LAURENS & LAURENS
[2015] FCCA 2754
•9 October 2015
FEDERAL CIRCUIT COURT OF AUSTRALIA
| LAURENS & LAURENS | [2015] FCCA 2754 |
| Catchwords: FAMILY LAW – Property – value of business – controversy over whether or not business has been sold and if it has whether it has sold undervalue or sham sale – tax issues – matter to be referred to the Australian Taxation Office. |
| Legislation: Family Law Act 1975, ss.75, 79 |
| Stanford & Stanford (2012) 247 CLR 108, (2012) 293 ALR 70, (2012) 87 ALJR 74, (2012) 47 Fam LR 481, (2012) FLC ¶93-518, [2012] HCA 52 Hickey & Hickey & Attorney-General (Intervener) (2003) 30 Fam LR 355, [2003] FamCA 395, (2003) FLC ¶93-143 Bevan & Bevan (2013) 279 FLR 1, (2013) 49 Fam LR 387, [2013] FamCAFC 116 |
| Applicant: | MS LAURENS |
| Respondent: | MR LAURENS |
| File Number: | MLC 8464 of 2014 |
| Judgment of: | Judge Harland |
| Hearing date: | 3 August 2015 |
| Date of Last Submission: | 3 August 2015 |
| Delivered at: | Melbourne |
| Delivered on: | 9 October 2015 |
REPRESENTATION
| Counsel for the Applicant: | Mr Podmore |
| Solicitors for the Applicant: | Lanham Lawyers |
| Counsel for the Respondent: | Ms Marshall |
| Solicitors for the Respondent: | Anthonys Solicitors |
ORDERS
The wife’s contravention application filed on 28 July 2015 is withdrawn and dismissed.
That within 42 days of the date of these orders, the parties do all acts and things to sell:
(a)Property G, being the whole of the land contained in the title reference volume [omitted]; and
(b)Property O being the whole of the land contained in the title reference volume [omitted].
That both parties take all necessary steps and execute all necessary documents to cause their property situated at Property G, and being the whole of the land comprised in title reference volume [omitted] be sold by private treaty at the earliest possible date at a price to be agreed on between the parties and failing such agreement to be determined by the proper officer of the Real Estate Institute of Victoria or his nominee.
That the proceeds of sale of the properties referred to in order 2 be disbursed as follows:
(a)the payment of agent’s commission, advertising costs and legal fees;
(b)in discharge of mortgage secured on the first property which sells;
(c)the balance of the proceeds of sale from the first property to sell is to be applied to discharge or reduce the business debts, being:
(i)[F] loan #6650 of $155,289.97;
(ii)[F] business one #2585 of $3,343.95;
(iii)[F] overdraft #6856 of $31,503.27;
(iv)[F] ATO debt of $32,429.60;
(d)the payment of agent’s commission, advertising costs and legal fees;
(e)in discharge of the mortgage secured on the second property to sell;
(f)in payment of any of the remaining business debts referred to in order 4(c) above; and
(g)the remaining balance be distributed as to 70% to the wife and 30% to the husband.
That in the event that Property G and being the whole of the land comprised in title reference volume [omitted] fails to be sold by private treaty within a period of three (3) months hereof, then each party take all necessary steps and execute all necessary documents to cause the said property to be sold by auction at the earliest possible date at a reserve to be agreed upon between the parties and failing such agreement to be determined by the proper officer of the Real Estate Institute or his nominee and that the proceeds of the said sale be disbursed as follows:
(a)the payment of agent’s commission, advertising costs and legal fees;
(b)in discharge of mortgage secured on the first property which sells;
(c)the balance of the proceeds of sale from the first property to sell is to be applied to discharge or reduce the business debts, being:
(i)[F] loan #6650 of $155,289.97;
(ii)[F] business one #2585 of $3,343.95;
(iii)[F] overdraft #6856 of $31,503.27; and
(iv)[F] ATO debt of $32,429.60.
(d)he payment of agent’s commission, advertising costs and legal fees;
(e)in discharge of the mortgage secured on the second property to sell;
(f)in payment of any of the remaining business debts referred to in order 5(c) above; and
(g)the remaining balance be distributed as to 70% to the wife and 30% to the husband.
That the parties be responsible for 50% each of any capital gains tax incurred from the sale of Property G being the whole of the land contained in the title reference volume [omitted].
That within 28 days from the date of these orders each party shall do all things necessary to:
(a)Transfer to the sole name of the wife of the motor vehicle 2012 Ford Territory, registration number [omitted] the cost of the wife; and
(b)Simultaneously with the transfer, discharge of all liability of the in relation to this motor vehicle at the cost of the wife
And the wife hereby indemnifies and shall keep indemnified the husband in relation to all liabilities in respect of the motor vehicle whenever and however arising.
That the parties do all acts and things necessary documents to transfer their interest in the [omitted] Vacation club Membership to the husband.
That the orders below have effect form the operative time:
(a)that in accordance with paragraph 90MT(1)(a) of the Family Law Act 1975, whenever a splittable payment becomes payable in respect of the husband’s interest in Colonial First State, the wife is entitled to a base amount of $48,080.67 and there is a corresponding reduction in the entitlement of the person to whom the splittable payment would have been made but for these orders;
(b)that, having been accorded procedural fairness in relation to the making of this order, this order binds the Trustee of the superannuation fund; and
(c)the operative time for this order is four (4) business days after the date of service of the orders on the trustee of the superannuation fund.
That in the event that either party should fail, neglect or refuse to sign or execute any deed, document or instrument required by or to give effect to these Orders then pursuant to s.106A Family Law Act1975 that the Registrar of the Federal Circuit Court of Australia, Melbourne Registry shall be and is hereby authorised, empowered and directed to sign and execute such deed, document or instrument in the place and instead of such party and to thereafter do all things and acts as are necessary to give validity and operation to same.
The Principal Registrar of the Federal Circuit Court of Australia is to forward a copy of these orders and judgment and any other relevant material from the court record to the relevant officer of the Australian Taxation Office of possible fraud on the part of the husband and/or the wife.
IT IS NOTED that publication of this judgment under the pseudonym Laurens & Laurens is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT MELBOURNE |
MLC 8464 of 2014
| MS LAURENS |
Applicant
And
| MR LAURENS |
Respondent
REASONS FOR JUDGMENT
The wife is aged 42. The husband is aged 46. They have one child, [X], aged 9.
The parties met in 1996. They started living together in 1997. They married on [omitted] 1999. The parties separated in May 2014.
Neither party had assets of any significance at the beginning of their relationship and both were engaged in work.
The parties purchased the property at Property O (“the Property O property”) for $240,000 with a mortgage of $220,000 in 1998.
They purchased an investment property at unit Property G, (“the Property G property”), for $240,000 with a mortgage of $204,000 in 2003.
The parties purchased a [omitted] business in 2008. They called the business “[F]”. They purchased the business through a trust they set up and they purchased the business with two other partners..
The husband was responsible for teaching and was the face of the business. The wife was responsible for the administration and finances of the business. The parties bought out the other partners in 2011 and 2012.
There are three issues of controversy in these proceedings:
a)The wife’s health and what adjustment, if any, should be made for this;
b)The circumstances surrounding the sale of the business, specifically, whether or not the husband recklessly sold the business for less than it was worth and whether or not the sale was a sham and the husband still owns the business;
c)What adjustment, if any, should be made because of the husband’s non-compliance with interim orders and late disclosure.
Conduct of the proceedings
The preparation of this case was unsatisfactory, especially for the husband’s side.
The wife commenced the proceedings seeking urgent orders. On
7 October 2014 the Court made orders providing for the husband to pay the following (as well as other orders):
a) the wife $400 weekly spouse maintenance;
b) the mortgage payments on both properties; and
c) the child’s school and medical fees.
The husband represented himself on that occasion.
Further interim orders were made on 16 December 2014. The husband was represented by Ms Marshall. The orders provided for:
a) the Property G property to be sold forthwith;
b) the business to be valued;
c) the husband to provide financial disclosure of all documents relating to the sale of the business and to provide bank statements on a weekly basis;
d) the husband to pay the wife the sum of $7,500;
e) the husband to pay $80 a week in child support; and
f) the husband to sign all documents to reduce the mortgage on the Property G property.
On 17 March 2015, further orders were made by consent. Ms Marshall represented the husband on that occasion. The orders provide for by consent that:
a)the husband provide full financial disclosure of the business [F] including all registered businesses titled [F];
b)the order for the sale of the investment property be discharged and the sale be determined at the final hearing; and
c)pursuant to orders made on 16 December 2014, the husband pay $2,000 in seven (7) days and the balance being $2,827.43 in instalments of $200 per month until discharge – it is not clear which order this is meant to refer to.
There is a dispute between the parties about compliance with interim financial orders.
It is also not clear from reading the later orders as to whether all of the interim orders made on 7 October 2014 were meant to continue or be varied by the later interim orders. It is not necessary for me to resolve this. I make the point only because if the wife had proceeded with the contravention application, there may have been some difficulties.
The husband was unrepresented for periods during the course of the proceedings. At times during the proceedings, the husband, both when he was and when he was not represented, failed to comply with orders. He filed documents the day before the hearing. The court was able to accommodate an adjournment to the following week.
The wife filed a contravention application a day prior to the hearing. She chose to withdraw that application at the final hearing. If she had not done so, the final hearing would have had to have been adjourned as the husband had not been on sufficient notice of the application. Necessarily, the contravention would have had to have been determined either before or at the same time as the final hearing. This is because the contravention concerned interim orders which would no longer be operative once final orders were made. If the wife seriously wanted to pursue her contravention application, she would have filed it much earlier.
The wife also made claims about her health but did not file medical evidence in the proper form to support her claims. It is not sufficient to simply annex a one page letter to her trial affidavit. If there is a serious issue to be tried about a party’s health so as to be relevant to a s.75(2) argument, it is incumbent on that party to file expert evidence. That requires a medical report annexed to an affidavit of the author of the medical report and for the author of the report to be available for cross-examination.
The lack of this evidence cannot be cured by cross-examining the husband about the wife’s health. He is not an expert. The fact that the wife suffers from migraines periodically does not assist the Court in determining whether her condition impacts on her future needs so as to justify an adjustment in her favour in the absence of expert evidence.
Both parties’ conduct with respect to disclosure is also unsatisfactory. As a result of the poor preparation in this case, although little time was taken up in court, significant time has been required to analyse the significant documentary evidence.
Acquisition of properties
The parties bought the Property O property in 1998 for $240,000 with a mortgage of $220,000.
They bought a second property, the Property G property, for $240,000 in 2003 with a mortgage of $205,000.
The business
The parties purchased a business in 2007 for $50,000 and they bought the business through a company entitled [F], ABN [1]. Initially, they had two other partners. They have since bought these partners out. The wife was responsible for the administration and bookkeeping and the husband taught various classes and managed the non-financial aspects of the business. There is a dispute between the parties as to how well the business was performing before the husband locked the wife out of the business in September 2014.
The financial statements do not show a healthy business:
Profit and loss sheets
2014 2013 2012
Gross profit trading: $383,150.40 $358,189.04 $376,147
Total income: $391,765.61 $395,205
Total expenses: $404,675.56 $386,160.53 $387,291
Accumulated profits: $11,603.50 $5,605.08 $7,914
The letter from the parties’ accountant dated 22 July 2012 notes that the profit recorded as being $69,648 was only because of the business partners not taking wages. It had a negative working capital of $42,635 indicating an insolvency problem. A letter from the accountants dated 31 July 2012 refers to the two previous defaults on the Australian Taxation Offices (“ATO”) instalment payment plan and the ATO’s refusal to allow the business to enter into another plan.
The wife says that the business was successful as they were attracting more clients. This is a true indicator of success, however the financial records of the business do not paint a healthy future. The death of the business increased when the parties bought out the other business partners in 2012. The parties refinanced the loans on their properties and borrowed $150,000 ($50,000 of this was used to pay out the old loan). The wife says $30,000 was used to pay out their partners and $20,000 to pay out their business partner’s credit card debts.
The wife denies remembering seeing a letter from the business accountant in 2011 flagging insolvency. She had to concede that there was an issue with the ATO that she defaulted on the instalment arrangement for payment of that debt. The wife maintained under cross-examination that the business was successful because of increased clientele and more money coming in despite the fact that the business had increased debt.
She agreed that she was responsible for the financial aspects of the business and says she liaised a lot with the accountants and had a bookkeeper working five hours a quarter.
The wife agreed that she took money out of the business to pay lawyers and says the husband agreed to that as they were trying to resolve matters amicably.
The wife’s father did some work in the business but is not listed as an employee, although she denied that he was paid cash.
In re-examination, the wife’s counsel asked her if there was cash in the business other than what was declared. The wife replied that there was a lot of cash in the business from birthday parties hosted on weekends. She said that those parties earned anywhere from $303,000 and up to 3 months in advance the business was holding deposits. Her counsel then asked if it was declared as part of the business income. The wife answered it was not. The wife’s evidence is indicative of their possibly being fraud committed with respect to income declared to the ATO. As I indicated to the parties very clearly during the course of the hearing, I will be requesting the Principal Registrar of the Court to provide a copy of judgment and court documents to the ATO for the ATO to consider whether or not it should carry out any investigation into any possible fraud conducted by the parties.
The wife said there were about 32 casual staff paid weekly and that the loans were really managing cash flow. At that point, counsel for the wife advised that her father would no longer be called as a witness and the wife would not be relying on his affidavit.
The wife did not impress me as having a sound grasp of the financial aspects of business.
It is clear that the husband has less understanding of the business than the wife. He says that he locked the wife out of the business after discovering that the wife had frozen personal accounts and that when he went to the bank, he discovered there were bills outstanding and a lot of debt. The husband says he signed papers but was not aware of the business’ financial position until he took it over.
The wife says the business was doing well and was able to pay all its liabilities as and when they fell due. She refers to the sales turnover of $400,000 per year. It is not the case that the business was paying all its debts as and when they fell due. If that was the case, it would have not been necessary to enter into a payment plan with the ATO, which was ultimately defaulted on. The sales turnover is not indicative of the overall financial health of the business.
The affidavit that the husband filed last minute gives very specific answers regarding the finances of the business, for example at paragraph 18. It was clear during the course of cross-examination that the husband had a very poor grasp of the financial position of the business. He said he spent a lot of time working with his barrister to work through the financials and would need to look at them to be able to answer questions.
The husband admits that he took $15,000 out of the business account in September 2014 but says that he put it back in increments. He was not however able to produce the relevant bank statements to show this.
The husband obtained a valuation but it was only on plant and equipment, not the business itself. This does not necessarily equal the value of the business. This is particularly so when the husband continues to work in the business and has the profile that he does in [omitted].
The husband says he sold the business. The wife doubts that the business was actually sold. The husband’s evidence on this point is somewhat contradictory and confused. If he did sell the business, it was a very rash decision, unilaterally made.
The husband says he organised the business to be sold with a business broker called Paramount. He signed an exclusive 60 day agency agreement with them on 30 September 2014. This is within a couple of weeks of locking the wife out of the business and after the wife commenced proceedings on 19 September 2014.
The husband says he sold the business to Mr M for $15,000. The ASIC records paint a confusing picture. The records show:
a)Mr M was appointed as director on 24 October 2014. He uses a similar company name;
b)The husband ceases to be a director on 12 November 2014, he says this is because he sold the business;
c)The husband is re-appointed as a director on 28 March 2015 and resigns again on 31 March 2015;
d)The husband is re-appointed on 27 April 2015;
e)Mr P was appointed as director on 1 November 2014 and ceased as a director on 27 April 2015.
The husband claims that Mr M bought the business that started a new company to do that. There is a company called “[F] Pty Ltd”, ABN [2], established on 16 October 2014 with Mr M as director.
The husband says that Mr P took over the old company but not to operate the business. When he was asked if he was saying that Mr M sold the business to Mr P, the husband said he was getting confused. He said there were entity issues when the business was sold and that the corporate trustee was sold inadvertently. He says it had something to do with the trust and that he had to be the one to wind it up. The wife’s counsel put to the husband that it was a sham sale and that he still operates the business. The husband denies this and said he is self employed as [omitted] there but does not run the business.
The husband says he entered into an employment agreement for a $974 weekly salary with Mr R. The wife annexes an unsigned copy of the agreement to her affidavit. She says the husband did not change the password to the business email account for several months so she was able to obtain some business documents which she has annexed to her affidavit. This includes a draft contract for the sale of the business for $15,000 attached to an email dated 12 February 2015. He said he was running classes and helping out and does not have to worry about the debts and that he has more money than before. However, he agreed that the debt is still there. In fact, there is a significant debt outstanding which is why it does not make sense for the husband to sell the business so quickly for such a low price. The husband says that there is no goodwill in the business and that he would be lucky if there was a couple of hundred paying members. The husband obtained the valuation of the plant and equipment.
The wife’s counsel put the proposition that the husband was either so incompetent that he sold the business for less than it is worth or it was a sham sale and he is still operating a business. The husband denies this but that conclusion is irresistible on the balance of probabilities. The husband says that when he saw the state of the business he went to the accountant who told him to wind up. He did not consult the wife and did not bring evidence in proper form from the accountant and called the accountant’s evidence. The wife’s counsel put to the husband that the wife is entitled to be suspicious because of his refusal to comply with court orders to provide information. The husband says that it is the fault of the lawyers and not him, but that is not correct. The husband had an obligation to comply with the orders and he would have had the business books and financial records in his possession if he was selling the business. It is not acceptable to blame his solicitors. He was in court on the three occasions when orders were made for him to provide the books of the company. He was well aware of his obligation and did not fulfil it.
The husband says that Mr M sold the business for about $25,000. If that is correct than that is indicative of the husband underselling the business, but I cannot be confident that that is what occurred because the annexure to the husband’s own affidavit is a letter from Paramount and business brokers dated 20 November 2014 which says that he was contacted by the husband on 23 September 2014 to sell his business and that the husband signed a 60 day listing agreement. He says at the end of the 60 day exclusive period, the husband told him that the business was to be taken off the market. This is completely inconsistent with the husband’s evidence under cross-examination. The valuation he obtained of the plant and equipment which were valued at $15,000 was dated 29 October 2014. The husband also annexes a letter from [omitted] dated 25 July 2015 which says that any emails sent from the email address [omitted] was due to a failure to update the management software and that that was the old owners address and not the new owner’s address. That letter was simply addressed ‘to whom may concern’. The author was not available for cross-examination. It seems like a very dubious explanation and is more supportive of the husband remaining involved in the business, because on the husband’s case, that email address would have been used incorrectly for six months or more. There is also a draft contract of sale dated 5 February 2015. The evidence of the husband simply does not hold up to scrutiny.
The husband says that whatever cash he received in the business he gave to the wife.
The draft balance sheet prepared as at 30 September 2014 shows a net deficit of $248,152.18. However, it is important to note the entry described as drawings to pay back Mr and Ms Laurens of $193,833.73. It is apparent that the parties kept the business going by increasing the debts secured over their real properties. Due to the husband’s extremely late disclosure and lack of compliance with previous orders, the wife did not have the opportunity to put on evidence as to what the business was worth. Whilst the poor financial performance, perhaps even financial mismanagement of the business, is the responsibility of both parties, this being a joint endeavour, what happened to the business after September 2014 is the sole responsibility of the husband.
Neither party was a reliable witness.
The parties did not spend any time at the hearing on the balance sheet. The parties do have different figures in their case outlines. I have used the wife’s figures for the real estate values. The husband cannot rely on market appraisals annexed to his affidavit filed the day before the hearing. As the husband has the up to date accounts for the business, I will use his figures for the business liabilities. I will not include the parties’ furniture. Each party will keep what they have. I also will not include the parties’ personal accounts and credit cards. Each party shall be responsible for their personal credit card debts and any balance in their bank statements.
Neither counsel made submissions about whether the parties’ superannuation should be dealt with in a separation pool or one pool. In these circumstances, I will include the parties’ superannuation interests in a single pool with the other assets. The wife seeks a superannuation splitting order from the husband’s superannuation.
The parties’ legal and equitable interests
As best as can be determined, the parties have the following interests:
Assets
Property O $660,000.00
Property G $380,000.00
[omitted] Vacation Club Membership $15,000.00
Ford Territory (husband) $35,000.00
Wife’s superannuation $33,170.00
Husband’s superannuation $82,045.24
$1,172,045.24
Liabilities
Mortgage Property O $358,887.00
Mortgage Property G, $212,128.00
[F] loan #6650 $155,289.97
[F] business one #2585 $3,343.95
[F] overdraft #6856 $31,503.27
[F] ATO debt $32,429.60
Ford Territory loan $29,314.04
$349,199.91
I am not including the parties’ personal bank accounts and credit card debts in the balance sheet. Each party will retain their bank accounts and be responsible for their own credit card debts. As I am not including the business at $15,000, I am also not including the partial property settlement which is said to represent half of the sale proceeds, as that would be unfair to the wife.
The Legislation
Part VIII of the Family Law Act1975 (“the Act”) is the part of the Act dealing with property, spousal maintenance and maintenance agreements. The major provisions relating to marital property division are contained in ss.79(1); 79(2); 79(4); & 75(2) of the Act.
Pursuant to s.79(1) of the Act, the court is authorised to make such order as it considers appropriate in order to alter the interests of the parties to a marriage with respect to property.
The expression “property” is defined in s.4(1) in relation to the parties to a marriage or either of them as meaning “…property to which those parties are, or that party is, as the case may be, entitled, whether in possession or reversion.”
Pursuant to s.79(2), the court is actively prevented from making such an order unless it is satisfied that it is just and equitable to do so in all the prevailing circumstances. This follows from the use of the prohibitory words “shall not” in the relevant section.
Section 79(4) provides the mechanics of how a court is to make an order altering marital property interests.
Paragraphs (a), (b) and (c) categorise contributions made by marital partners, which are relevant. Paragraph (d) directs the court to take into account any order regarding the earning capacity of either party to the marriage concerned.
Paragraph (e) directs the court to consider a list of matters contained in s.75(2), which are germane to spousal maintenance or the prospective positions of the parties concerned by reference to their respective financial resources, means and needs. Finally, paragraphs (f) and (g) apply to child support and previously made parenting orders, as relevant. There is some overlap between these various provisions and not all will be applicable in every case.
Until the High Court decision in Stanford & Stanford (2012) 247 CLR 108; (2012) 293 ALR 70; (2012) 87 ALJR 74; (2012) 47 Fam LR 481; (2012) FLC ¶93-518; [2012] HCA 52, the position in respect of the process to be applied to the resolution of matrimonial property cases was said to be well settled with a preferred approach as set out by the Full Court in Hickey & Hickey & Attorney-General (Intervener) (2003) 30 Fam LR 355, [2003] FamCA 395, (2003) FLC ¶93-143 at 78,386 [39].
The High Court considered the operation of s.79 in the matter of Stanford. In this case, the majority stated at [35]-[36] that:
“It will be recalled that s 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, it is just and equitable to make the order.”
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 definition. It is not possible to chart its metes and bounds.” [Footnotes omitted]
The High Court found three fundamental propositions with respect to the application of s.79, which can be summarised as follows:
1.Firstly, in order to ascertain whether it is just and equitable to make a property settlement order, it is necessary to identify the existing legal and equitable interests of the parties in the property. The High Court emphasised the word ‘existing’.
2.Secondly, although s.79 gives the court a broad power to make property settlement orders, it may not be exercised in an unprincipled fashion. There must be no assumption that the parties’ interests are or should be different to their existing interests.
3.Thirdly, when considering whether making a property settlement order is just and equitable, the court must not assume that one or the other party has the right to a property adjustment order. The court must give separate consideration to s.79(2) in addition to the matters referred to in s.79(4).
In Stanford, the High Court indicated that, in the vast majority of matrimonial property cases, the requirements of s.79(2) will be readily satisfied, largely as a result of a consideration of the circumstances of the parties concerned, particularly the nature of their separation.
The High Court also pointed out that what is just and equitable is different in every case.
Stanford casts doubt on the correctness of adding back notional amounts to the pool for the purposes of property settlement. The Full Court confirmed this in Bevan & Bevan (2013) 279 FLR 1, (2013) 49 Fam LR 387, [2013] FamCAFC 116. The Full Court said at paragraph [79]:
“We observe that “notional property”, which is sometimes “added back” to a list of assets to account for the unilateral disposal of assets, is unlikely to constitute “property of the parties to the marriage or either of them, and thus is not amenable to alteration under s 79. It is important to deal with such disposals carefully, recognising the assets no longer exist, but that the disposal of them forms part of the history of the marriage – and potentially an important part. As the question does not arise here, we need say nothing more on this topic, save to note that s 79(4) and in particular s 75(2 (o) gives ample scope to ensure a just and equitable outcome when dealing with the unilateral disposal of property.”
Both parties seek property adjustment orders. Some of their property is in joint names. I am satisfied that it is just and equitable to make property orders adjusting the parties’ legal and equitable interests.
It is difficult to achieve a just and equitable outcome when the case has been poorly presented and both parties have been unreliable. In her final submissions, the wife seeks the whole of the known assets. She bases this firstly on her migraines impacting on her ability to work. There is no evidence to support this submission. The wife also sought an adjustment in her favour because she has the greater care of the parties’ daughter. The husband is currently only spending a few hours a fortnight with [X] supervised by the wife’s parents. The husband has initiated parenting proceedings but they are only at the early stages. This factor does justify an adjustment in the wife’s favour.
In her case outline, the wife seeks orders for the husband to refinance the business loans into his sole name and to indemnify the wife. That order is unrealistic. The husband will not have either real estate to provide as security. The business debt is $194,556.79. Whilst I accept that the figure of $15,000 is not the value of the business, nor is the financial health of the business such that if the husband did sell the business he received a sum that would greatly reduce that debt. The wife has also has to take some financial responsibility for the amount of debt. The parties entered into the business together. The wife controlled the finances. Clearly neither party is a sophisticated business person.
The husband should be responsible for a greater proportion of the debts because of his reckless dealings with the business post separation and his lack of disclosure. This will be addressed by way of adjustment in favour of the wife under s.75(2).
The husband has a higher income than the wife. The wife has some capacity to earn an income. The wife is reliant on Centrelink benefits. She does not have the capacity to take on the mortgage of the Property O property. The equity in the [G] property will not be sufficient to discharge the business debts. Both properties will need to be sold.
The wife will receive an adjustment of 20%. There will not be enough equity in the investment property to pay out the mortgage and the whole of the business debts. On the current figures, there will be a shortfall of $54,694.79. The actual shortfall is likely to be higher as there is no allowance for the selling costs. The parties also refer to capital gains tax but neither party has attempted to give any figure for that.
I will order the Ford Territory be transferred to the wife subject to the encumbrance. The wife will need to either take over the debt or discharge it. On the available figures, the equity in the Ford Territory is $5,685.96. The husband will retain the interest in the [omitted] Vacation Club which the parties’ attribute a $15,000 value to. I am not making an adjustment as to divide the value of these two assets as to 70% to the wife and 30% to the husband as the amounts are small and it would make the orders more complex.
Whilst I am not satisfied that the business is worth $15,000, it is also not worth such a significant sum once the debts would be discharged.
It is also clear from the wife’s evidence that the parties may have defrauded the ATO by failing to declare cash income earned in the business. As I indicated during the hearing, I am referring the papers to the ATO. There may be further financial consequences for the parties as a result but that is a consequence of their own misconduct.
I certify that the preceding seventy-five (75) paragraphs are a true copy of the reasons for judgment of Judge Harland
Associate:
Date: 9 October 2015
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