the firm in the period 23 May 2022 to 14 December 2022. This suggests a financial resource which can meet any short fall.
car
The Applicant deposes to being without a car since October 2022 because a motor vehicle 1 that she was driving now has a smashed windscreen, and faulty handbrake, brakes, Bluetooth and charging. It is parked at the Respondent’s home and full of personal belongings. The Applicant deposes that her motor vehicle 2 has been in the “repair shop” since July 2021. The Applicant says she needs a seven seater vehicle to transport herself, X, Z and Y “plus three boarders from H School”.
The Applicant adduces no evidence as to what expense may be required to retrieve the motor vehicle 2 from the repairer. The motor vehicle 1 contains personal items that can be removed. It is unreasonable to seek a vehicle large enough to transport three children from other families.
The Applicant seeks a vehicle that is not more than five years’ old on the basis that the Respondent drives new vehicles, such that there should be parity as to standard. The evidence establishes that the Respondent drives vehicles manufactured in 2010 and 2017.
Conclusion
I make the Orders set out herein.
I certify that the preceding eighty-eight (88) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Eldershaw. Associate:
Dated: 22 December 2022
0
2
0