LEANDER & SCANNELL
[2020] FCCA 2830
•26 October 2020
FEDERAL CIRCUIT COURT OF AUSTRALIA
| LEANDER & SCANNELL | [2020] FCCA 2830 |
| Catchwords: FAMILY LAW – Property dispute – parties in person – added to hearing days – husband did not provide full disclosure – preparation and production ‘on the run’ – business treated as a cash box – parties not always commercially astute with decisions – applicant wife made greater overall contributions and as primary carer has greater needs. |
| Legislation: Family Law Act 1975 (Cth), ss.75(2), 79 |
| Cases cited: Re F (Litigants in Person Guidelines) [2001] FamCA 348 Jewel v Jewel [2013] FCWA 81 Stanford v Stanford [2012] HCA 52 Carter & Carter (1981) FLC 91-061 Waterman & Waterman (2017) FLC 93-762 Chang & Su [2002] FamCA 156 Rolfe & Rolfe (1979) FLC 90-629 Mallet & Mallet (1984) FLC 91-507 Rainbird & Rainbird (1977) FLC 90-256 Freeman & Freeman (1979) FLC 90-697 Read & Read (1984) FLC 91-527 Gosper & Gosper (1987) FLC 91-818 Kessey & Kessey (1994) FLC 92-495 Calverly and Greene (1984) FLC 91-565 NHC & RCH (2004) FLC 93-204 Wilde & Wilde [2007] FamCA 1044 AJO & GRO [2005] FamCA 195 DJM & JLM [1998] FamCA 97 Townsend & Townsend (1995) FLC 92-569 Kowaliw & Kowaliw (1981) FLC 91-092 |
| Applicant: | MS LEANDER |
| Respondent: | MR SCANNELL |
| File Number: | MLC 1107 of 2017 |
| Judgment of: | Judge Curtain |
| Hearing dates: | 25 November 2019, 12 February 2020; 10 & 13 July 2020, 13 July 2020, 10-12 and 14 August 2020, 24-25 August 2020, 7 September 2020 and 14 September 2020 |
| Date of Last Submission: | 14 September 2020 |
| Delivered at: | Melbourne |
| Delivered on: | 26 October 2020 |
REPRESENTATION
| The Applicant appeared in person |
| The Respondent appeared in person |
ORDERS
The Applicant wife have the sole right title and interest in the real property situate at and known as B Street, Suburb C, Northern Territory (“the real property”) to the exclusion of the Respondent husband, and it is declared that the Respondent husband has no right, title or interest in the real property.
Within 120 days of the date of these Orders the Applicant wife shall do all acts and things necessary including signing all documents as may be required to discharge the mortgage in the parties’ joint names and refinance same into her sole name secured over the real property.
Within 60 days from the date of these Orders, the Respondent husband do all such acts and sign all such documents as may be necessary to transfer to the Applicant wife, at the expense of the Applicant wife, the Motor Vehicle 1 on an unencumbered basis, if it is not already in her name.
In relation to the following corporate entity and trust:
(a)D Pty Ltd;
(b)The Scannell Family Trust
(“the Corporate Entity and Trust”)
the parties shall within 60 days do all acts and sign all documents as are necessary for the Applicant wife to resign any and all offices she holds in the Corporate Entity and Trust and relinquish any and all right and title in the Corporate Entity and Trust and assign to the Respondent husband, at their equal joint expense, any interest and/or entitlement she may have in the Corporate Entity and Trust inclusive of but not limited to transferring to the Respondent husband any shares in the company and all credit and debit loan accounts.
The Respondent husband within 90 days shall do all things necessary and sign all necessary documents to liquidate the company in Order (4)(a) above and wind up the trust in Order (4)(b) above at the equal joint expense of the Applicant wife and Respondent husband.
In addition to, and without limiting his obligations pursuant to Order (4) herein, the Respondent husband shall indemnify and keep indemnified the Applicant wife with respect to any liability (past, present or future) in the name of the Corporate Entity and Trust save for the Applicant wife’s personal tax liability arising from same and the business “E Company” and the $100,000 business loan with Westpac Bank referred to in Order (7) below.
The Applicant wife shall within 120 days wholly pay the monies owing including interest and charges for the $100,000 business loan with the Westpac Bank (...59) and indemnify the Respondent husband in relation to same and $3,500 to F Accounting.
In the event that either the refinance in Order (2) and/or the payment in (7) have not been wholly made within 120 days save for the $3,500 to F Accounting then the Applicant wife shall do all things necessary and sign all necessary documents for the real property be forthwith sold altogether out of Court (“the sale”) and upon completion of the sale, the proceeds of the sale be applied:
(a)firstly, to pay all costs, commissions and expenses of the sale;
(b)secondly, to discharge the mortgage and any other encumbrance affecting the real property;
(c)thirdly, to discharge the Westpac Business Loan of around $100,000 referred to in Order (7) above; and
(d)fourthly, the balance to the Applicant wife.
Pending the payment or completion of the sale, the Applicant wife have the sole right to occupy the real property and during such right of occupation the Applicant wife pay all instalments pursuant to the mortgage and all rates and like apportionable outgoings of the real property as they fall due.
The Respondent husband have the sole right title and interest in:
(a)the business known as “the G Company”;
(b)H Pty Ltd; and
(c)the H Pty Ltd Family Trust
to the exclusion of the Applicant wife and the Respondent husband shall indemnify and keep the Applicant Wife indemnified in respect of any liability (past, present or future) in the name of the entity, trust and business referred to in (a), (b) and (c) above.
The parties shall within 30 days do all things necessary and sign all necessary documents including but not limited to correcting any business records in relation to the tax liability for the Applicant Wife for the business known as “E Company” and the Corporate Entity and Trust referred to in Order (4) to be reassessed by an accountant nominated by the Applicant Wife at her expense with the Applicant Wife being at liberty to lodge any Amended Tax Return or Returns for same.
Unless otherwise specified in these Orders and save for the purposes of enforcing any monies due under these or any subsequent Orders:
(a)each party be solely entitled to the exclusion of the other to all real and personal property (including choses-in action and shares) registered in the name of or in possession of such party, or to which that party is legally or beneficially entitled, as at the date of these orders;
(b)monies standing to the credit of the parties in any bank account are to become the property of the party in whose name the account is registered;
(c)each party retain for their sole use and benefit any superannuation or employment related benefits accrued in their sole name;
(d)insurance policies remain the sole property of the owner named therein;
(e)each party be solely liable for and indemnify the other against any liability encumbering any item of property to which that party is entitled pursuant to these Orders;
(f)each party be solely responsible for any liability of whatsoever nature and kind in their respective names, including but not limited any credit card liability, and
(g)any joint tenancy of the parties in any real or personal estate is hereby expressly severed.
The Respondent husband and Applicant wife, their servants and agents shall promptly do all things necessary and execute all necessary documents to ensure full compliance with these Orders.
Otherwise all extant applications before the Court be and are hereby dismissed.
IT IS NOTED that publication of this judgment under the pseudonym Leander & Scannell is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT MELBOURNE |
MLC 1107 of 2017
| MS LEANDER |
Applicant
And
| MR SCANNELL |
Respondent
REASONS FOR JUDGMENT
Introduction
In an effort to assist the parties focus on and prepare for the future trial, there were series of short directions hearings at the City J Circuit.
On 12 February, 2020 with the above in mind, I had the following conversation:
“…HIS HONOUR: How soon can you get a valuation?
MR SCANNELL: I could organise one tomorrow. I also need to do my financial report which I haven’t done.
HIS HONOUR: Okay. How soon will you be able to get that done?
MR SCANNELL: Yes, I can do that today/tomorrow as well.
HIS HONOUR: No, no. Not today/tomorrow. I want it done properly. I don’t want anything missed. I want it clear that there’s a lot of involvement with you and moneys and property as is this lady. We’ve got to have the history of that very clear for both of you and me. I don’t want to have a hearing in Melbourne and you say, “Don’t know what happened to that”, or there’s documents there you haven’t produced. So, all right. Now, let’s get back to discovery. Is there some documents you haven’t produced that the wife wants to see?...”
Notwithstanding the above comments, there was an ongoing dispute at trial about discovery and full and frank disclosure by the parties.
In April, 2017, the Applicant wife, caused an Initiating Application to be filed in our Court seeking parenting and property relief following the parties’ separation fourteen months earlier.
Little did she know at that time that three years later, the saga of seeking final property orders would be an on-going challenge for them both. Initially the parties had lawyers, but from 31 July, 2018 they were appearing in-person and their ignorance of this Court’s practice and procedure led to a number of adjournments of the pre-trial and trial hearings for the parties to comply with earlier orders for disclosure, or for the need for further discovery and inspection, or filing of more detailed affidavits to assist the court in unravelling their joint roles in a failing business purchased by them in 2013 called “E Company”, (hereafter called “E Company” or the “E business”).
This business was only recently sold and settled in late 2019. The Respondent husband post-separation purchased a G Company business which had the effect of further muddying the financial waters in which both parties were wading.
Background
The parties cohabited from 2003, when the Applicant wife was aged 20 and the Respondent husband 21, they were married in 2004 and separated on 6 February, 2016, a period of 13 years. They initially lived in the Northern Territory until moving to City J in 2009 along with their two children, X born in 2005, and Y born in 2008.
On 17 November 2017 Final Parenting Orders were made by consent which, inter alia, provided:
1. The parties have equal shared parental responsibility for the children X born in 2005 (“X”) and Y born in 2008 (“Y”) (collectively “the children”).
2. The children live with their mother.
3. The mother be permitted to relocate the children’s residence to the Darwin area as of the 15th January 2018.
4. The parties do all such acts and things and sign all necessary documents to enrol the children at K School (Northern Territory) commencing the first school term 2018
There were also orders for the children to spend time with the Respondent husband prior to leaving City J and after relocating to Darwin, amongst other parenting Orders.
Subsequently, the Respondent husband caused an Application in a Case to be filed in in February 2018 seeking to re-litigate the parenting issues as the Applicant wife decided to delay her move to Darwin, “…until later this year”. At paragraph 7 of her Affidavit filed 21 February 2018, the Applicant wife said “…In accordance with the Interim Property Orders made on the 17th November 2017(“the interim Property Orders”) I have left the management of our family business to the husband. The business is still on the market for sale. I am worried that the husband may not be able to manage the business to its full potential and if I am not available to assist, it will lose its value as a going-concern.”
I note that the Applicant wife still resides in City J with the children, and that further final parenting Orders were made by consent on 26 July 2019 as follows:
1.All previous parenting orders be discharged.
2.The mother and father have equal shared parental responsibility for the long term decisions regarding the care, welfare and development of the children, X born in 2005 and Y born in 2008 (“the children”).
3.The children live with the mother.
4.The children spend time and communicate with the father as follows:
(a)During school terms, each alternate weekend commencing 26 July 2019 from Friday at the end of school until the end of school or 3.15pm on Wednesday on condition he does not work whilst the children are in his care.
(b)For one half of all school term and long summer holidays with the dates and times to be determined by agreement between the parties,
(i)To reach an agreement in relation to the holiday period, each party is to provide the other with a nomination as to which part of the holidays they wish to spend with the children no later than 60 days prior to each holiday period.
(ii)In the absence of agreement, the children spend the first week of the holidays with the father in the first and third term breaks and the second week for the second term and with the mother for the first half in the second term and long summer break.
(c)In 2020 and each alternate year thereafter, the children shall spend time with the mother from 5.00pm Christmas Eve until 3.00pm Christmas Day and the children shall spend time with the father from 3.00pm Christmas Day until 10.00am Boxing Day;
(d)In 2019 and each alternate year thereafter, the children shall spend time with the mother from 3.00pm Christmas Day until 10.00am Boxing Day and the children shall spend time with the father from 5.00pm Christmas Eve until 3.00pm Christmas Day;
(e)If the time that the children would normally spend with the mother falls on Father’s Day then the children shall spend time with the father from 10.00am until 5.00pm on Father’s Day;
(f)If the time that the children would normally spend with the father falls on Mother’s Day then the children shall spend time with the mother from 10.00am until 5.00pm on Mother’s Day;
(g)If Y’s birthday falls on a time that the children are not spending with the mother, the children shall spend time with the mother from 2.00pm that day until 2.00pm the following day; and
(h)If Y’s birthday falls on a time that the children are not spending with the father, the children shall spend time with the father from 2.00pm that day until 2.00pm the following day;
(i)As otherwise agreed between the parents from time to time; and
(j)On each parent’s birthday the children are to be with the respective parent from 5.00pm the previous day until 9.00am the day after the birthday.
5.The time that the children spend time with the father in sub-paragraph 4(a) hereof shall be suspended during all the school term holidays.
6.The children’s time with the father be conditional upon the following conditions:
(a)For 24 hours prior to and during any time spent with the children, the father be restrained from consuming alcohol.
(b)The father ensure that the children’s homework is undertaken by the children.
(c)He prioritises the care of the children over his engagement in online gaming activities.
7.The children’s time with the father shall be conditional upon the father not residing with the children or spending any overnight time (between 8.00pm and 8.00am) at any of his places of work being the G Company, Town L, Victoria or City J, Victoria save for a meal for no more than 2 hours.
8.Each parent is authorised to receive, at their own expense, copies of all school reports, newsletters, photos and other school documentation relating to the children and to attend all functions, interviews, sports days, concerts and other activities normally attended by parents.
9.Each parent is authorised to receive the usual medical information about the children and to liaise with their treating medical practitioners, however the father is not authorised to change the children’s primary contact details from the mother’s to his own.
10.Each parent is to keep the other informed of the children’s health and any health issues as well as any procedures or operations to be undertaken prior to those procedures, or operations being undertaken.
11.Each parent is restrained from denigrating, criticising, belittling, abusing or harassing the other parent in the presence of hearing of the children or either of them is not to permit any person to do so. Each parent is to ensure that the children attend school and attend on time, unless the children or either of them are unwell and a medical certificate is obtained.
12.Each parent is to ensure that the children complete their homework when in their respective care.
13.The order for the appointment of the Independent Children’s Lawyer be discharged.
The property dispute has travelled a long, torturous road, partially due to the difficulty in marketing and selling the E business.
The earliest order for sale of the business and for property procedural orders was made on 17 November, 2017 by consent as follows:
Interim Property
24.The husband within 10 days do all such acts and things and sign all necessary documents to list the business, E Company (“the business”) on the market for sale as a going concern, including all existing stock, plant and equipment, with M Agents (or such other broker as agreed between the parties) (“the broker”) (“the business sale”) and by way of consequential arrangements for the purpose of effecting the business sale:
(a)The listing price, sale price and terms of sale for the business shall be as determined by the parties jointly and failing agreement as advised by the broker.
(i)Until 31st December 2017 the wife or her nominee shall have responsibility for managing the business pending sale;
(ii)Thereafter the husband shall have responsibility for managing the business pending sale; or
(iii)Thereafter an agreed nominee shall have shall have responsibility for managing the business pending sale
and the parties shall cooperate in any way with respect to the other’s management and “managing the business” includes paying all normal business liabilities including staff wages and the liabilities owed to the Westpac Bank as required by the Westpac Bank before drawing personal wages.
(b)Both parties shall cooperate in any way with the broker in relation to the business sale, including allowing inspection of the business and business records at times requested by the broker or prospective purchasers.
(c)The husband shall do all such acts and things and sign all necessary documents as director of D Pty Ltd (“the company”) as Trustee for the Scannell Family Trust (“the Trust”) to effect the business sale.
(d)The parties shall jointly retain Mr N, Lawyer, City J, Victoria for the purpose of any business sale and that solicitor shall be renumerated on his standard rates applicable to such transactions.
(e)The husband or his nominee have the option to buy the business and any brokerage fee shall be paid by the husband solely in the event one is charged in this instance.
Proceeds of business sale
25.Upon completion of the business sale the proceeds shall be applied as follows:
(a)First, to pay all costs, commissions and expense of the business sale.
(b)Secondly, to discharge any liabilities of the Trust, company and business including without limiting the generality of the above the various business bank liabilities with Westpac Bank and any liability for any loans or future taxes or duties howsoever arising from the activities of the company and /or the business (“the business liabilities”).
(c)Thirdly the balance to be held in the Trust account of Mr N, Lawyer.
26.Liberty be reserved to either party to apply with respect to the terms, conditions and execution of the business sale.
The Trust and Business Income and Accounting
27.Within 21 days of the date of these Orders the parties do all such acts and things and sign all necessary documents to instruct F Accountants, to complete and lodge all outstanding financial statements and taxation returns for the Trust.
28.The parties do all such acts and things and sign all necessary documents to resolve the Trust distributions for the financial years ending 30th June 2016 and 30th June 2017 on the basis that the Trust income is distributed equally between the parties subject to the parties being satisfied as to the financial statements for those financial years.
29.The Trust pay the individual income taxation liabilities of the parties for the financial years ended 30th June 2016 and 30th June 2017.
Settlement of the sale of the P Street, Suburb O property
30.The proceeds of the sale of the interest in the real property situate at and known as P Street, Suburb O, in the State of Victoria being the whole of the land more particularly described in Certificate of Title Volume ... Folio ... (“the P Street, Suburb O property”) be distributed as follows:
(a)To pay the costs, commissions and expenses of the sale;
(b)To discharge the mortgage to the Westpac Banking Corporation registered number ....
(c)To distribute one half of the balance to Messrs. P Lawyers on behalf of the husband by way of interim adjustment of property to the husband;
(d)To distribute one half of the balance to Q Lawyers on behalf of the wife by way of interim adjustment of property to the wife.
31.To enable settlement of the sale of the P Street, Suburb O property to occur the .husband cause to be withdrawn, at his expense or from his interim adjustment of property referred to in Order 7(c) above, the caveats registered ... and ....
Restraint
32.The parties otherwise be and are hereby restrained from further encumbering or dealing with the property of the marriage save for:
(a)in the normal course of business;
(b)dealings with their own personal income; and
(c)the wife disposing of her interest in the property at R Street, Suburb S, NT as required by the other registered proprietors but the wife must fully keep the husband informed about any such disposal including the value of such interest application of the funds.
Valuation
33.The wife do everything necessary to facilitate the husband obtaining market appraisals and/or a valuation of the property at B Street, Suburb C NT.
34.Unless by 35 days prior to the Conciliation Conference the parties have confirmed in writing an agreement as to the current market value of B Street, Suburb C, Northern Territory then each party forthwith do all acts and things necessary to obtain a joint valuation by an appropriately qualified person as to valuation, such valuation to be sworn to by the expert and filed with the court by not later than 5 business days prior to the Conciliation Conference AND such valuation to be paid by the Scannell Family Trust AND that no other evidence as to the value of the said property be admitted into evidence unless the Court grants leave.
35.Each party ENSURE that their Application/Response seeks a superannuation splitting order (at least in the alternative) AND, if necessary, file an amended application or response, within 28 days, setting out the potential splitting orders and serve same on the other party(s) and relevant superannuation fund(s) (together with notice of the Conciliation Conference date and trial date).
36.The parties (and, if represented, their legal representatives) attend a Conciliation Conference with a Deputy Registrar of the Federal Circuit Court of Australia at the BALLARAT Law Courts Building on 16 January 2018 at 11.00a.m. AND THAT leave be granted to the mother to appear by video link if available, or if not by telephone.
On 22 February, 2018, the parties made further consent Orders as follows:
Property
7.Within 14 days of the date of these Orders the husband provide the following in respect of the G Company business (“the G Company business”):
a.Copies of all documents relating to the husband’s purchase of the G Company business including but not limited to the purchase contract, settlement statement and finance documents;
b.A USB stick with a backup copy of the books of account for the G Company business from the date of purchase to the current date together with the name of the operating software, login and password details; necessary to access information on the USB.
c.Copies of the business activity statements for the G Company Business lodged since the date of purchase;
d.Copies of the husband’s individual taxation return and any entity associated with the G Company Business for the financial year ended 30th June 2017 and notices of assessment;
e.Copies of any freehold lease or lease of the G Company business demonstrating any options to renew;
f.Records of cash and EFTPOS sales from the G Company business cash registers from the date of purchase to the current date.
8.Within 7 days the wife, on behalf of both parties, notify the parties’ business broker that there is a deadline for the making of offers to purchase the parties’ E Company business (“the E business”) being 31st March 2018.
9.If by the 31st March 2018 the E Company business is not the subject of a contract of sale the parties do all such acts and things and sign all necessary documents to obtain, at equal cost. a joint valuation by an appropriately qualified person as to valuation, such valuation to be sworn to by the expert and electronically filed with the court by no later than 5 business days prior to the mediation AND no other evidence as to the value of the said E Company business be admitted into evidence unless the Court first grants leave.
10.If prior to the 31st March 2018 a firm offer to purchase the E Company business, evidenced by a contract of sale signed by the prospective purchaser (“the offer”), is made in the amount of $595,000 or higher, then the husband shall have the first right of refusal and must within 48 hours of the receipt of the offer (“the option date”) elect, in writing, to purchase the E Company business at the same price. In this event the husband shall bear all brokerage fees and commissions in relation to the sale of the E Company business.
11.If the husband fails to elect to purchase the E Company business by the option date then the parties shall do all such acts and things and do all such documents to accept the offer.
12.Unless by the 12th March 2018 the parties have confirmed in writing an agreement as to the current market value of:
a.The G Company business;
b.The wife’s one third interest R Street, Suburb S, NT;
c.B Street, Suburb C NT;
then each party forthwith do all such acts and things necessary to obtain, at equal cost, a joint valuation by an appropriately qualified person as to valuation, such valuation to be sworn to by the expert and electronically filed with the court by no later than 5 business days prior to the mediation AND no other evidence as to the value of the said property be admitted into evidence unless the Court first grants leave.
13.Each party ENSURE that their Application/Response seeks a superannuation splitting order (at least in the alternative) AND, if necessary, file an amended application or response, within 28 days, setting out the potential splitting orders and serve same on the other party(s) and relevant superannuation fund(s) (together with notice of the Mediation date and trial date).
If that was not enough, further consent Orders were entered into on 7 August 2019 which provided:
1.The parties do all such things and sign all such documents necessary to enable the Accountants (F Accounting) to provide by way of financial disclosure:
(a)Quick books date file for Scannell Family Trust; and
(b)The H Pty Ltd Family Trust Deed; and
(c)Quick books date file for the H PTY LTD Family Trust; and
(d)Details of any loan accounts held by Mr Scannell
within 7 days of this Order.
2.Should the respondent fail to comply with Order 1, the respondent shall direct the Accountant to provide the documents listed from (a) to (d) to the applicant within 14 days of a request by the applicant.
3.The respondent and applicant to provide the following documents to the other party within 28 days of this order:
(a)Individual tax returns of each party from 2016 to 2019;
(b)Bank statements where each party is an individual or joint account holder including but not limited to savings accounts, loan accounts, mortgage accounts, credit cards from 2016 to 2019;
(c)Records of cash and Eftpos sales from the G Company Business cash registers from the date of purchase to the current date with the mother to copy at her expense and time;
(d)Details of any assets sold or transferred by each party following the date of separation;
(e)Two kerbside valuations of the G Company Business.
After attempting to commence the trial on 20 November 2019, the matter was adjourned part-heard because of the need for full compliance with earlier orders as detailed above. On that day, I made the following orders:
1.The property dispute of this matter be listed to the Ballarat sittings of this Court on 12 February 2020 at 10.00am for a Part Heard Defended Hearing.
2.The parties make, file and serve no later than 5 February 2020:
(a)An updated affidavit detailing their orders sought and all allegations relevant to the property dispute;
(b)An updated Financial Statement if the current document is out of date; and
(c)An agreed list of the agreed value of all property and property valuations of any disputed value.
3.The parties undertake discovery and inspection no later than 25 January 2020 of the following documents:
(a)The wife is to provide to the husband:
(i)ANZ Accounts and Westpac Accounts from February 2016 to the present in the wife’s name; and
(ii)Court documents that state the wife has no interest in the property and that no payment has been or should be made to her; and
(iii)All debts to be disclosed; and
(iv)Title search on R Street, Suburb S; and
(v)Income statements from B Street, Suburb C from 2016.
(b)The husband is to provide to the wife:
(i)All bank statements since separation in relation to either personal, either company being the G Company or E Company and joint accounts; and
(ii)Valuations of the G Company and the house; and
(iii)Financial report from the husband; and
(iv)Discovery and inspection of the documents in relation to the purchase and debts associated with the property purchased in his or his partner’s name at the P Street, Suburb O property and copies of bank records of all accounts held in the husband’s name or jointly.
Unfortunately when it returned to Circuit on 12 February 2020, I again adjourned the matter part-heard due to non-compliance with earlier Orders, this time to the Melbourne Registry, and amongst others, made the following orders:
3.The Respondent husband’s agent and partner, Ms T make, file and serve an affidavit within 28 days detailing all financial contributions she has made to the defacto relationship and in particular, the purchase of the property situate at U Street, Suburb O.
4.In the event that order 3 herein is not complied with, the Applicant Wife is granted leave to issue a subpoena to Ms T to attend and give evidence in court on the adjourned date.
5.Within 28 days, the Respondent husband provide to the mother all documents in his possession and/or control in relation to the:
(a)Discharge of E Company loan accounts ...05 and ...40;
(b)Closure of E Company business overdraft account ...88;
(c)Closure of the Scannell Family Trust;
(d)List of assets solely or jointly owned by the Respondent Husband; and
(e)Financials of E Company business with F Accounting.
6.The Respondent husband otherwise comply with orders 2 and 3(b) made on 20 November 2019 within 28 days.
7.Within 28 days, the Applicant wife provide the following documents to the Respondent Husband:
(a)Rental income from B Street, Suburb C, Northern Territory for the 2016-2017 period; and
(b)Income received from the E Company business from end of financial year in 2016 to December 2018.
After two days in Melbourne hearing the dispute by way of Microsoft Teams, the start of which was delayed because the Respondent husband had no material with him and had to travel two and a half hours by road to collect the documents, I made the following orders on 13 July 2020:
1.All extant applications be adjourned part heard to 10 August 2020 at 10.00am for Final Hearing (“the Final Hearing”) with an estimated hearing time of two (2) days.
2.The Respondent husband make, file and serve an Affidavit within seven (7) days detailing:
(a)when the sale of the business ‘E Company’ was settled and how the monies were distributed from the sale, annexing any copy documents in his possession, evidencing same;
(b)the drawings from the above business by the parties or paid to each of the parties when operated by the Applicant wife from February 2016 to December 2017 inclusive and January 2018 to its sale when operated by the Respondent husband including any other benefits they received from its operation during those periods;
(c)how the parties’ personal tax debt arose from the operation of the business in Order 2(a) above and over what period it arose; and
(d)what further documents in the possession or control of the Applicant wife that he needs to inspect.
3.The Respondent husband cause accountant Mr V to swear, file and serve an Affidavit within fourteen (14) days regarding the parties’ operation of the business referred to in Order 1(a) by the parties either jointly or severally and if Mr V is reluctant to swear the Affidavit then the Respondent husband have liberty to make, file and serve a Subpoena on Mr V to give evidence by Microsoft Teams or other such medium.
4.The Applicant wife make, file and serve an Affidavit in reply to the Respondent husband’s Affidavit referred to in Order 2, within seven (7) days of being served with the Respondent husband’s Affidavit detailing:
(a)what personal tax liability arose from her operation of the business referred to in Order 2(a) above and what personal tax liability arose from the Respondent husband’s operation of the business and what period; and
(b)detail any further documents in the possession or control of the Respondent husband that she needs to inspect.
This proved to be a very difficult trial for a number of reasons including the parties were acting for themselves, there were no Case Outlines filed by either of them, some material was out of date, and the pool of assets and liabilities had to be determined by the Court notwithstanding my earlier Order for an agreed list. Further, the Court was “flooded” with primary and secondary financial documents by email from both parties in the running that were difficult to tender through Microsoft Teams and needed collating and assessment for their relevance. The hearing was held on a number of different dates at a number of different venues including Ballarat, Melbourne, and by Microsoft Teams by initially in the Court and then at parties’ and Judge’s homes.
Whilst I assisted the parties as best as I could pursuant to Re F: Litigants in Person Guidelines (2001) FLC 93-072 it proved to be a challenging trial for the Court.
The evidence
A. The Applicant wife’s material:
a)Affidavit of the wife, affirmed and filed 8 February 2020 (wherein she also detailed the orders sought);
b)Affidavit of the wife, affirmed and filed on 3 August 2020;
c)Financial Statements filed on 26 April 2017 and 27 June 2019
(it should be noted that not all allegations contained in the material were put to the Respondent husband)
B. The Respondent husband’s material:
d)Response to Initiating Application, filed on 21 July 2017;
e)Affidavit of the husband, affirmed and filed 21 July 2017;
f)Affidavit of the husband, affirmed and filed 16 February 2018;
g)Affidavit of the husband, affirmed and filed 24 January 2019;
h)Affidavit of the husband, affirmed and filed 12 July 2019;
i)Affidavit of the husband, affirmed, and filed 28 July 2020;
j)Financial Statements, filed 21 July 2017 and 11 March 2020;
k)Affidavit of Ms T, filed 11 March, 2019;
l)Affidavit of Mr V, filed 27 July, 2020
(it should be noted that not all allegations contained in the material were put to the Applicant wife)
A. The Applicant wife’s evidence
The Applicant wife initially appeared to be more organised than the Respondent husband, providing a detailed explanation of the orders sought. She was cross-examined twice by the Respondent husband. At first he did not appear to have many questions to ask and was floundering. In the circumstances of the pandemic and the complexity of this case, I gave him another opportunity to regroup and prepare for cross-examination. Therefore, the cross-examination of the husband went first. The evidence of the Applicant wife was generally believable except when she appeared to be evasive in relation to the financial benefits she received from the E business when she solely operated it in 2016 and 2017, and sale of some of its assets when she was planning to relocate to Darwin.
B. The Respondent husband’s evidence
The Respondent husband generally got off to a shaky start because he was poorly prepared. After a couple of days of adjusting to appearing for himself, he started to detail his case fairly well and raise some very relevant topics. He did not appear to be on top of the facts of their financial relationship as much as the Applicant wife, and therefore when their evidence clashed I generally preferred her evidence, save and except in relation to her sole operation of the business and sale of some of its assets. In relation to his sole operation of the business during 2018 and 2019, it appears that the Respondent husband also enjoyed some benefits similar to the wife. They both treated it more as a cash box than as an independent legal entity to be operated on a commercial arm’s length basis.
The evidence of Ms T
This lady is the Respondent husband’s partner and given the allegations of the Applicant wife regarding the purchase of U Street, Suburb O in the partner’s sole name and section 75(2)(m) of the Family Law Act 1975 (Cth), I had her make, file and serve an Affidavit detailing her financial relationship with the Respondent husband. The Applicant wife suggested that the Respondent husband had made significant contributions to the purchase of this realty but the evidence was otherwise. Although the Respondent husband’s parents loaned or gifted this lady $10,000 each to purchase the property, the Respondent husband only contributed $2,800 plus fifty percent of the proceeds of $3,150 they received from the sale of their pups, being a total sum of $6,300. I accept the evidence of Ms T in relation to financial relationship she has with the Respondent husband and that the property was purchased in her sole name primarily from funds she borrowed and saved.
Mr W
This gentleman is the paternal grandfather who loaned monies to the Respondent husband post-separation to assist him in the purchase of the G Company business. He also gave Ms T $10,000 to assist in the purchase of her property. He gave evidence by telephone and was cross-examined by the Applicant wife. I accept his evidence and that he is still owed $35, 225 by the Respondent husband.
Ms Z
This lady resides in Queensland and is the paternal grandmother who also advanced monies to the Respondent husband for the purchase of the G Company business. She also gave evidence that she lent Ms T $10,000 for her purchase of the realty. She gave evidence by telephone and was cross examined by the Applicant wife. I accept the evidence of Ms Z generally and that she and her current husband are still owed $58,500 by the Respondent husband.
Mr V
This witness is the accountant employed by the Respondent husband for some years in relation to their business. He is the deponent of an Affidavit filed on 27 July 2020 executed pursuant to the Court’s Covid-19 Practice Direction.
His evidence was about the parties’ jointly purchased and operated business, titled “E Company”. It was a business name operated through a corporate structure titled “Scannell Proprietary Limited” which was also the trustee for the Scannell Family Trust. It was common ground that the Respondent husband was the sole director of the company but the husband and wife were equal shareholders.
When they separated in February 2016, the Applicant wife initially continued to operate the business with some limited input from the Respondent husband until around June 2016[1]. It was under her full control until late December 2017, when she surrendered control of the business to the Respondent husband. He then continued to operate it in the absence of the Applicant wife until settlement of its sale in December 2019.
[1] See paragraph 45 of the Respondent husband’s affidavit filed 21 July 2017.
To add to the confusion, when the Applicant wife operated the business she used MYOB computer software and retained these records when she left the business in December 2017, whilst the Respondent husband used QuickBooks Online (QBO) and he retained these records. He also initially “blended” some of the business income with the G Company income during 2018, because he said that the Applicant wife retained control of the business bank account.
Mr V had the unenviable task of having to sort out the financial tangle created by these two and I generally accept his evidence, although some of his conclusions and assumptions may not have come from the instructions of both parties.
Mr AA
This gentleman is a professional valuer working in the Northern Territory and he produced a written valuation, instructed by the Applicant wife, for the realty at B Street, Suburb C, Northern Territory dated 1 August 2020. It was tendered and marked ‘Exhibit 14’.
He gave evidence by telephone and was cross examined by the Respondent husband. I accept his evidence. His qualifications and experience were not challenged and I accept that the property now has a current value of $490,000.
Approach to property proceedings
There is a general approach to hearing property applications that has been established over time by the decisions by the Full Court of the Family Court of Australia. This in part was refined following the High Court decision of Stanford v Stanford (2012) 87 ALJR 74.
I adopt the approach detailed by the Honourable Justice Walters at paragraph 72 of his decision in Jewel v Jewel [2013] FCWA 81 which provides:
“72. Assuming a step-based approach to the determination of an application brought pursuant to the provisions of FLA s 79 is still appropriate, it is arguable that the effect of the High Court’s decision in Stanford is as follows:
a) The first “step” in the property settlement exercise is to identify, according to ordinary common law and equitable principles, the existing legal and equitable interests of the parties in their property.
b) The second “step” involves ascertaining whether it is just and equitable to make an order altering the interests of the parties in their property. In most cases – relevantly, where the parties have separated and are no longer living in a marital relationship – the underlying assumptions that the parties had to the effect that the existing property ownership arrangements were functional (or perhaps irrelevant) and could be varied by agreement between them, no longer apply. That fact alone should ordinarily persuade the court that it is just and equitable to make orders altering the parties’ interests in their property. It is only after the Court has concluded that it is just and equitable to make such orders that it should proceed to take what might be regarded as the third and fourth steps.
c) In the third “step”, the court should identify and assess the contributions of the parties within the meaning of ss 79(4) (a), (b) and (c) and determine the contribution based entitlements of the parties.
d) In the fourth “step”, the court should identify and assess the relevant matters referred to in ss 79(4)(d), (e), (f) and (g), including, because of s 79(4)(e), the matters referred to in s 75(2) so far as they are relevant and determine the adjustment (if any) that should be made to the contribution based entitlements of the parties established as a consequence of the previous step.
e) Finally, the court should consider the effect of the various findings and assessments it has made and make such orders as it considers are just and equitable in all the circumstances. As I have recorded above, my view is that this process does not amount to an opportunity to make a further adjustment; it is an opportunity for the judicial officer to determine finally how, in reality, just and equitable orders might be achieved having regard to all the circumstances of the case.”
The pool
Assets
| Asset | Value determined on the best available evidence (rounded to nearest dollar) |
| a) B Street, Suburb C, Northern Territory | $ 490,000[2] |
| b) Motor Vehicle 1 (Applicant Wife’s) | $5,000E |
| c) Savings[3] (Applicant Wife’s) | $1,245E |
| d) Household contents (Applicant wife’s) | $10,000E |
| e) Net sale proceeds of P Street, Suburb O | $24, 335 (paid to the wife) |
| $24,240 (paid to the husband) | |
| f) Joint savings account | $6,744 (paid to the wife) |
| $6,744 (paid to the husband) | |
| g) The “G Company” business – no valuation but Respondent husband produced an agent’s “assessment” at $60,000 but he purchased the business for $110,000 plus stock | $60,000 -$110,000E plus stock |
| h) Motor Vehicle 2 (Respondent Husband’s) | $25,000E to $35,000E |
| i) 2 motorcycles (Respondent husband’s) | $5,500E |
| j) Savings[4] (Respondent husband’s)[5] | $706 |
| k) Household contents (Respondent husband’s) | $10,000E |
| l) Interest in U Street, Suburb O property (Respondent husband’s) (Respondent husband) | $6,300 |
| m) Scannell Pty Ltd and Scannell Family Trust (operated E Company business) | Hollow business shell with unknown value (if any) |
[2] Only valuation of assets provided to the Court.
[3] The Applicant wife’s and Respondent husband’s savings are ignored by the Court to avoid double counting given they are likely to have come from the divided joint account at separation.
[4] Ibid.
[5] The Respondent husband also holds $3750 in savings on trust for the children which was ignored as an asset in this trial by the Applicant wife.
Liabilities of the Respondent husband
| Liability | Agreed or unchallenged or established by evidence (rounded to nearest dollar) |
| n) Car loan | $27,419 |
| o) Debt to parents | $93,725 |
| p) Personal tax liability currently | $68,000E |
| q) Possible tax liability from “E Company” | $12,000E |
| r) Expected tax liability for “G Company” | $89,559 |
Liabilities of the Applicant Wife
| Liability | Agreed or unchallenged or established by evidence (rounded to nearest dollar) |
| a) F Accounting debt | $3,500 |
| b) Possible personal tax liability | $52,000 to $53,000E |
| c) Possible tax liability from 2018/19 and 2019/20 including E Company | At least $12,000E plus, otherwise not known. |
Joint liabilities
| Joint liabilities | Agreed value (currently or unchallenged) (rounded to nearest dollar) |
| a) Westpac loan | $100,000E |
| b) B Street, Suburb C property mortgage | $161,885 |
Superannuation
| SUPERANNUATION | |
| Superannuation | Agreed value (currently or unchallenged) (rounded to nearest dollar) |
| a) Husband’s superannuation | $57,000 as at 21 July, 2017 $32,693 currently plus $19,000 addback being $51, 693 in total |
| b) Wife’s superannuation currently | $21,694 as at 19 April, 2017 $34,097 currently |
There was a dispute about the Applicant wife’s interest in realty located at R Street, Suburb S in the Northern Territory. Her father included her name on the Certificate of Title in 2007 along with his then de facto wife although his daughter made no financial contributions to this; it was a gift. Subsequently there were proceedings between her father and his de facto wife in the Adelaide Registry of the Family Court of Australia and an Order made on 8 April 2016 by the Honourable Justice Dawe which provided that the Applicant wife should be paid $145,662. When examined by the Respondent husband, the Applicant wife said that this order was successfully appealed and set aside. She was paid nothing. The Respondent husband doubted this evidence. He had raised this earlier in the proceedings and I advised him to search the records of the Adelaide Registry. On the last day of the trial he raised this again and as he had failed to do the advised search, I made the following order:..2. Liberty be reserved for the Respondent to apply for a Mention within 7 days in relation to the Orders of the Adelaide Registry of the Family Court of Australia..
The matter was listed for Mention on 7 September 2020 pursuant to this liberty as he forwarded 2 copy Orders from the Family Court of Australia. The first was dated 20 July 2017 made by the Full Court sitting at Brisbane which allowed the appeal and set aside the above order made 8 April 2016.
The second Order is dated 28 November 2018 made by the Honourable Justice Strickland at Darwin which listed the Applicant wife in this case as the Second Respondent, which provided, inter alia, that his former wife’s interest in R Street, Suburb S would be transferred to the First Respondent, the maternal grandfather. On the face of the Order it appears that the Applicant wife received no benefit from being a party to the litigation.
On the morning of 7 September 2020 the Applicant wife forwarded a sealed copy of an Order made by the Honourable Justice Berman made on 18 March, 2020 in the Adelaide registry of the Family Court which provided for the sale of the R Street, Suburb S property and in Order 3(g) for the net proceeds to pay “…in full all amounts outstanding of the ANZ loan...”
However, the Respondent husband also forwarded on the morning of the Mention, a Title Search of the property showing the Applicant wife still on the title. She said she had to transfer her interest to her father but he could afford the cost. I ordered the solicitor for the de facto wife involved in the matter to give evidence by telephone on 14 September 2020.
The solicitor for the maternal grandfather’s de facto wife appeared by Microsoft Teams on 14 September 2020 last, and gave Evidence in Chief that the Applicant wife in this case had no interest in the real property at R Street, Suburb S. When invited to cross-examine the witness, the Respondent husband did not challenge the solicitor’s evidence.
Section 79(2) the 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.
Both sought different financial relief. Given the conflicting proposals, the extent and nature of the debts and with the parties having limited assets, I was satisfied that it was just and equitable for there to be a trial.
Contributions
Section 79(4)(a) the financial contribution made directly or indirectly by or on behalf of a party to the marriage or a child of the marriage to the acquisition, conservation or improvement of any of the property of the parties to the marriage or either of them, or otherwise in relation to any of that last-mentioned property, whether or not that last-mentioned property has, since the making of the contribution, ceased to be the property of the parties to the marriage or either of them
On cohabitation in January 2003, the Respondent husband brought into the relationship a motor vehicle he valued at $3,000 and no other significant assets. The Applicant wife had superannuation, (said by her to have been …“ not a lot of money…”), and an interest in realty at BB Street, Suburb CC in the Northern Territory which she had purchased in 2000. That property was sold in late 2005, and after expenses, left the Applicant wife with $65,000 to $70,000 net which was used by the parties to purchase chattels, pay out a motor vehicle loan of approximately $25,000 and reduce the mortgage over real property situate at B Street, Suburb C in Northern Territory (“B Street, Suburb C”) by around $30,000 to $35,000.
The B Street, Suburb C property was purchased by the Applicant wife in 2003 for $72,000 with monies given to her by the maternal grandfather, Mr DD, in the sole name of the Applicant wife. The parties at this stage had been living together for a few months and the Respondent husband concedes this was a gift to his former partner. Subsequently, with the physical assistance of the maternal grandfather, who was a builder, and who gifted his labour and with over $190,000 borrowed in her sole name, a residence was constructed on this land in around 2004 or 2005. The Respondent husband has not established that he made a financial contribution to this build. It has remained in the Applicant wife’s sole name and after the parties left Darwin in 2009 to reside in City J, it has been generally rented out for years with a company, with the income meeting the rental costs, the mortgage instalments and rates. The net balance was sometimes as high as $7,000 per annum, and sometimes they had a loss of a few hundred dollars. More often than not, it made a profit that was used to benefit the family.
On the first day of trial I asked the Applicant wife what the Respondent husband owned on cohabitation and she said he owned nothing. On the second day of trial I had the following conversation with the Respondent husband:
“…MR SCANNELL: Because, your Honour, I believe some of the statements are true from the applicant, that when we did cohibit – or cohabit, whatever the word is – I did have nothing, your Honour. I came with a vehicle, and that was – that was all; no significant savings, and the assistance from the applicant’s father in purchasing the house was obviously very significant, and I wouldn’t be where I am today, your Honour, without that assistance, and
HIS HONOUR: So you came into this relationship in 2003 with a motor
MR SCANNELL: Yes.
HIS HONOUR: vehicle and no other assets of significance?
MR SCANNELL: That’s correct, your Honour.
HIS HONOUR: Thank you. I just want to make a note of that. Yes, keep going.
MR SCANNELL: Yes, for sure. No
HIS HONOUR: And you say that her father made some contributions on her behalf, did he?
MR SCANNELL: That’s correct, your Honour, yes. Well, obviously the purchase of the land, and the discounted purchase of the building of the house, your Honour, was obviously discounted as compared to what would be a full cost for a normal person, your Honour.
HIS HONOUR: So he built it at a discounted price because it was his daughter?
MR SCANNELL: Correct, your Honour, yes….”
At paragraph 23 of his Affidavit filed 21 July, 2017, the Respondent husband alleges on cohabitation to the best of his …“recollection” he had superannuation of $30,000 and the Applicant wife $10,000. The evidence of the parties at the trial was very different on this topic and given the Respondent husband relied on his …“recollection” and they were 20 and 21 years of age on cohabitation, it is very unlikely they had superannuation of $40,000 in total. I accept their trial evidence.
After initially working as a customer service representative, the Respondent husband was employed full time as a manager and then an office manager at a Darwin business. Subsequently, he worked at the Employer EE as a manager, and solely paid the mortgage instalments, rates and other expenses of the family from late 2005 to 2009 whilst in Darwin.
After relocating to City J in 2009, for 8 months the Respondent husband was working full-time for Employer FF and then working full-time at a company until they purchased the E business in 2013.
He then earned from $50,000 gross to around $60,000 gross from his employment which I am satisfied was devoted to the parties’ and their children’s then assets and needs, but not B Street, Suburb C save for the comments above in paragraph 46.
From cohabitation, the Applicant wife was also employed as a customer service rep and then worked full time with Employer GG and then Employer HH. The parties were married in 2004 after which they travelled throughout Queensland for around 3 months working casually as customer service representatives.
On returning to reside in the Northern Territory, the Applicant wife worked in a shop until 2005. Their first child X was born in 2005 and the Applicant wife was then, in her words…“a stay at home mum”. She continued in this role until the children commenced kindergarten and/or school. Their second child, Y was born in 2008.
As indicated earlier, the family relocated to reside in City J in 2009 and in around 2012 the Applicant wife returned to paid casual employment with Employer GG working shifts and weekends around the Respondent husband’s availability to care for the children. She continued in this casual employment until with borrowed monies they purchased the City J E business in 2013. I am satisfied she used her employment income to support the family or contribute to their assets.
As I noted earlier, they both operated the E business until around mid-2016 when the Respondent husband was locked out and the Applicant wife had sole control until December 2017 when the Respondent husband assumed sole control until settlement of the sale in December 2019.
In 2009, the maternal grandfather gifted $70,000 to the Applicant wife which was used to benefit the parties and their family.
The parties jointly purchased a home at P Street, Suburb O for around $310,000 with most of the monies borrowed. The property was sold post-separation in January 2018 after the Applicant wife spent around $13,000 to prepare it for sale and the net proceeds were divided with $24,239.88 to the Respondent husband and $24,334.28 to the Applicant wife. They also equally divided their joint bank account, each receiving $6,744.58.
During cohabitation other than the noted gifts above, neither party received any other gifts or windfalls.
Section 79(4)(b) the contribution (other than a financial contribution) made directly or indirectly by or on behalf of a party to the marriage or a child of the marriage to the acquisition, conservation or improvement of any of the property of the parties to the marriage or either of them, or otherwise in relation to any of that last-mentioned property, whether or not that last-mentioned property has, since the making of the contribution, ceased to be the property of the parties to the marriage or either of them
The evidence in this area was fairly scarce and it appears that both parties from time to time made non-financial contributions of a differing style over the period of their relationship. It appears that they were similar.
Section 79(4)(c) the contribution made by a party to the marriage to the welfare of the family constituted by the parties to the marriage and any children of the marriage, including any contribution made in the capacity of homemaker or parent
An early Full Court case in this area is Rolfe & Rolfe (1979) FLC 90-629 where the then Chief Justice said at page 78, 272:-
“The purpose of section 79(4) (b) (the precursor to section 79 (4) (c)) in my opinion is to ensure just and equitable treatment of a wife who has not earned income during the marriage, but who has contributed as a home maker and parent to the property….Because of that responsibility she may earn no income or only small earnings, but provided she makes her contributions to the home and to the family the Act clearly intends that her contribution should be recognised not in a token way but in a substantial way.”
In Mallet & Mallet (1984) FLC 91-507 His Honour Wilson J said at page 79, 126 the following:-
“The Act requires that the contribution of a wife as a homemaker and parent be seen as an indirect contribution to the acquisition, conservation or improvement of the property of the parties regardless of where the legal ownership resides. The contribution must be assessed, not in any merely token way, but in terms of its true worth of the building up of the assets. However, equality will be the measure other things being equal only if the quality of the respective contributions of the husband and wife, each judge by reference to their own sphere, are equal…It follows that it cannot be said of every case where the parties reside together that equal value must be attributed to the contribution of each…What the Act requires that in considering an order that is just and equitable the court shall take into account any contribution made by a party in the capacity of homemaker or parent. It is a wide discretion which requires a court to assess the value of that contribution in terms of what is just and equitable in all the circumstances of a particular case. There can be no fixed rule of general application.”
I accept the evidence of Applicant wife that she was the primary homemaker and parent during the parties’ cohabitation. She has also continued in this role post separation. She undertook the role of primary carer from the children’s birth until they commenced kindergarten and/or school when the Respondent husband became more involved in their day to day welfare. However on my assessment of the evidence, while the Respondent husband clearly played a role in the children’s lives, the Applicant wife was always the primary carer and homemaker during cohabitation and post-cohabitation, which is a significant contribution.
Section 79(4)(d) the effect of any proposed order upon the earning capacity of either party to the marriage
The parties earning capacity, with the Applicant wife as a customer service officer and the Respondent husband as a business owner, will not be adversely effected by these Orders. It may however be effected by the debts they developed and accrued during their relationship, which is a significant total sum.
Section 79(4)(e) the matters referred to in subsection 75(2) so far as they are relevant
(a) the age and state of health of each of the parties
The Applicant wife is aged 38 years and the Respondent husband is aged 39 years. Neither of them raised any health issues. The Respondent husband in his Affidavit filed 28 July, 2020 said they are in good health.
(b) the income, property and financial resources of each of the parties and the physical and mental capacity of each of them for appropriate gainful employment
The respective Financial Statements updated during their evidence in the trial, details their financial circumstances along with the list of assets, liabilities and financial resources referred to in this judgment under the heading of “the pool”, starting at page 23.
The Applicant wife is employed casually as a customer service rep and currently works a staggered roster with a 5 day week with a net payment of approximately $730 and then 12 days in a row for $1,170 net. She also works one-half of all holidays when the children are with their father. She also receives some rental income. She has the physical and mental capacity for appropriate gainful employment.
The Respondent husband currently operates the accommodation part of a G Company business which is negatively affected by the current Covid-19 restrictions. He has previously been employed in various industries for around ten years but ignores that income earning capacity. He also has the physical and mental capacity for appropriate gainful employment.
(c) whether either party has the care or control of a child of the marriage who has not attained the age of 18 years
The Applicant wife and Respondent husband both have a role in the care and control of their two children X aged 14 years, and Y aged 12 years, with the Applicant wife currently having the greater role of primary carer but noting the children do spend significant and substantial time with the Respondent husband.
(d) commitments of each of the parties that are necessary to enable the party to support:
(i) himself or herself; and
As commented on above, their commitments to self-support are detailed in their Statements of Financial Circumstances.
(ii) a child or another person that the party has a duty to maintain
Both parents have a duty to maintain their children, which currently primarily falls on the Applicant wife’s economic shoulders, given the Respondent husband is relying on Child Support overpayments to meet his assessment which will soon expire. I note that he also gave evidence that he contributes to the children’s other expenses such as education, but I do expect this is not as often or to the same extent as the Applicant wife, on the evidence I heard.
(e) the responsibilities of either party to support any other person
Not relevant, save for above.
(f) subject to subsection (3), the eligibility of either party for a pension, allowance or benefit under:
(i) any law of the Commonwealth, of a State or Territory or of another country; or
Neither party discloses receipt of a government pension, allowance or benefit although I suspect they are eligible for some form of government payments in the circumstances of the current Covid-19 “lockdown” and restrictions on small business operators, and as family carers.
(ii) any superannuation fund or scheme, whether the fund or scheme was established, or operates, within or outside Australia;
Both parties have an interest in humble superannuation schemes and the Respondent husband has withdrawn some funds from his scheme post-separation, which I will comment on further. If he had been more prudent, his superannuation could have been greater. The Applicant wife’s superannuation is a small sum and this is significant in this unusual case, which I will also comment on in my conclusion.
and the rate of any such pension, allowance or benefit being paid to either party
(g) where the parties have separated or divorced, a standard of living that in all the circumstances is reasonable
This is difficult to comment on given the current Covid-19 restrictions in Victoria. Both parent appear to have an adequate but not a high standard of living in all the circumstances.
(h) the extent to which the payment of maintenance to the party whose maintenance is under consideration would increase the earning capacity of that party by enabling that party to undertake a course of education or training or to establish himself or herself in a business or otherwise to obtain an adequate income
Not relevant.
(ha) the effect of any proposed order on the ability of a creditor of a party to recover the creditor's debt, so far as that effect is relevant
The parties have a number of creditors who do not appear to be currently pressing for payment under the current pandemic. It is therefore very difficult, if not impossible to assess this accurately. I take judicial notice that it appears many debtors are currently accepting a moratorium on payment of debts or monies due.
(j) the extent to which the party whose maintenance is under consideration has contributed to the income, earning capacity, property and financial resources of the other party
Not relevant.
(k) the duration of the marriage and the extent to which it has affected the earning capacity of the party whose maintenance is under consideration
Not relevant.
(l) the need to protect a party who wishes to continue that party's role as a parent
Both wish to continue their parenting roles. They have a close and loving relationship with their children and they both seek to nurture this.
(m) if either party is cohabiting with another person--the financial circumstances relating to the cohabitation
The Respondent husband resides in a de facto relationship with his partner, Ms T who is aged 24 years and currently receiving the Jobkeeper benefit. She is contributing to his financial needs given his current lack of adequate income and they are living in a home she purchased with some limited financial contribution from the Respondent husband and his parents. Although the Respondent husband alleged the Applicant wife was in a de facto relationship, there was no evidence of this or cohabitation.
(n) the terms of any order made or proposed to be made under section 79 in relation to:
(i) the property of the parties; or
The Orders I made are detailed at the start of this Judgment and in my view are just and equitable in all the circumstances of this most unusual case.
(ii) vested bankruptcy property in relation to a bankrupt party;
Not relevant.
(naa) the terms of any order or declaration made, or proposed to be made, under Part VIIIAB in relation to:
(i) a party to the marriage; or
Not relevant.
(ii) a person who is a party to a de facto relationship with a party to the marriage; or
Not relevant.
(iii) the property of a person covered by subparagraph (i) and of a person covered by subparagraph (ii), or of either of them; or
Not relevant.
(iv) vested bankruptcy property in relation to a person covered by subparagraph (i) or (ii);
Not relevant.
(na) any child support under the Child Support (Assessment) Act 1989 that a party to the marriage has provided, is to provide, or might be liable to provide in the future, for a child of the marriage
The Respondent husband has a duty to provide Child Support and is subject to a current assessment that he puts at $304 per month and is being met by his past overpayments[6]. However, this is a short term solution and it is clear that he currently does not have a significant income. I am concerned that much of the financial burden to meet the children’s needs in the future will fall on the shoulders of the Applicant wife.
(o) any fact or circumstance which, in the opinion of the court, the justice of the case requires to be taken into account
[6] See page 5, paragraph 21 of the Respondent husband’s Financial Statement filed 11 March, 2020.
A very significant period of the relationship was from 2003 to 2005 when the Applicant wife personally and through her father, made very early and important contributions which I detail in my conclusion.
Further assessment of facts and law
Nearly 40 years ago the Full Court of the Family Court of Australia in Carter & Carter (1981) FLC 91-061 at pages 76, 491 and 76, 492 established the approach I must take in this matter. It said as follows:
Section 79(1) is quite clear. It refer to applications as to the property of the parties to the marriage or either of them. It does not differentiate as to when or how the property was acquired or which of the parties owns that property. The section proceeds that the Court may make such orders as it thinks fit altering the interests of the parties “in the property including an order for settlement of property”. Again, there is no differentiation as to when or how the property was acquired or which of the parties owns that property.
Any property of either party or their joint property can therefore be dealt with by the Court. No part of the property is to be separated out and defined as matrimonial property or any other sort of property. There is no part of the property that is to be excluded from the jurisdiction of the Court to make an order changing the ownership of that property.
The proper approach is to ascertain what property is owned by the parties and then, applying the principles set out in subsection (2) and (4) of section 79 to determine what orders should be made.
Although section 79(1) has since been amended to take into account bankruptcy, in my view the words of Carter still have application today.
I raise this topic because the Respondent Husband initially wanted to exclude such assets as “the G Company” and his Motor Vehicle 2 which were clearly acquired by him post-separation. However, as I understand it, it is my duty to consider all property generally at the time of the hearing for the purpose of section 79 as there may be little or no contribution to these assets but there may be some relevance when I come to consider the section 75(2) factors.
This is difficult to explain to applicants in person but the reality is section 79 requires a Judge to look at the total landscape of assets in front of him before making a considered decision that is just and equitable under the Family Law Act, 1975.
There are two possible judicial approaches to the parties’ assets and the assessment of the section 79(2) and (4) factors in any property dispute pursuant to the Family Law Act, 1975 namely: (a) “the global approach” which involves a global view of all of the parties’ assets; or (b) the “asset by asset approach” which as the name implies, requires the court to consider the parties’ interests (if any) in each asset.
The facts peculiar to this case, in my view, requires the Court to consider the dispute pursuant to the “asset by asset approach” for the following reasons:
a)The parties’ initial financial contributions around the time of or shortly after cohabitation and marriage, were clear and separate. B Street, Suburb C, after 2009 moved from being the former matrimonial home to being an investment property where generally its own income serviced its liabilities and expenses, noting however that it often provided a surplus of funds and sometimes between tenants, was a financial burden;
b)The post-separation purchases by the Respondent husband in the form of a $42,000 motor vehicle and the G Company business; and
c)Some assets in which they had a joint interest being the monies from the sale of P Street, Suburb O and the joint bank account have already been dealt with by the parties and equally split between them.
The parties’ household contents
These appear to have been purchased during cohabitation or through the E Company business generally post-separation. In any event they are of a humble similar value.
B Street, Suburb C, Northern Territory
This was an asset that was brought into the marriage by the Applicant wife with little contribution to it subsequently by the Respondent husband. I will discuss this further in my conclusion.
The Applicant wife’s Motor Vehicle 1 and the Respondent husband’s motorcycles
Motor Vehicle 1 was purchased by the parties during cohabitation. The Respondent husband’s motorcycles were of similar value and appear to have been purchased during cohabitation or soon thereafter with funds from the E Company business. It was not entirely clear, but given their relatively low value, it is not significant.
The G Company
In early 2017, the Respondent husband purchased a business titled “The G Company” for $110,000 plus stock, being a total cost of $139,857 all of which he borrowed.
The Applicant wife argued that this business was worth somewhere in the region now of $250,000 to $300,000 but at best this was a guess given she did not obtain an expert’s valuation of the business and therefore, had no evidence to support her speculation. The Respondent husband produced an email where the author was an alleged expert but he was not called nor the evidence tested. He estimated that the business could possibly be sold for $60,000. As it stands, the best available evidence I have from this matter is that the G Company business is at least worth $60,000 plus stock and it could be up to $110,000 plus stock being the price paid by the Respondent husband to purchase the business.
As noted earlier, he still owes his parents $93,725 and has an Australian Taxation Office debt of $89,559 arising from this business.
He has been hoping to sell the business as an ongoing concern but to date has had no reasonable offers. In my view, it is clear that the Applicant wife has not been able to establish any contribution to this asset and further, that her section 75(2) factors can be satisfied from other assets. It is also clear that the Respondent husband made the total “contributions” to the purchase of this business, however wise or unwise that was.
The Respondent husband’s motor vehicles
The Respondent husband retained a Motor Vehicle 3 from the marriage that he alleged had little or no value and this was not challenged by the Applicant wife.
After separation it appears that his heart ruled his head and he purchased for $42,000 a high performance Motor Vehicle 3, borrowing all the money. It is now worth somewhere in the region of $25,000 to $35,000 being the best available information produced by the parties and he still owes $27,419 in relation to the original loan. He has little or no equity in this motor vehicle. The Applicant wife did not contribute to this purchase and her section 75(2) needs can be satisfied from other assets. The Respondent husband solely ‘contributed’ to this asset.
P Street, Suburb O
This realty was purchased by the de facto partner of the Respondent husband, Ms T in her sole name for the sum of $348,000, with a deposit of $40,000. Her evidence was that she borrowed $317,000 in her sole name to purchase this property.
The Applicant wife argued that the Respondent husband has a $30,000 interest in this realty given the contributions to the purchase by his parents, plus other small contributions clearly made by the Respondent husband. It is clear that the paternal grandfather gifted some $10,000 to Ms T and the paternal grandmother loaned her a similar sum with these monies being accumulated funds saved by the Respondent husband to repay his parents the monies they advanced him to purchase his G Company business. It was the Applicant wife’s case that these monies realistically were provided by the Respondent husband and therefore, should be seen to be his contribution. The evidence of the paternal grandparents did not support that argument and on balance, it is my view that these monies were advanced by them diverting monies due to be paid to them, saved by their son. The Respondent husband at best made a small contribution to the purchase of this property in the region of $6,300, post separation. The Applicant wife made no contribution to this asset and her section 75(2) needs can be satisfied from other assets.
The City J E Company.
To use a modern expression, the elephant in the room in this dispute was about the parties roles in the E Company business and the documentation in relation to its operation. On day 4 of the trial, when the Applicant wife was cross-examining the Respondent husband about Exhibit 10, (a secondary document created by the Applicant wife which set out the cash receipts for the year ending in 2018 from this business), it apparently disclosed that $11,000 had not been banked in 2018 nor had $44,000 been banked in 2019. The Respondent husband was asked to explain given it arose during his period of sole operation of the business. Initially, the Respondent husband said he did not have the answer to these discrepancies.
In the circumstances I advised him I would give him a chance to review the original documents that the Applicant wife had collated to create this document, and we would return to this issue on the next day.
This caused the Applicant wife to complain that the business records for the November and December 2019 daily takings were missing from the documents that were produced by the Respondent husband.
It appears that after the Applicant wife stopped operating the business at the end of 2017, she left all the documents save for her computer records in relation to it, at the business premises which was then occupied by the Respondent husband. It also appears that after the business was sold that all of these documents and the filing cabinet containing them were retained by the Respondent husband.
I note that on a number of occasions the Applicant wife complained that the Respondent husband had not produced all documents, for example there were missing documents from his bank account that the Applicant wife wanted to examine, there were missing statements from the trading accounts of the E Company business, there were missing cash account statements that the business ordinarily kept, and on one occasion the Applicant wife made the following complaint:
…“Over the course of the past four and a half years, I have experienced extreme difficulty with Mr Scannell in getting documentation from him either signed or produced, to be able to be brought across for this discovery. And its because of this unforthcoming nature that we have been in this situation where his is Court ordered numerous times to provide these documents for discovery, and after four and half years we still have not been able to progress because he continues to delay the process by not providing these.”
The next day, being day 5 of the trial, the Applicant wife resumed the cross – examination of the Respondent husband as follows:
…“Annexure 26 exhibit 10 – have you had an opportunity to cross-reference that for your accounting software?‑‑‑Yes, as I said before, I had an hour and a half on the phone to the accountant yesterday, and to which – sorry?
It’s yes or no? Have you had an opportunity to cross-reference ‑ ‑ ‑?‑‑‑Yes, I have.
And did the figures not match up to what these figures of daily takings of cash were, not match to what your ledger said on your accounting software? Well, hang on. No, no. It does not match up to your accusations and your filing. However, it does match up to what they’ve done for the last seven years. So, no, it doesn’t match up to yours. However….
Thank you. I will actually move on to and note….
HIS HONOUR: Let him finish. Let him finish. Go on.
THE WITNESS: It does not match up to yours. And from what the accountant has explained to me to explain to you, it is that they get paid quite a substantial amount of money to do their job. And I pay them to do that because they’re good at what they do. I am not the best at filing or paperwork. This has been a very complex case for me in terms of providing anything and everything because I’m not a very well organised person. And I think you also know that. So, I can’t ‑ ‑ ‑
MS LEANDER: So, in relation to your saying that that $45,000, for example, or forty four and a half thousand dollars on page 6 of exhibit 10 you say could be used, for example, for purchases such as fuel for the Company E business, is that correct?‑‑‑Yes, correct.
Cash would be used?‑‑‑Correct.
As per annexure 14 of my affidavit on 3/08/2020, which is the Scannell Family Trust financial statements?‑‑‑Yes.
The fuel and oil, for example, for the Company E business of 2019 is just over $6.000. That doesn’t account for ‑ ‑ ‑?‑‑‑No, it doesn’t.
An expense so great of that figure in cash being spent at the service station next to the Company E business for petrol. That’s an extreme number. Can you explain that?‑‑‑Yes, I can. I can explain it by saying I think you need to talk to the accountant because he is the professional who has gone through all our documents, and he has lodged it with the ATO. If they lodged something that they believed was incorrect, especially seeing something so simple that you seem to have produced to say there’s $10,000 missing and $40,000 missing – I think these professionals would pick this up and find that there’s something wrong. Okay. I can’t answer your question because I don’t know – I can’t figure out the answer. I’m sorry…”.
I will comment on this lack of full disclosure further from paragraph 118 when I review the parties’ respective roles in the E Company business.
The parties initial Financial Statements filed in 2017 should have been carefully noted by them. The Applicant wife’s filed on 26 April, 2017 at page 12 set out the following:
Applicant wife’s valuation of business assets and liabilities Scannell Pty Ltd atf Scannell Family Trust
(Earnings based calculation, which includes assets of $175,500)
$195,502 Liabilities Westpac Company Loan (...59)
$93,500
Westpac Finance Loan (...00)
$34,000
Westpac Business Overdraft (...88)
$8000
Westpac Business Loan
$243,500
Nett ($183,498)
The Respondent husband’s filed on 21 July, 2017 disclosed at page 2 under Part B the following:
A Your total average weekly income (THIS IS THE FIGURE AT ITEM 16)
$500
B Your total personal expenditure (THIS IS THE FIGURE AT ITEM 33)
$973
C Total value of property owned by you (THIS IS THE FIGURE AT ITEM 44)
$121,250
D Total gross value of your superannuation (THIS IS THE FIGURE AT ITEM 45)
$57,000
E Total of your liabilities (THIS IS THE FIGURE AT ITEM 58)
$ 547,560
It should have been apparent to the parties that this E Company business was not a successful commercial venture for them.
It is common ground that this business was purchased by the parties in 2013 as a going concern for $250,000 with a bank loan or loans. They had no or little equity in the business from the very start.
Subsequently in 2014 or 2015, they borrowed a further $150,000 to update their equipment. The financial alarm bells should have been ringing very loudly at this point.
Although it was on the market for sale for many months, it finally sold and settled on 20 December 2019 when it was purchased for the total sum of $353,433.73 including all stock.
The sale of the business in late 2019 was fortuitous for the parties given the Covid-19 pandemic that struck Victoria in early 2020 and has been a financial disaster for many small business people. Although they still owe $100,000, it could have been much worse without a sale of the business.
The $100,000 business loan the parties took out from Westpac Banking Corporation is a major dispute between them. From my understanding of their cases, each seeks the other to be responsible for this debt.
As I have said earlier in this judgment, when the case was mentioned before me on an interlocutory basis on a number of occasions I emphasised to the parties very clearly for the need for proper valuations and full and frank disclosure and the duty to do all this, in a proper and full way. Notwithstanding these many warnings and orders, it appears to me that both have contributed to their difficulty in running the case by not complying fully with my interlocutory orders. However, the Respondent husband solely operated the business in its last years and has the control of the vast bulk of the business documents and records. He has been at best, reckless and at worst, intentionally unhelpful to the extent that the Applicant wife’s ability to put her case has been frustrated by his lack of full disclosure. In Waterman & Waterman (2017) FLC 93-792 at page 77,077 the Court said this:
“32…Importantly, the duty to disclose is a duty owed to both the other party and to the court. The duty is to make “full and frank disclosure of all information relevant to the case in a timely manner” (emphasis added). These statements made by Smithers J in Briese & Briese[7] remain, with respect, as true today as they were then:
“…a person in the position of the husband in this case has a positive obligation to set out at an early stage his financial position in a clear and comprehensive manner… The need for each party to understand the financial position of the other party is at the very heart of cases concerning property and maintenance…”
33. Although frequently cited and quoted I consider it important to again refer to what the Full Court said in Morrison & Morrison[8]
“… The constant emphasis of the cases is that in order for there to be a just and equitable and an appropriate order altering the interests of the parties in their property there must be a full and frank disclosure between them of all circumstances which may be relevant to the determination of their true financial position both presently and in the foreseeable future...
[7] (1986) FLC 91-713 at page 75, 180.
[8] (1995) FLC 92-573 at page 81, 670
34. Of considerable significance in this case, as it seems to me, the Full Court went on to say:
… We take this opportunity once again to reinforce the view that the duty of disclosure is a basic duty. Ordinarily, a failure to comply with that duty will amount to a miscarriage of justice…”
In the Full Court decision of Chang & Su (2002) FLC 93 117 Their Honours Kay and Dave JJ said at page 89, 187:
“…Of course it is the obligation of parties to make a full and proper disclosure of the financial circumstances, either as to assets, liabilities or income (Marriage of Black and Kellner [(1992) FLC 92-287]; (1992) 15 Fam LR 343 and Marriage of Weir [(1993) FLC 92-338]; (1992) 16 Fam LR 154). As the latter case makes clear, where there has been non-disclosure by one party, the Court should not be ‘unduly cautious’ about making findings in favour of the other party…”
The Respondent husband said on day 5 that …“I am not the best at filing or paperwork… I am not a very well organised person”. This does not excuse his lack of full compliance with the duty of full disclosure in a timely way. I will adopt the approach in Chang & Su cited above in this case.
On the seventh day of the trial the following exchange took place:
“… MR SCANNELL:..It’s fair to say that both of us have a personal tax debt that’s quite – quite large?‑‑‑
MS LEANDER: That’s correct. Because you wouldn’t sign the documents and you wouldn’t get things finalised while the money was available to be paying these debts.
HIS HONOUR:…When you say the money was available, where was it?‑‑‑
MS LEANDER: …While I was running the business, as you can see, the company shows it was – it was a profitable business. I was putting everything through the books. I – everything was on there.
You’re missing the point. If this business is to pay out the operators fifty-fifty in income and then pay over tax, there must have been some account or provision for tax somewhere. But I’ve never seen where you can point to an account where you had a sum of money to pay the tax?‑‑‑There was no separate account whilst I was managing the business. I only had one account.
Yes. Well, that’s the point I’m trying to make. Whilst the business had a good turnover and you both lived off it, there was never a provision for tax. You never saved moneys to pay the tax the company was to pay?‑‑‑No, not for the – I was paying the BAS myself when I was running the business, because I was able to ..... but not the – not the company.
No. I’m talking about your each personal income tax liability?‑‑‑No. I haven’t been able to pay it.
No. There has never been a provision in the operation of the company for that, has there?‑‑‑That’s correct. No, your Honour.
And isn’t that one of your basic business mistakes?
MR SCANNELL: Yes.
HIS HONOUR: You never provided for the tax that was going to accumulate, but you lived off the company. And I don’t criticise you. A lot of people do it. You lived for the time and met your bills, but you didn’t have a provision for tax. And, ultimately, it caught up with you. Is that fair, or do you think that’s unfair?
MR SCANNELL: I think that’s fair, your Honour. I believe that’s correct.
HIS HONOUR: Ms Leander?‑‑‑It’s fair, your Honour…”
The Respondent husband’s accountant, Mr V filed an Affidavit on 27 July 2020 annexing a report and gave evidence detailing how both parties financially benefited from the E Company business beyond their salaries and ‘normal’ fringe benefits, including:
A.The Applicant wife:
a)On ceasing her role in the business in late 2017, she retained the cash …“money in the till” which totalled $17,580 and possibly more;
b)She admitted she also retained over $7,000 in EFTPOS income that should have been paid to the business;
c)She was involved as a party in her father’s family law dispute as an intervener being heard in the South Australian and Darwin Family Courts with the business paying around $50,000 to a legal representative who acted for her by the name of Mr JJ;
d)Over two years she spent $13,800 on her Motor Vehicle 1 which appears excessive as a business expense;
e)Over $2000 paid to her family lawyer by the business;
f)The purchase of white goods for $3,850 retained by the Applicant wife and paid for by the business;
g)A purchase of a barbeque for $1,550 which was retained by the Applicant wife and paid for by the business;
h)After leaving the business, she retained some of its assets including but not limited to merchandise, costumes, machinery, two motors, two industrial vacuum cleaners, office chairs, a frame, a booth and furniture; and
i)The Respondent husband alleged she retained $22,000 that was not banked in November and December 2017. It is unclear to what extent she benefited from this given the way the parties ran the case.
B. The Respondent husband:
a)Soon after separation the parties attempted and the Applicant wife believed they had struck a property settlement. After taking on operation of the business in 2016, she paid the Respondent husband pursuant to her belief they agreed on a settlement, over $44,000 by instalments which he retained notwithstanding they ultimately did not settle their dispute;
b)in 2018 and 2019 financial years over $11,137 and $44, 493 according to the Applicant wife was not banked by the Respondent husband. It is unclear to what extent he benefited from this given the poor record keeping, unclear evidence and way the parties ran their case;
c)he paid $5,229 to his family lawyers with business funds;
d)he purchased a washing machine and clothes dryer for $9,250 paid for by the business and retained by him;
e)after selling the business he retained a machine that was owned by the business;
f)he blended $5,000 with the income from the G Company takings that he retained which should have been paid into the E Company business account which became a net figure of $2,559 after merchant fees; and
g)he purchased a camera for $1,249 and a barbeque for nearly $6,000 amongst quite a few other personal expenses including holidays which were not business related but were paid for through the business.
When the Respondent husband was cross-examined by the Applicant wife at one stage, he said the following in relation to this topic:
…“I was trying to do and get out of the business as much as what you had. That’s all. So I was literally purchasing a barbeque that you had purchased. I was buying a trailer that you had got a trailer from the E Company which was about a three thousand dollar trailer”…
He went on to say soon after:
…“I’m not denying these purchases and I’m actually really sad and sorry to say that I’m probably acting like a twelve year old with my brother who is fourteen, anything that he got, I wanted the same and I’ve done that with the business. And I’m sorry, I have misspent the funds. I’ve used it on my own expenses and I’ve done nothing more than what you have done”…
The E Company business and dissolution of company and Family Trust
The Respondent husband is the sole director of the company and as I understand the evidence, controls the Scannell Family Trust. He gave evidence on day 3 that he had agreed to liquidating the company and ceasing the trust. The Applicant wife also agreed to this, but wanted the Respondent husband to pay for it.
There is a need to wind up these entities following the sale of the business. Given that he is the sole director, has already made enquiries with an accountant about this topic and has possession of most of the business records from his sole control from late 2017, it appeared to me it should be facilitated by transferring all of the company and trust to him to allow him to undertake this task, at the joint expense of the parties.
The Applicant wife’s tax liability
On day 1 of the trial, to better understand her case I had the following discussion with her:
“MS LEANDER: So that’s for – that’s the 55 approximately thousand dollars that is owing to ATO through the Scannell Family Trust of money that was distributed to me which wasn’t actually distributed to me, so I have accumulated an excessive tax debt yet don’t actually have the money to pay this.
HIS HONOUR: So according to the books of the trust, this money was paid to you - - -
MS LEANDER: Yes.
HIS HONOUR: ‑ ‑ ‑ and that was fiction?
MS LEANDER: That’s correct.
HIS HONOUR: And what financial year was this purportedly paid to you?
MS LEANDER: The two financial years that Mr Scannell was running the company prior to it selling, and also while I was running the company the books were changed after Mr Scannell took management of the business and changed it to make it look like I received more money than what I actually did, so therefore in accounts looking like I was receiving more money, therefore needing to pay more tax on this money.
HIS HONOUR: So he had a distribution in the last two years of operation of the company, you say, and in theory the distributions to you from the company and trust, but you never actually received that money?
MS LEANDER: That’s correct.
HIS HONOUR: And that total is somewhere in the region of 55,000 tax?
MS LEANDER: That’s correct, your Honour…”
“…HIS HONOUR: However – I’m just continuing to read your affidavit:
“…However, if Mr Scannell is unwilling to pay the tax liabilities, I seek that the financial records be corrected by F Accounting at Mr Scannell’s expense to show the accurate figure of my earnings during this time…”
So you want him to recreate the records to show there weren’t any distributions to you?
MS LEANDER: Yes, that’s correct. If he’s not willing to pay the tax debt, then he should fix the books so that it shows the accurate figure...”
Although this case was heard over many days there was no clear evidence that the Respondent husband should be solely responsible for this debt. Therefore, it appeared to me that the Respondent husband and Applicant wife should now instruct accountants to investigate and reassess this liability but at the expense of the Applicant wife, given the final property Orders that I will make in this matter and the tax reassessment (if any) could also benefit her if she is accurate in her complaint. Moreover, I note the Respondent husband’s current financial position.
Debt to F Accounting
I also had the following conversation with the Applicant wife on day 1:
“HIS HONOUR: Now, you also seek that Mr Scannell pay all F Accounting liabilities held in your name. What are they?
MS LEANDER: It’s a three and a half thousand dollar debt which is information that F had to put together for the E Company business.
HIS HONOUR: All right. So what they’ve done is they’ve done some work on behalf of both of you, they allege, and your share of the bill is 3500?
MS LEANDER: Yes, that’s correct…”
Given the parties’ roles and involvement in the E Company business pre and post-separation, and the benefits they received from it over that period and given further that the F Accounting debt arose from the accountants providing a service to both of them, the parties should each pay one half of the accountant’s bill. The Applicant wife’s share is $3,500.
Superannuation
Neither party had accurate documentary proof of their superannuation balance as at separation in February 2016 but in his final address the Respondent husband said his was $57,000 and the Applicant wife’s was $21,000.
The best available evidence was their respective Statements of Financial Circumstances. The Applicant wife’s was filed on 26 April 2017 with a balance then of $21,694 with Super Fund KK.
I am informed by her it is now around $34,000 but she did not disclose how it became that figure over the last three years, whether it was from further contributions, accrued interest or a combination of both.
The Respondent husband was equally unhelpful. His Financial Statement was filed on 21 July 2017 with a sum of $57, 000 in Super Fund LL. He said that he had invested aggressively at a higher risk level when the Applicant wife suggested his superannuation was previously $64,000 or $68,000. This was not established to my satisfaction by her, notwithstanding the allegation.
The Respondent husband said that his fund’s balance was about $54,000 at separation and he had made since then two withdrawals being:
a)$19,000 on 4 December 2019 which included a $5,000 tax payment with the balance being spent on a IVF procedure for himself and his current partner; and
b)$10,000 this year pursuant to the Covid-19 easing of rules to allow a person to access their fund for financial hardship.
He said his current balance was now $32,693. He did not explain to me the arithmetic of how he arrived at this figure, but I assume that his fund grew post - separation given the $29,000 withdrawal added back to $32,693, totals $61,693 which is not the sum in the fund he had at separation.
In NHC & RCH (2004) FLC 93-204 at page 79,314 the Full Court referred to earlier observations by Full Courts on this topic and said as follows:
“…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. (Marker [1998] FamCA 42, 1 May 1998, per Baker, Kay and Chisholm JJ.)
…
46. Whilst 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. (Cerini [1998] FamCA 143, 8 October 1998, per Nicholson CJ, Ellis, Kay JJ.)…”
I note further that in the case of Wilde & Wilde [2007] FamCA 1044, the Full Court cautioned against including as a general rule monies expended by parties post – separation on reasonable living expenses as addbacks.
In my view, given the Respondent husband’s inability to earn a reasonable income from his G Company business in the circumstances of the Covid-19 pandemic, the use of his superannuation to meet his living expenses was not unreasonable and should not be considered as an addback.
However, the more difficult issue to assess as a possible addback was his use of superannuation funds for the IVF procedure with his current partner. The use of these funds triggered a $5,000 tax payment which perhaps could have been avoided if other sources of funding were considered. Given the withdrawal is discretionary, why did it have to be done now? Why could his partner not pay for this or contribute to it? The Respondent husband should have provided all relevant facts about the reasons for and the circumstances of this withdrawal.
This withdrawal was not similar to the living expenses, which were unavoidable and necessary, whereas the IVF procedure was not established to my satisfaction that is was necessary that it had to be undertaken so recently and could not be delayed or other sources of funding considered.
I note the Full Court decision of AJO & GRO (2005) FLC 93-218 which outlines three categories of cases where it appropriate to notionally add back to the pool of assets that no longer exist namely:
a)Where matrimonial monies have been used to pay legal fees (see DJM & JLM (1998) FLC 92-816);
b)Where there has been a premature distribution of assets (see Townsend & Townsend (1995) FLC 92-569);
c)Where a party has embarked on a course of conduct designed to reduce the value of an asset or where a party has acted recklessly, negligently or wantonly in respect to an asset (see Kowaliw & Kowaliw (1981) FLC 91-092).
In my view, this withdrawal was a premature distribution of an asset that could have been subject to a Court order and therefore, in the unusual circumstances of this case will be considered as an addback to the Respondent husband’s superannuation fund.
Conclusion
The Applicant wife’s financial contributions to the relationship were very significant in the facts peculiar to this case.
She purchased prior to cohabitation BB Street, Suburb CC, Northern Territory. She sold it in late 2005 which generated a profit of something between $65,000 to $70,000 net, which was used for the parties’ benefit by paying out a car loan, purchasing chattels and reducing the mortgage over B Street, Suburb C, Northern Territory by $30,000 to $35,000. The Respondent husband argued that he contributed to the mortgage payments for this property but I note that this was a relatively short period and he resided there.
In relation to B Street, Suburb C, this vacant land was registered in the Applicant wife’s name and paid for in 2003 by the Applicant wife’s father who also gifted his labour as a professional builder to subsequently construct a home on the property. The Applicant wife borrowed $190,000 in her sole name to meet these building costs in 2004 or 2005. As commented on above, $30,000 to $35,000 from the property brought into the relationship by the Applicant wife reduced this mortgage debt. It is probable that the Applicant wife’s father’s free labour saved the parties tens of thousands of dollars in construction costs.
What is most uncommon about this case is how after 2009, when the parties left the Northern Territory to reside in City J, the B Street, Suburb C property ceased being the former matrimonial home and became an income generating asset. It was rented for many years through a company and generally after expenses, produced an income source which benefited the parties. It did have an occasional loss when there were no tenants. They made no further direct or indirect contributions to this asset save for their dealings with a company and other subsequent tenants which from the limited evidence, appears to have been a matter for the Applicant wife.
The importance of the income from this property can be seen from paragraph 33 of the Respondent husband’s affidavit filed 28 July 2020 where he says as follows:
“…I am estimating the income from B Street, Suburb C has been $25,000 each year for the last four and half years ($112,500) minus monthly payments of around $800 a month is in my estimate about $43,200 in loan payments leaving $69,300 of disposable income received. (I need income statements to confirm this).”
I suspect that this is an overestimate but it does indicate to me that this was a significant contribution directly brought into the marriage by the Applicant wife.
In relation to the Applicant wife’s father paying for the vacant land at B Street, Suburb C and contributing his labour free to the construction of a home, the authorities of Rainbird (1977) FLC 90-256, Freeman (1979) FLC 78-717, Read (1984) FLC 915-27, Gosper (1987) FLC 91-818 and Kessey (1994) FLC 92-495 direct me to acknowledge that these were gifts to the Applicant wife and contributions effectively made by her to the parties’ assets.
In relation to the loan to build the home, sought and obtained by the Applicant wife in her sole name, secured over B Street, Suburb C, the authority of Calverly and Greene (1984) FLC 91-565 indicates that this was also a contribution by the Applicant wife.
Another important contribution by the Applicant wife following the authorities of Rainbird et-al above, was made in 2009 when her father gifted her $70,000 which was used for the parties’ benefit. On day 6 of the trial there was some discussion on this topic and the Respondent husband said …“I am happy to concede the $70,000 being gifted to Ms Leander.”
The Family Court authorities often talk about the need to consider the possibility of countervailing contributions over the period of cohabitation by a couple against the significant initial contributions by one partner, where this occurs.
From cohabitation in 2003 to late 2005, both parties worked full time and it appears equally contributed to their costs, expenses and assets subject to what I have said in the prior paragraphs. They had two children, the first born in 2005 and the second in 2008. The Applicant wife was the primary carer and the primary homemaker while the Respondent husband worked full time and devoted his income to meeting the mortgage instalments, rates and other outgoings for B Street, Suburb C for the next four years until 2009 when they moved to City J. This was an important contribution by him but no more important and no less important than the Applicant wife’s contribution as homemaker or parent.
In the High Court case of Calverly & Greene at page 79,567 their Honours Mason and Brennan JJ said as follows:
…“ The payment of instalments under the mortgage was not a payment of the purchase price but a payment toward securing the release of the charge which the parties created over the property purchased”.
Subsequently the parties moved to City J. The Respondent husband again sought employment earning an income as an employee until 2013 when they went onto make similar contributions to acquiring assets and operating the E Company business.
After standing back and reviewing all the relevant evidence and section 79(4)(a) factors, it appears to me that the Respondent husband has not made a significant countervailing contribution. The Applicant wife made a greater financial contribution than the Respondent husband also noting the further contribution by the Applicant post-separation, spending over $13,000 preparing the former matrimonial home for sale.
The contributions by the Applicant wife to the welfare of the family
The evidence about the role of homemaker or parent discloses that the Applicant wife stopped working out of home full time on the birth of the first child and did not return to full time employment until the children commenced kindergarten and/or school, noting she did some casual employment when the children were at kindergarten level or thereabouts. The Applicant wife was the primary carer for the children for many years. I note the children were born in 2005 and 2008 and the Applicant wife’s role of parent was a significant contribution to the welfare of the family.
As the High Court said in Mallet, this contribution by the Applicant wife to the welfare of the family as a parent and homemaker should be properly recognised and not in a token way.
It is also important to note that this has been an ongoing contribution as primary carer since separation four years ago and will continue on the facts before me, into the future. This is also an important contribution that deserves appropriate recognition in a significant way.
Section 75(2) factors
A major aspect of the section 75(2) factors, is the ongoing financial needs of the children. They are soon to be 15 and 13 years and as they age, we are told by the Lovering and Lee tables at CCH Family Law Service, Volume 2 “Office” at page 50,161 and 50,162 that, they will cost more to support in the future. For example, see Lovering where middle income families with a teenager need $224.85, and the low income average for the same age is $135.12. The Respondent husband undoubtedly loves and adores his children, but that does not clothe or feed them or provide a roof over their heads. The Applicant wife will have to do all of these and more as the primary carer. He is currently not directly paying Child Support assessments but is relying on earlier overpayments to meet this need which will soon run out. The Applicant wife complained that the payments were sporadic…“sometimes he does pay and sometimes he doesn’t”.
He owns and operates a G Company business, that in my view, prior to Covid-19, was financially struggling and now with the pandemic, is a significant financial burden for him. He is attempting to sell it but has major debts to his parents and to the Australian Taxation Office. He had to access his superannuation to pay his living expenses. Whilst I admire his ambition and confidence, my assessment of his operation of the E Company business and the G Company business in the last few years leads me to conclude on the balance of probabilities that he will not have the future income to pay appropriate significant Child Support regularly or make proper financial contributions to the needs of his children. It is my assessment of the evidence that the bulk of the financial future needs of the children, if not all, will probably fall on the Applicant wife’s shoulders, the primary carer.
Another section 75(2) factor relevant to the Applicant wife in this case is that has merit, is the parties’ disparity in their superannuation benefits. She was right to submit that because she devoted herself to the children’s care when they were young, she was denied the opportunity to work full time and to build up her superannuation. Her superannuation was around $21,000 at separation whereas the Respondent husband’s was $57,000.
It is to be noted that section 75(2)(b) talks of “the physical and mental capacity of each (the parties) for appropriate gainful employment”. The Respondent husband said he has …“been in firms for over ten years” He has an earning capacity he has not exercised and he has decided to be an independent small businessman, with little or no success. After separation, he purchased a motor vehicle for $42,000 with borrowed funds whereas a reliable car for around $10,000 would have been a more sensible purchase.
Although I am sorry that the Respondent husband has made poor financial choices post-separation, these cannot on the evidence be a factor under the Family Law Act 1975 for any favourable adjustment to him.
This has been a very difficult case to assess not only because of the pandemic causing us to do the trial electronically, but both parties were their own advocates and had serious weaknesses in the way they prepared and ran their case. It was very difficult for me to have a full detailed history of their financial relationship in the unusual circumstances of this case. Overall my assessment of the section 79 and section 75(2) factors in this case, is to acknowledge that the Applicant wife has made greater contributions which I put at around sixty seven percent and I add a further twelve percent for the section 75(2) factors. It must be remembered that this is a relatively small pool and at first blush this conclusion may look generous.
The divisible pool arising from the marriage relevant to section 79 and section 75(2) is as follows:
| B Street, Suburb C, Northern Territory: $490,000 Less mortgage: $161,885 Balance: $328,115 | |
The Applicant wife’s motor vehicle: | $5,000E |
| The Applicant wife’s household contents: | $10,000E |
| The Respondent husband’s motorcycles: | $5,500E |
| The Respondent husband’s household contents: | $10,000E |
| The Applicant wife’s superannuation: | $34,097 |
| The Respondent husband’s superannuation (including addback): | $51,693 $444,405 |
Less Westpac business loan debt: | $100,000 |
Net Total: | $344,405 |
It follows that the Applicant wife would retain the B Street, Suburb C property and be solely responsible for the mortgage and Westpac loan leaving around $228,000 net plus her car and chattels of $15,000, less the $3,500 accountant’s debt, giving a figure of $239,500 approximately, and with $34,097 superannuation, a total of $273, 597. I note her superannuation was around $21,000 at separation.
The Respondent husband would retain his motorcycles and chattels of around $15,500 and his superannuation of around $51,000 (including addback), being a total of $66,500. The Respondent husband said his superannuation was $57,000 around separation.
By way of resources, he would still retain his post separation interest in U Street, Suburb O of $6,300, the motor vehicle with an estimated value of between $25,000 to $35,000 and the G Company business with an estimated value of between $60,000 to $110,000 plus stock along with his many post separation debts that are personal to him, of $280,000 plus.
The above assessment must not be seen as an “arithmetic exercise” but an assessment of all of the facts and law, as I see it, to arrive at a just and equitable conclusion. It should be further noted:
a)that I have not included the parties’ E Company tax debts of $12,000 from 2018 to 2020 as they are estimates only and the same for both;
b)nor have I included the $62,000 approximately from their joint bank account and home sale net proceeds previously equally divided between the parties, given neither sought that to be reviewed or adjusted;
c)the parties’ other tax debts of $68,000 for the Respondent husband and $52,000 to $53,000 for the Applicant wife have not been directly taken into account because of the benefits they took from the business that they were both not entitled to, detailed in paragraph 122 above . Further, Applicant wife’s tax is uncertain and given the discussion detailed in paragraph 121, it is just and equitable they should be responsible for their own tax; and
d)it should not be forgotten that whilst both parties benefited from their separate operation of the E Company business post-separation, it is common ground over and above this, the Respondent husband was paid $44,000 by the Applicant wife post-separation. She did not request this to be an “addback” but it is a clear benefit he received that should not be ignored.
Finally it should be noted that whilst both parties at different times talked of or commented on negotiations in their Affidavits and the trial about a property settlement soon after separation that failed, I have put no weight on this. It was ignored for the purpose of this trial save for and to indicate to the parties it was irrelevant and the financial circumstances have changed.
I certify that the preceding one hundred and seventy (170) paragraphs are a true copy of the reasons for judgment of Judge Curtain
Associate:
Date: 26 October 2020
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