LETHAM and JONES
[2012] FMCAfam 1
•17 February 2012
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| LETHAM & JONES | [2012] FMCAfam 1 |
| FAMILY LAW – Property Settlement – where husband has failed to make full and frank disclosure of his share holdings in various entities – discussion of disallowance of debts and treatment of add backs generally – analysis of section 75(2) factors. |
| Family Law Act 1975 (Cth) Federal Magistrates Court Rules2001 Federal Magistrates Court Regulations |
| Anast & Anastopolous (1982) FLC 91-201 B & B (2006) FamCA 883 Bevan (1995) FLC 92-600 Biltoft (1995) FLC 92-614 Black & Kellner (1992) FLC 92-287 Brice (2007) FamCA 170 Briese (1986) FLC 91-715 C & C (1998) FamCA 143 C & C (2005) FLC 93-220 Chang v Su (2002) FLC 93-117 Clauson (1995) FLC 92-595 Ferraro (1993) FLC 92-335 G & G (2004) FamCA 1179 Giunti (1986) FLC 91-759 Gollings and Scott (2007) FLC 93-319 Hickey (2003) FLC 93-143 K & K (2002) FamCA 1150 (reported, in part, in (2003) FLC 93-135) Kernahan [2007] FMCAfam 952 Kouper (No.3) (2009) FamCA 1080 Kowaliw (1981) FLC 91-092 Lee-Steere (1985) FLC 91-626 Mayne (2011) FLC 93-479 Mezzacappa (1987) FLC 91-853 Mitchell (1995) FLC 92-601 Nemeth (1987) FLC 91-844 Norbis (1986) FLC 91-712 AJO v GRO (2005) FLC 93-218 Oriolo (1985) FLC 91-653 OSF & OJK (2004) FLC 93-191 Pastrikos (1977) 31 FLR 524 Pastrikos (1980) FLC 91-987 Polonius and York (2010) FamCAFC 228 Reichstein (2006) FamCA 1422 Rushton (2011) FMCAfam 1259 Russell (1999) FLC 92-877 Shimizu and Tanner (2011) FamCA 271 Stirling & Dobson (2011) FLC 98-056 Townsend (1994) FLC 92-569 Vautin (1998) FLC 92-827 Waters & Jurek (1995) FLC 92-635 Weir (1993) FLC 92-338 White (1995) FLC 91-648 Whitely (1996) FLC 92-684 |
| Applicant: | MR LETHAM |
| Respondent: | MS JONES |
| File Number: | MLC 7045 of 2009 |
| Judgment of: | Walters FM |
| Hearing dates: | 11 – 14 July 2011 25 – 27 July 2011 |
| Date of Last Submission: | 27 July 2011 |
| Delivered at: | Melbourne |
| Delivered on: | 17 February 2012 |
REPRESENTATION
| Counsel for the Applicant: | Mr Williams |
| Solicitors for the Applicant: | Carew Counsel Pty Ltd |
| Counsel for the Respondent: | Mr Sweeney |
| Solicitors for the Respondent: | Taussig Cherrie Fildes |
ORDERS
The wife’s application for spousal maintenance be dismissed.
All extant applications in relation to child support be struck out.
The Property B
Within thirty (30) days from the date of these orders, the husband and the wife must do all such acts and things and sign all such documents as may be required to effect a sale of the real property situate at and known as Property B, being the whole of the land more particularly described in Certificate of Title Volume [omitted] (“the Property B”), and:
(a)the listing price for the Property B shall be as agreed between the parties and if there is no agreement the listing price shall be as advised by a valuer nominated by the President of the Real Estate Institute of Victoria;
(b)the property shall be listed for private sale with an estate agent agreed upon between the parties.
(c)upon completion of the sale, the proceeds of the sale be applied as follows:
(i)first, to pay all costs, commissions and expenses of the sale;
(ii)second, to discharge the mortgage or mortgages and the Viridian Line of Credit encumbering the Property B;
(iii)third, to discharge the finance and the Viridian Line of Credit secured against the wife’s [omitted] motor vehicle (Esanda Finance Lease contract number [omitted]);
(iv)fourth, to repay to the children all moneys removed from their accounts; and
(v)finally, the balance to the wife.
Pending the settlement of the sale of the Property B:
(a)The wife have the sole use and occupation of the Property B, and during that right of occupation the wife be solely liable for and indemnify the husband against the following outgoings on the Property B:
(i)all municipal and water and sewerage rates;
(ii)the premiums for the continuation of current insurance policies on the house, and on the contents located in the Property B; and
(iii)utility expenses, including but not limited to gas, electricity and telephone usage.
(b)The husband must:
(i)pay and discharge any amount over $40,000 owing on the Viridian Line of Credit secured against the Property B; and
(ii)pay, as and when they shall fall due, all instalments and money due under the mortgage or mortgages presently encumbering the Property B, and make all further payments necessary to ensure that the total mortgage liability as at the date of settlement does not exceed $311,134.
The UK Property
Within thirty (30) days the wife must do all such acts and things and sign all such documents as may be required to transfer to the husband, at his expense, all of her right, title and interest in the real property situate at and known as Property P, United Kingdom (the UK Property).
The husband indemnify and keep indemnified the wife against all liabilities, claims, actions, suits or demands relating to or arising out of the UK Property including but not limited to liability for the payment of any taxation.
[L] Superannuation Fund
The parties must do all such acts and things and sign all such documents (including but not limited to selling the real property at Property K) as may be required to split the net assets of the [L] Superannuation Fund as to one half to the wife and one half to the husband, after the wife has first been reimbursed the amount paid by the wife to discharge the Viridian Line of Credit from the proceeds of sale of the Property B.
Pending the said superannuation split, the husband and the wife hold the net assets of the [L] Superannuation Fund on trust for the parties as described herein and for the purposes set out in these orders.
Within thirty (30) days from the said superannuation split, the wife must resign as a Trustee and Member of the [L] Superannuation Fund and the husband must thereafter indemnify and keep indemnified the wife against all liabilities, claims, actions, suits or demands relating to or arising out of the [L] Superannuation Fund.
[L] Family Trust
Within thirty (30) days from the date of these orders, the wife must resign as a Trustee and Member of the [L] Family Trust, and the husband must thereafter indemnify and keep indemnified the wife against all liabilities, claims, actions, suits or demands relating to or arising out of the [L] Family Trust.
Motor Vehicles
The husband retain to the exclusion of the wife his 2001 [omitted] motor vehicle registration number [omitted].
The wife retain to the exclusion of the husband her 2008 [omitted] motor vehicle registration number [omitted].
Household Contents
The wife retain to the exclusion of the husband all furniture and effects currently situate at the Property B.
The husband retain to the exclusion of the wife all furniture and effects currently situate at his rental property in [omitted].
Within thirty (30) days from the date of these orders, the parties must do all such acts and things and sign all such documents as may be required to close Commonwealth Bank savings account number [omitted] held in joint names.
Other assets and liabilities
The husband must pay the wife the sum of $18,200.00, at the rate of $175.00 per week for 104 weeks – commencing on Friday 24 February 2012.
The wife be liable for and indemnify the husband against all payments in respect of her Centrelink Debt.
Unless otherwise specified in these orders and save for the purpose of enforcing any moneys due under these or any subsequent orders:
(a)each party be solely entitled to the exclusion of the other to all other property (including choses-in-action) in the possession of such party as at the date of these orders (the furniture, personal possessions, and like chattels in the Property B property being deemed to be in the possession of the wife);
(b)moneys standing to the credit of the parties in any joint bank account are to become the property of the wife;
(c)insurance policies remain the sole property of the owner named thereon;
(d)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; and
(e)any joint tenancy of the parties in any real or personal estate is hereby expressly severed.
The wife must file and serve any application for costs (in the form of an application in a case) and supporting affidavit or affidavits by not later than 4.00 pm on Friday, 16 March 2012.
The husband must file and serve any Response to such an application, together with a supporting affidavit or affidavits, by not later than 4.00 pm on Friday, 13 April 2012.
The wife must file any reply to the husband’s Response and supporting material by not later than 4.00 pm on 27 April 2012.
The issue of costs otherwise be adjourned.
IT IS NOTED that publication of this judgment under the pseudonym LETHAM & JONES is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT MELBOURNE |
MLC 7045 of 2009
| MR LETHAM |
Applicant
And
| MS JONES |
Respondent
REASONS FOR JUDGMENT
Introduction
Three broad issues were presented to the Court for determination in these proceedings, although the relevance to those issues of much of the filed material, and some of the oral evidence, was not always apparent. The issues comprised property settlement, spousal maintenance and child support.
Just a few months ago, I found it necessary to make the following comments in relation to a property settlement and child support case that had been run before me. Regrettably, the comments apply, with equal force, to the present case:[1]
(The parties are intelligent and well educated) – and neither can be regarded as commercially naïve. Even so, it was perfectly apparent that neither had been prepared to take a realistic or commercially practical approach to their competing applications prior to the commencement of the trial itself, and neither had made a genuine effort to focus in a mature and responsible manner on the real issues that the Court would ultimately have to determine.
(On occasions) during the hearing I warned the parties, through their counsel, that the child support aspect of the proceedings was poorly prepared and inadequately defined. I foreshadowed that I would not be able to separate the wheat from the chaff (as it were), and that I would find myself unable to resolve this aspect of the dispute. As matters have transpired, I have indeed found myself unable to resolve the child support issues for the benefit of the parties. I have concluded that I have no alternative but to strike out all applications dealing with child support, and to refer the parties back to the processes available to them through the Child Support Agency.
Legal practitioners act on instructions, and the parties in this case are able people with strong personalities, who are more than capable of providing such instructions. Whether they were capable of listening to and accepting the advice of the legal practitioners acting for them, or willing to do so, is another matter.
Although the parties are the authors of their own misfortune in so far as the Court's inability to deal with the child support aspect of the dispute is concerned, their advisers should perhaps be reminded of comments made by Muirhead J over 30 years ago when speaking of the obligations of legal practitioners in the family law jurisdiction:[2]
The philosophies of (the Family Law Act) are clear and should be borne in mind not only by judges but by counsel and solicitors. It is true that the adversary system remains in the processes of determining contested issues. But the legal profession act as advisers, they are more than mouthpieces, more than puppets reacting to instructions. In this jurisdiction, the functions of this Court are not often understood by parties in dispute. A bit of sound common sense and dispassionate legal advice will often go a long way in solving the issues confronted by people who have temporarily lost their sense of proportion ...
[1] See Rushton (2011) FMCAfam 1259
[2] See Pastrikos (1977) 31 FLR 524 at 526, cited in White (1995) FLC 91-648, at page 82,558
The parties in this case have certainly lost their sense of proportion.
During closing addresses, I expressed the view that the manner in which the case had been prepared and presented was an outrage, and that it reflected very poorly on both sets of legal advisers. Counsel did their best with the material at their disposal, but even they lost focus on far too many occasions during the hearing.
For reasons that I do not understand, the parties made no genuine attempt to analyse the real effect of the orders they sought and then compare the result so achieved with the real effect of the orders sought by the other party. If I am wrong in that regard, then it is certainly not apparent to me that any such attempt was made. Simply put, both parties and their legal advisers gave every appearance of having tunnel vision. As I said during Mr Williams' closing, the case was "all over the place" and there had been no meeting of minds in relation to many issues. Significantly, even the limited degree of concurrence that was eventually achieved would not have occurred without the active intervention of the Court.
Although I could not resolve the child support issues presented to me for determination, I have done my best to deal with the property and spousal maintenance aspects of the proceedings.
Relevant corporate and other entities
Further to the comments recorded above, neither party appeared to make a determined effort to clearly identify the relevant corporate and other entities referred to in this case, and to explain their interrelationship and the husband's (or the parties') interest in them. The husband seemed determined to obfuscate his true financial position, and to do as little as possible to clarify it for either the wife or the Court. He could have, and should have, arranged at any early stage for his personal friend, Mr G (who is intimately involved in the management of most of the various enterprises, and about whom I will say more later in these Reasons), to provide a detailed explanation of the relevant financial structure and the husband's past and present involvement in it. He did not do so until (metaphorically speaking) the 11th hour and 59th minute: Mr G swore an affidavit on 13 July 2011, being the first day of the trial. I am satisfied that the filing of the affidavit was delayed until that time primarily for tactical reasons. I eventually ruled that the husband could not rely upon it.
At first blush, the wife appears to have made significant efforts to understand the relevant financial structure and the husband’s involvement in it. It seems to me, however, that the wife and her advisers lost sight of the wood for the trees, as it were. Large segments of the wife's affidavits were devoted to detailed complaints about the husband's inadequate financial disclosure and the efforts made by the wife's solicitors to gain access to information or documents that they felt were of importance. But, ultimately, only token efforts were made to draw the various threads together to assist the Court to fully understand the parties' past and present financial position. I am satisfied that this approach was also adopted for tactical reasons.
In other words, I am satisfied that the husband failed to make full and frank disclosure of his true financial position in a timely fashion because he believed that it would impede the wife in the presentation of her case, and make it difficult for the Court to make clear findings that he perceived may be to his detriment. At the same time, I am satisfied that the wife perceived that it may not be in her best interests to clearly identify the husband's true financial position and that, from a tactical point of view, it would be preferable to argue that the husband had failed in his obligations in that respect and that the Court should adopt what has been described as "a broad brush approach" when dealing with financial issues.
My views in this regard were reinforced by the manner in which the trial was conducted. Both parties filed their material late, and it was only after intervention from the Court that their legal advisers made something approaching a genuine effort to prepare a schedule of property and liabilities in a form that might be of assistance from the Court's point of view. Further, both parties conducted their cases on a "scattergun" basis, and if there was "theme" or clear direction to the approach taken by counsel (no doubt, on instructions), then it was not clear to the Court.
Subject to further historical and other information set out below, I propose to provide the following "thumbnail sketch" of entities referred to in the proceedings.
The husband is involved in the [omitted] industry. He was employed by [I] Pty Ltd (which I shall call "[I]") from 2002 to late 2009 or early 2010. [I] is part of a larger group of companies, which I shall call the [I] Group.
According to its website, [I] "is a [details of company omitted]", which "now has operations throughout Australia, UK, New Zealand and Canada".
Mr G (to whom I referred above) was appointed a director of [I] in March 1998. He remains a director, and is the company secretary. He is also a principal in an [omitted] firm known as [omitted]. He is, and at all relevant times was, intimately involved in the management of the [I] Group.
Mr G is a close personal friend of the husband.
The husband is not a company officer of [I]. He owns 6% of its issued shares.
The UK arm of the [I] Group is [I] UK ("[I] UK"). [I] also controls [I] ("[IW]"), which may or may not be its wholly owned subsidiary, and has a 50 per cent interest in a New Zealand based business known as [F] Ltd ("[F]").
It appears that [IW] has ceased trading.
According to exhibit W1, [I] has a 50% interest in [IW], [F] and [I] UK.
[V] Pty Ltd ("[V]") is – according to its website – "[company details omitted]". [V] shares premises and other resources with [I]. [V] pays management fees to the [I] for the use or provision of, among other things, premises and staff. It is clearly part of the [I] Group. Mr G is a director of [V], and is the company secretary.
The husband and the wife hold 12.5% of the issued shares in [V]. They hold them on behalf of their family trust, the [L] Family Trust.
Two other entities appear to be associated with [V], namely [omitted] Neither of these entities seems to be relevant for present purposes.
In his affidavit sworn 20 September 2010, the husband said that he left [I] in May 2010 as "it was not meeting (his) long-term financial expectations". He continued:[3]
I commenced a business known as [M] Pty Ltd with a financial backer Mr A. I had no funds to put into the business and he agreed to put in $100,000 for a 40% share of the business.
[3] see paragraph 16 of the husband's affidavit sworn 20 September 2010
He added that [M] Pty Ltd (which is actually incorporated as [M], and which I shall call "[M]") was then trading at a loss.
ASIC material records that [M] was incorporated on 1 March 2010, with the husband as its sole director. The husband owns 60% of the shares in the company. A separate corporate entity (no doubt associated with Mr A) owns the remaining 40% of the shares. The registered office of [M] is situated in the offices of [I] – being the firm of which Mr G is a principal.
Mr G is also the Chief Financial Officer of what is described as the [O] Group. According to its website –
The [O] Group is a collective of companies specialising in [omitted]. An Australian owned company, [O] operates in key global markets including the UK, Australia and New Zealand.
[O] [company details omitted].
Various entities appear to be associated with the [O] Group, namely [G] Pty Ltd ("[G]"), [companies omitted].
According to exhibit W1, [I] has "100% ownership" of [G]. [G] is, in turn, "a 100% owner" of the other entities referred to in the previous paragraph – save for [omitted] Pty Ltd, in respect of which it is "a 50% owner".
Exhibit H7 refers to additional entities, including [E] (or "[E]") – which is grouped as a single entity with [I] – and [R]. Neither of these entities appears to be directly relevant for present purposes.
The precise interrelationship between [I] or the [I] Group and [G] or the [O] Group is less than clear. Given the way the case was presented, however, it is unnecessary for the Court to go further than the general description given above and the discussion that occurs elsewhere in these Reasons.
Background and relevant financial and other history
In these Reasons, and unless otherwise indicated, all statements of fact comprise findings of fact.
I do not propose to set out a comprehensive chronology or procedural history in these Reasons. Such matters have been adequately dealt with in the outline of case documents filed by the parties. The wife's affidavits of 21 October 2010 and 7 July 2011 also contain detailed (indeed, unnecessarily detailed) chronologies focusing on the wife's perceptions of the husband's business interests, his post separation behaviour and procedural issues.[4]
[4] see, for example, paragraphs 80 to 198 (occupying 17 pages) of the wife's affidavit sworn 7 July 2011
The husband was born in 1969, and the wife in 1973. They married [in], and separated on 18 April 2009. It follows that the length of their relationship was just under 13 years. Neither party had been previously married. They were divorced in May 2010.
The parties were born in Wales. They emigrated to Australia in September 1996, immediately after their marriage.
There are two children of the marriage. [X] was born [in] 2000, and is now 11. [Y] was born [in] 2005 and is now 6.
[X] and [Y] live with the wife in the former matrimonial home in [Property B]. They have lived with her since the parties separated, and have spent time with the husband regularly. Final parenting orders were made, by consent, on 29 July 2011. The orders provide for the parties to have equal shared parental responsibility for [X] and [Y], who are to live with the wife and spend substantial and significant time with the husband. The orders are not controversial and can be read if further details are required.
The husband lives with his partner, Ms C. They have one child, [Z], who was born [in] 2011.
The wife has not repartnered.
At the date of the marriage, both parties were working in the UK in the [omitted] industry. The husband was a [occupation omitted] earning approximately 40,000 pounds per annum; the wife was an [omitted] earning something in the order of 11,000 to 16,000 pounds per annum. The husband was 27 and the wife was 23.
The husband worked on a full-time basis throughout the marriage. The wife worked part-time and was the primary home maker and caregiver for the children. In paragraph 30 of his affidavit sworn 20 September 2010 (and again in paragraph 30 of his affidavit sworn 28 June 2011), the husband seemed to acknowledge that the wife was the primary home maker and caregiver for the children, but a couple of paragraphs later he suggested that he was "the equal home maker and parent". I reject the husband's evidence in this regard, and note that it is clearly inconsistent with the husband's case as presented at trial and, indeed, with his outline of case document – which records (in Part E) that "the wife was the home maker and parent within the family and the husband also made substantial home maker and parent contributions".
I accept that the husband assisted the wife with the various homemaking and maintenance tasks, and that he also assisted with the care of the children. Given that he worked on a full-time basis, however, I have no doubt that the wife's contributions as homemaker and parent significantly outweighed those of the husband. It is certainly not to his credit that he seemed to suggest (in his affidavit material, at least) that his contributions in this area equated to those of the wife. They did not and, I find, the husband well knew that they did not. Indeed, the wife was not cross examined in relation to this subject.
Neither party had any significant assets at the date that they commenced cohabitation. After moving to Australia and living in Sydney and Brisbane, they moved to Melbourne in June 1999. The husband had been offered employment in Melbourne.
As part of the relocation to Melbourne, the parties sold a property that they had purchased in Brisbane. They then bought the former matrimonial home in Property B. Nearly 90% of the purchase price was borrowed, the remainder being provided (I assume) from the proceeds of sale of the property in Brisbane. The purchase price of the former matrimonial home was approximately $470,000 or $480,000.
The husband had joined [I] in or around 2002. According to material attached to the wife's affidavit of 7 July 2011, he was employed as "[omitted] for the [I] Group of companies". His base salary package then (in other words, in 2002) was to be $160,000 per annum, plus 9% superannuation. In addition, he was to be entitled to bonuses and equity participation on a conditional basis.[5] The appointment was for a 12 month period.
[5] see pages 94-5 of the annexures to the wife's affidavit sworn 7 July 2011
In his affidavit sworn 20 September 2010, the husband said that he left [I] in May 2010 as "it was not meeting (his) long term financial expectations". He continued:[6]
I commenced ([M]) with a financial backer Mr A. I had no funds to put into the business and he agreed to put in $100,000 for a 40% share of the business. Initially I took a salary of $4800 per week however the business has not taken off and I am now struggling to generate any income at all. The $100,000 was expended on the first three months and I can only draw down on moneys collected by the business after meeting its expenses.
[6] see paragraph 16 of the husband's affidavit sworn 20 September 2010
He added that [M] was then trading at a loss.
Later in the affidavit, however, the husband said:
In May this year I took employment as [omitted] at [M]. (Emphasis added).
According to the wife, the husband ceased employment with [I] in or about December 2009. He then entered into a consultancy agreement with a related company (called [omitted] Pty Ltd). The consultancy arrangement operated for a period of approximately 3 months.
As indicated above, the registered office of [M] is situated in the offices of [I][omitted] – being the firm of which Mr G is a principal.
During his time at [I], the husband acquired an interest in the business (through "equity targets"). In his affidavits of 20 September 2010 and 28 June 2011, he said that he owns "6% of the business" but has never been "on the board" or a company director.
The wife was sceptical the husband's decision to leave what she regarded as his "high-paid employment" with [I] "a matter of months after commencing family law litigation against (her)". She said that the husband had thoroughly enjoyed working for [I] during the relationship and had never previously raised concerns about the business "not being profitable enough or about him not being happy working there".[7]
[7] see paragraph 108 of the wife's affidavit sworn 7 July 2011
In May 2009 – in other words, approximately one month after they separated, and approximately a year before the husband left [I] to establish [M] – the husband and the wife engaged Mr F to prepare an informal valuation of the husband's business interests. I shall deal with Mr F's evidence later in these Reasons, but suffice it to say at this stage that I have no doubt that the husband failed to provide full and frank details of his business interests to Mr F at that time.
At the same time (on 12 May 2009), the husband emailed his close friend, Mr G, seeking information regarding businesses described as "[I]/[E] and [omitted]".[8] As indicated above, Mr G was clearly responsible for managing the affairs of the various entities comprising what the [I] Group. That the husband had some form of interest in the [I] Group was conceded at that early stage, but the nature and value of the husband's interest were less than clear to the wife and her advisers.
[8] see annexure LVJ 12 to the wife's affidavit sworn 21 October 2010
The husband asked Mr G for basic information relating to the value of his shareholdings in the [I] Group to effectively "keep the wife happy". He then wrote:[9]
Worst case is that she can appoint a corporate lawyer to go through our books, which clearly we don't want so I need enough info to appease her but not too much obviously.
[9] see the husband's email to Mr G dated 12 May 2009, comprising part of annexure LVJ 12 to the wife's affidavit sworn 21 October 2010
Mr G responded to the husband within a very short time. He wrote:[10]
[10] see Mr G's email to the husband dated 12 May 2009, comprising part of annexure LVJ 12 to the wife's affidavit sworn 21 October 2010
We have in recent times been undertaking a valuation of the business for the purpose of creating [O]. ...
Based upon the attached spreadsheet your interest in [O] would be $481,647.
The spreadsheet referred to in Mr G's email to the husband recorded the husband as having the following shareholdings:
a)[IW]: 6%
b)[I] – all: 6%
c)[V] – Oz: 12.5%
d)[E]: 6%
e)[V] – North: 11.25%
f)[R]: 6%
g)[F]: 3%
The spreadsheet contained further calculations adjusting the above figures consequent upon the creation of [G] and the [O] Group. The calculations reveal that the husband would be entitled to a 4.5% shareholding or interest in [G] or the [O] Group, valued at $481,647 – which is the amount referred to in Mr G's email to the husband.
The wife said, and I accept, that, at that time, she was unaware of more than half of the entities referred to in the spreadsheet.
Approximately 10 minutes after the husband received Mr G's email suggesting that his interest was worth $481,647, the husband responded to Mr G in the following terms:[11]
[11] see page 2 of the annexures to the wife's affidavit sworn 7 July 2011
F*ck that's a bit too much for these purposes. Do you have anything that makes me look completely poor?
I'll ring you in 5 ............
I shall refer to this email as the "'completely poor' email". I shall refer to the email exchange on 12 May 2009 (in other words, the three emails quoted above) as "the appeasement communications".
In my opinion, the sentiment expressed in the "completely poor" email and the appeasement communications perfectly reflects and encapsulates the husband's attitude to the financial aspects of these proceedings.
On 1 June 2009, Mr F advised the parties that the net assets of [I] were valued at $464,000, and that it followed that the husband's 6% interest in [I] was worth $27,840. Although the wife was not aware of Mr G's figures (as referred to in the appeasement communications) at that stage, she could not accept Mr F's valuation. It is apparent, of course, that the valuation was not comprehensive in that it did not take into account the other entities in which the husband was involved or the true structure of his entitlements. Notwithstanding the obvious inadequacies associated with Mr F's figure, the husband saw fit to rely upon it in his affidavit sworn 29 September 2009. Those inadequacies were well known to the husband at the time that he swore the affidavit, and I am satisfied that his reliance upon Mr F's figure reflected an intention on his part to mislead both the wife and the Court as to the likely value of his interest in the [I] Group in the broadest sense. This intention was, of course, entirely consistent with, and with the theme of, the appeasement communications.
On 11 August 2009, the husband filed an initiating application. The wife filed a response on 16 November 2009.
As recorded above, the husband left [I] somewhere between December 2009 and May 2010, and commenced [M] in March to May 2010. There is clearly some form of connection between [M] and the [I] Group in the broadest sense, and both are closely associated with Mr G and his accounting firm, [I] [omitted].[12]
[12] see, for example, paragraph 105 of the wife's affidavit sworn 21 October 2010 and paragraph 115 of the wife's affidavit sworn 7 July 2011
As recorded in her affidavits sworn 21 October 2010 and 7 July 2011, the wife made considerable efforts to understand and place an appropriate value on the husband's shareholdings and business interests. As the proceedings approached the interim hearing held on 9 November 2010, those efforts increased, but the husband's financial position became progressively more confusing. For example, in paragraph 129 of the earlier affidavit the wife referred to what appeared to be an ever increasing web of seemingly connected entities associated with companies in which the husband was a shareholder. The wife had no or very limited knowledge of certain of these entities. In subsequent paragraphs of the affidavit, the wife referred to comments or assurances made by the husband or on his behalf that appear to be inaccurate.
For his part, the husband complained (in his affidavit sworn 20 October 2010) that although the wife had requested "discovery of a plethora of financial information" from him, she had not "provided discovery" of her own financial circumstances to a sufficient extent. In what appears to be a manifestation of the philosophy that "attack (or offence) is the best form of defence", the husband deposed that he was:[13]
[13] see paragraph 10 of the husband's affidavit sworn 20 October 2010
... concerned that (the wife) is unnecessarily delaying determination of financial matters because:
· she wants to stave off the inevitable sale of the former matrimonial home;
· she does not appear to realise the parlous financial circumstances of the family or the untenable position whereby the current mortgage continues while the family seeks to maintain two households;
· (she) appears to be clutching at straws with ever widening requests for disclosure, despite the fundamentally simple financial position of the family; and
· if (she) wishes to obtain her own valuation of my business interests then she should do so without further delay.
In all the circumstances, it is clear that the husband's expressed "concerns" were disingenuous. The paragraph quoted above was little more than posturing and irrelevant bluster, and a further manifestation of the husband's attitude as reflected in the appeasement communications. True it is that the husband eventually disclosed more and more information regarding his financial position, but the fact of the matter is that – to use a colloquialism – the wife and her advisers were put "on the drip feed". I have discussed a litigant's obligation to make full and frank disclosure of his or her financial position under the heading "Full and Frank Disclosure" below. The husband failed to meet that obligation. Worse, he obfuscated and dissembled in the process of pretending to meet the obligation.
After separation, the husband continued to meet a number of financial expenses. He said that he paid the mortgage on the former matrimonial home, council and water rates, various insurances, minimum credit card payments, repayments relating to the wife's car and a further sum of $3500 per month direct to the wife "for other expenses". He did not pay child support because he felt that the making of the other payments absolved him from the responsibility of having to do so.
The wife disputed that the husband paid all of these expenses. For example, she said that she paid for council and water rates and all insurances (from the $3500 per month that she received from the husband). She also disputed that the husband paid any credit card payments relating to her, in that she said that she did not have any credit cards in her name. Nothing turns on these discrepancies.
In August 2010, the husband advised the wife that he was experiencing financial difficulties. He suggested that he was unable to pay the mortgage over the former matrimonial home and that he could no longer afford to pay for [Y] to attend kindergarten. The wife disputed the husband's description of his financial position and suggested that the husband had been receiving income from sources that he had not previously disclosed. She commenced paying for [Y] to attend kindergarten.
In mid September 2010, the husband did not meet the mortgage repayments in respect of the former matrimonial home. In the same month, the husband deposed that he was struggling to generate income through [M], and his solicitors advised the wife's solicitors that the husband's financial circumstances were dire.
A lengthy contested interim hearing took place on 9 November 2010. Certain interim parenting issues were in dispute, but the bulk of the argument related to financial matters, and to whether the husband had made full and frank disclosure of his true financial position (and properly discovered relevant documents). At the conclusion of the hearing, I informed counsel that I was far from satisfied that the husband had made full and frank disclosure of his financial position (and, relevantly, his income).[14]
[14] see 9 November 2010 transcript, page 69
After setting the matter down for trial on 11 July 2011 and making various orders relating to arrangements for the children, I made detailed orders dealing with financial disclosure and preservation of the parties' assets. I also made orders to the following effect:
a)Until further order, the husband pay for the support of the wife:
i)$1000 per calendar month towards the mortgages encumbering the former matrimonial home;
ii)$650 per calendar month towards the wife's car lease; and
iii)$3500 per calendar month, commencing 15 November 2010.
b)The funds presently held in the Family Trust CBA account (estimated at between $17,500 and $18,000) be set aside for the use of the wife to meet any shortfall on the mortgage as required by the bank to prevent foreclosure pending trial.
c)All questions of costs be reserved.
The orders of 9 November 2010 are not controversial and can be read if further details are required. I shall refer to them as the November 2010 orders.
In his affidavit sworn 28 June 2011, the husband said that he had continued to meet the wife's car lease payments (being $650 per month) and pay her $3500 per month. He continued:[15]
I have had to borrow money from my partner to meet those payments and have sometimes been late with the payment ... because I have had to wait for my partner to be paid. I have been unable to pay the $1000 (per month) towards the mortgage as I simply do not have the funds.
[15] at paragraph 58
From the wife's point of view, the husband elected to use the order to the effect that funds in the Family Trust CBA account were to be set aside to meet any shortfall on the mortgage as a "get out of jail free card". She was convinced that the husband had sufficient funds available to him to make not only the minimum payment of $1000 per month, but the full mortgage payment as well.
Although the husband's counsel had advised the Court during the hearing on 9 November 2010 that the CBA had agreed to accept a total payment of $1000 per month towards the mortgages on an interim basis, the bank later denied such an agreement. According to the wife, the bank had agreed to accept $1000 per month towards the arrears owing on the mortgages, but still required the parties to make the primary repayments of $3287 per month. In other words, the total amount that the parties should have been paying was $4287 per month.
Given that the husband had failed or refused to pay the amount of $1000 per month that he was ordered to pay pursuant to the November 2010 orders (let alone the total amount that the parties should have been paying, being $4287 per month), the wife utilised funds in the Family Trust account for this purpose. According to the wife, some $19,000 was utilised from the Family Trust account in this way, and by April 2011 the balance in the Family Trust account had been reduced to zero.
On or about 21 April 2011, the husband and Ms C travelled to the UK. According to the husband, Ms C paid for the trip. On the way to the UK, the husband visited Singapore for one day. While there, he closed an HSBC account that he had operated for some time (but had not disclosed in his Court documents). The husband stopped in Singapore again in May 2011, on his way back from the UK.
On 19 May 2011, the Court made orders (by consent) to the effect that the mortgages and outstanding rates and charges be paid from the children's CBA Youthsaver accounts pending trial, with the characterisation of such payments to be determined at trial.
In late June 2011, the husband's solicitors filed an affidavit sworn by Mr F, attaching his report to the effect that the value of the husband's shares in [I] was $33,669, and that the value of his shares in [V] was $nil. It would appear that other entities were not considered.
The trial commenced on 13 July 2011. Due to an illness suffered by Mr Williams, it could not continue on 14 July 2011. It resumed on 25 July 2011, however, and continued on 26 and 27 July.
Documents relied upon
The husband relied on the following documents:
a)outline of case document filed 8 July 2011;
b)initiating application filed 11 August 2009;
c)amended initiating application filed 28 June 2011;
d)his affidavits sworn 29 July 2009, 20 September 2010, 20 October 2010 and 28 June 2011;
e)his financial statement sworn 20 September 2010; and
f)affidavit of Mr F sworn 24 June 2011.
The wife relied on the following documents:
a)outline of case document filed 8 July 2011;
b)amended response to initiating application filed 7 July 2011;
c)her affidavits sworn 21 October 2010 and 7 July 2011 (both of which attach a significant volume of largely unhelpful material);
d)affidavit of Ms DD sworn 12 July 2011 (eventually tendered as exhibit W10); and
e)affidavit of [name omitted] sworn 7 July 2011.
As indicated above, Mr Williams (for the husband) sought to rely on an affidavit of Mr G which was sworn on 13 July 2011 (being the first day of the trial). After hearing submissions from Mr Williams and
Mr Sweeney (for the wife), I ruled that Mr G's affidavit could not be relied upon.[16] Although neither party had complied with the directions regarding the filing of material for trial, each had consented to certain identified material of the other being accepted into evidence. Mr G's affidavit was in a different category, because Mr Sweeney objected to the husband relying on it. In my opinion, it was clear beyond argument – from a very early stage – that Mr G would be a relevant and important witness in the proceedings. It was for the husband (in whose "camp" Mr G logically belonged) to take steps to have him provide his evidence on affidavit at a much earlier stage than the first day of the trial. During the course of his submissions, Mr Williams suggested that Mr G was only considered to be a required witness after the receipt of the wife's trial affidavit and the affidavit of her expert witness, Ms D, but I rejected that submission as disingenuous.
[16] see 13 July 2011 transcript, page 21
Orders sought
In his amended initiating application (filed on 28 June 2011) the husband sought orders to the effect that "the assets of the parties found to be available for division between them be divided 55% to the wife and 45% to the husband". At least, that is what the husband sought in paragraph 1 of the final orders sought in the amended initiating application. In paragraph 7 of the same document, however, he sought "such further and other orders necessary in order to effect an equal division of the parties' assets as referred to in the preceding paragraphs and, if necessary, sale of real or personal property".
Similar paragraphs appear in the husband's outline of case document.
In his opening address, however, Mr Williams submitted that "there ought to be a division between the husband and wife of approximately 65%/35%, and equalisation of superannuation", on the basis that the parties' contributions should be treated as being equal and that the wife should be awarded a further 15% to take account of the section 75(2) factors.
In her amended response filed 7 July 2011, the wife sought a series of complex and disjointed orders, including orders for spousal maintenance and child support. The effect of these orders was explained in the wife's outline of case document (filed on 8 July 2011) as follows:
Property Division
The (wife) seeks orders such that she retains the total net sale proceeds from the matrimonial home, superannuation, her motor vehicle and household contents, with the (husband) to retain the remaining net assets of the matrimonial asset pool ... Such division equates to a 61.3%/38.7% division in her favour. Whilst the (wife) submits that she is entitled to a larger split of the asset pool in her favour based on contributions and section 75(2) factors, the composition of the asset pool is such that she only seeks the orders sought ...
Spousal Maintenance and Child Support
... The (Wife) seeks orders that the (husband) pay her $250 per week spousal maintenance until 30 June 2013, at which time she expects to complete her [qualification omitted].
The (wife) seeks a departure order for child support such that the (husband) pay:
· $300 per child per week in periodic child support;
· primary school fees and associated educational expenses;
· later, private secondary school fees and educational expenses; and
· any gap payment in relation to the children's medical and dental costs.
Perhaps not surprisingly (having regard to what appears to be the chaotic nature of his brief), Mr Sweeney elected not to open. In his closing address, however, he handed up a document headed "Property of the Parties – [LETHAM & JONES]". The document records the following:
It is accepted that the superannuation is to be equally divided.
Figures are then set out which purport to show that "on the husband's best case", non-superannuation property is to be divided on the basis of 68.65% to the wife and 31.65% to the husband. Alternative figures are presented which suggest that the division of non-superannuation property is more likely to be on the basis of 64.1% to the wife and 35.9% to the husband.
In his closing address, Mr Williams submitted that the Court should find that the parties' contributions (in all their various guises) should be regarded as equal. By implication, he submitted that the adjustment in the wife's favour to take account of section 75(2) factors should amount to 15% (or, perhaps, 15% of the non-superannuation property). He opposed any order being made in respect of spousal maintenance.
In relation to child support:
a)Mr Williams conceded that the husband should be assessed "at the top rate", and that that rate should adhere until 30 June 2013; and
b)Mr Sweeney eventually indicated that the wife would not be proceeding with her claim for payment of private school fees.
In his closing address, Mr Sweeney confirmed that the parties' superannuation entitlements should be equalised. He also confirmed that the parties' contributions (in all their various guises) should be regarded as being equal.
It is fair to say that the parties' respective cases passed like two ships in the night. It was only in the closing stages of the trial that it became apparent that the parties were no more than approximately $45,000 apart in their competing property settlement applications.
I have already recorded my frustration with the fact that the parties seemed to make no genuine attempt to analyse the real effect of the orders that they sought and then compare the result so achieved with the real effect of the orders sought by the other party.
In the circumstances, the Court is left to do the best that it can with the evidence before it. I accept, however, that the parties have agreed that their superannuation entitlements are to be equalised and that the final orders to be made pursuant to these Reasons should reflect that agreement. In reality, the core question (at least in relation to property settlement) boils down to whether the wife is to retain the entire net proceeds of sale of the former matrimonial home, or whether the husband should be paid some moneys from the sale proceeds.
Property Settlement – The Law[17]
[17] This generic summary of the law relating to property settlement is substantially reproduced from my decision in the matter of Kernahan [2007] FMCAfam 952
The general approach that should be adopted by the court in relation to a property settlement application has been described in many cases.[18] The court must first identify the property of the parties. It must then attribute a value to each item of property – usually as at the date of the hearing. Thereafter, it must assess the extent of each party’s contributions under the various sub-headings described in section 79(4) of the Family Law Act 1975. Finally, the court must consider the financial resources, means and needs of the parties, and the other matters set out in section 75(2) so far as they are relevant. An adjustment of the amount due to each party by way of contribution is then made by reference to the section 75(2) factors. It is not essential, however, that such an adjustment take place. Generally speaking, an adjustment is made because one party has greater needs and the other has stronger means.
[18] See, for example, Pastrikos (1980) FLC 91-987, Lee-Steere (1985) FLC 91-626, Ferraro (1993) FLC 92-335, Clauson (1995) FLC 92-595 and Whitely (1996) FLC 92-684
In relation to the contributions of the parties under section 79(4) generally, it has been held that a “global” approach will usually be more convenient than an “asset by asset” approach – although the application of an asset by asset approach does not (of itself) amount to an error of law.[19]
[19] See Norbis (1986) FLC 91-712
The section 75(2) factors are related to the process of arriving at a just and equitable result. It follows that there may be circumstances in which the justice and equity of the case, and the specific provisions of section 75(2), support an adjustment in a party’s favour for matters which cannot comfortably be described as being of financial or economic significance.[20]
[20] See McMahon (1995) FLC 92-606 at 82,043
Under section 79(2), the court is required to be satisfied that the property settlement orders that it proposes to make are just and equitable – and not simply that the underlying percentage division of the net value of the parties’ property is appropriate. In other words, in the consideration of whether the overall result of property settlement proceedings is just and equitable, it is the justice and equity of the actual orders, and not of the percentage distribution, which must be considered.[21]
[21] See Russell (1999) FLC 92-877
The overall process to be applied in property settlement cases is summarised by the Full Court in Hickey (2003) FLC 93-143, where their Honours said:[22]
The case law reveals that there is a preferred approach to the determination of an application brought pursuant to the provisions of s.79. That approach involves four inter-related steps. Firstly, the court should make findings as to the identity and value of the property, liabilities and financial resources of the parties at the date of the hearing. Secondly, 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 expressed as a percentage of the net value of the property of the parties. Thirdly, 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 section 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 at step two. Fourthly, the court should consider the effect of those findings and determination and resolve what order is just and equitable in all the circumstances of the case…
[22] At paragraph 39
My view is that the testing of any proposed orders by reference to section 79(2) is not a fourth substantive step (properly so called) in the property settlement exercise.[23] In applying s.79(2), the court has power to adjust the form, structure or balance (for want of a better description) of the orders that it is minded to make in order to give effect to its conclusion as to the parties’ respective entitlements after the application of the first three steps mentioned in Hickey. In other words, the determination of the proportional or other distribution or division of the parties’ property between them must necessarily be concluded before the court considers the justice and equity of the actual orders that are to be utilised to give effect to that distribution or division.
[23] See OSF & OJK (2004) FLC 93-191
In B & B (2006) FamCA 883, Faulks DCJ said:[24]
If the judge has properly carried out his or her functions in determining the factors under section 79(4) (including those applicable factors under section 75(2)), the result overall should be just and equitable within the terms of the Family Law Act 1975. Accordingly, if a judge on reviewing his or her deliberations in relation to the first three stages concludes that the result does not appear to accord with justice and equity, then it is likely that the earlier adjustments were wrong. This fourth stage is really a description of a judicial thought process rather than a third discretionary phase. I do not accept the proposition that there is a third discretionary phase un-associated with contributions and/or the financial circumstances of the parties (or the other matters under section 79(4)) which somehow permits a judge in accordance with his or her conception of justice and equity to vary determinations otherwise properly made in accordance with the first two discretionary assessments.
I accept that in some cases there may be a minor adjustment required, for example to enable a cash-poor litigant to retain some real estate when he or she has no capacity to make any payment to the other party. For my part, it seems to me that even that sort of adjustment is more appropriately incorporated into the first two discretionary phases.
[24] In paragraphs 105 & 106
In Brice (2007) FamCA 170, however, Kay J suggested – in a passage that is clearly obiter – that section 79(2) is itself a source of substantive power. His Honour continued:[25]
If the sum of the parts created by section 79(4)(a), (b) and (c) contributions and section 79(4)(e) considerations adds up to too much or too little, then further adjustments may be made in order to meet the over-riding dictate that an order must not be made unless it is just and equitable.
[25] At paragraph 19
For the reasons that I set out in OSF & OJK (2004) FLC 93-191 (and, in particular, in paragraphs 26 to 28 thereof), I prefer the analysis of Faulks DCJ in B & B to that of Kay J in Brice.[26]
[26] See also the comments made by Faulks DCJ in Mayne (2011) FLC 93-479, at paragraphs 65 and 66
At the end of the day, though, the precise nature of the final step or stage in the property settlement exercise may not be of any real significance in the present case. It is enough to record that the process involves the Court metaphorically “stepping back” to consider whether the proposed orders (arrived at after the application of the first three steps described in Hickey) are just and equitable.
Full and frank disclosure
There can be no doubt that both parties have a clear obligation to make full and frank disclosure of their financial circumstances in a timely manner.[27].
[27] See Reichstein (2006) FamCA 1422 at paragraph 80.
The duty to make full and frank disclosure of one’s financial position has been set out in a number of cases determined by the Full Court over the years. Those cases were summarised in Chang v Su (2002) FLC 93-117. Full and frank disclosure is required as a matter of principle in proceedings between spouses or former spouses under the Family Law Act (see, for example, Oriolo (1985) FLC 91-653, Briese (1986) FLC 91-715 and Giunti (1986) FLC 91-759). Where the court cannot be satisfied as to the extent of a party’s property, it can be less cautious than might otherwise be the case when making relevant orders (see Mezzacappa (1987) FLC 91-853, Black & Kellner (1992) FLC 92-287 and Weir (1993) FLC 92-338).
The authorities referred to above reveal that a judicial officer is entitled to take a “robust view” in relation to findings regarding a party’s financial position (including a party’s capacity to meet any proposed order) where that party has failed to make full and frank disclosure of his/her financial position.[28]
[28] See Chang v Su at paragraphs 71 an 72
In November 2002, the High Court dismissed an application by the husband in Chang v Su seeking special leave to appeal from the Full Court’s decision. In the course of argument, Callinan J observed:
It does not matter what the principle might be seen to be, a Court has to do the best it can. It does the best it can, having regard to the evidence that is adduced, and if the parties are not frank then naturally there is going to be a measure of imprecision about any findings that the Court can make.
In K & K (2002) FamCA 1150 (reported in (2003) FLC 93-135 – but not as to this issue) – the Full Court said:[29]
(It was submitted that certain cases discussed in the judgment) were authority for the proposition that where there was a finding of deliberate non-disclosure the Court could act more robustly in making findings adverse to the party who had actively misled it. We do not see that the principle should be so confined.
Whether the non-disclosure is wilful or accidental, or is a result of misfeasance, or malfeasance or nonfeasance, is beside the point. The duty to disclose is absolute. Where the Court is satisfied that the whole truth has not come out it might readily conclude the asset pool is greater than demonstrated. In those circumstances, it may be appropriate to err on the side of generosity to the party who might otherwise be seem to be disadvantaged by the lack of complete candour…
[29] At paragraphs 50 and 51.
Of particular relevance to the circumstances of this case (including, in particular, the husband's attitude as reflected in the appeasement communications) is the following passage from the Full Court's decision in Nemeth (1987) FLC 91-844:[30]
[30] At pp. 76,384-5
(The trial judge) summarised the husband's attitude in the litigation as being one of saying to the wife:
"Go and find out for yourself.''
Because of this attitude the wife was obliged to engage expert professional persons to make extensive investigations, and, in the light of the great complexities of the husband's affairs, the resultant cost to her was substantial. ...
The decision in Oriolo[31] shows that it is fundamental to the operation of the Family Law Act in financial cases that there should be this obligation to make a full and frank disclosure of all matters relevant to the ascertainment of the financial position of each party, over and above mere compliance with the rules. There is a positive obligation on a party to set out at an early stage his financial position in a clear and comprehensive manner. This includes evidence as to the value of his assets and not merely a recital as to what they are. It is not enough to argue, as the appellant did in this case, that he had disclosed his assets (which he did eventually), and that it was for the wife to provide valuations as to them. In particular this is not appropriate in the light of the complications attached to the ascertainment of values. The Family Law Act demonstrates by its terms that it is aimed at early resolution of disputes, where this is possible. Inadequate disclosure almost inevitably prevents there being a properly based approach to the question of settlement. Where the case goes to trial inadequate disclosure may lead to delays, sometimes requiring adjournment; invariably it leads to more protracted and costly proceedings. The failure of a party to be completely open and forthcoming as to his or her financial position, should always place that party at risk in relation to an order for costs. (Emphasis added.)
[31] Oriolo (1985) FLC 91-653
The wife's affidavit sworn 21 October 2010 records a detailed history of the wife's attempts to understand and place an appropriate value on the husband's shareholdings and business interests. I accept and adopt that history, and find that the husband's disclosure in relation to such matters was piecemeal, delayed and generally inadequate. In the circumstances, I am clearly permitted to take what might be considered a robust view in relation to findings regarding the husband's financial position and, if necessary, to err on the side of generosity to the wife (who was the party that would otherwise be disadvantaged by the husband's lack of candour).
I would add that Mr Williams seemed to suggest, on a number of occasions, that it was for the wife to provide valuations of the husband's shareholdings and business interests and that, in essence, the husband was justified in taking the attitude that the wife should "go and find out for herself". That suggestion flies in the face of long years of authority in the area of Family Law. The true position is, of course, as set out in the passage that I have cited from Nemeth above.
The parties’ credibility and approach to the proceedings
I was impressed by the wife as a witness, and I find that her evidence was generally truthful. She made relevant concessions, and there was a balance and candour in her evidence that was often missing from the husband’s evidence. I am satisfied that she was credible, that she gave appropriate responses to the questions asked of her and that she endeavoured to assist the Court in that regard.
The husband was not an impressive witness. I understand that litigation can be a stressful experience for a litigant, who can experience nervousness or anxiety in the course of giving evidence. But the husband did not appear the nervous or anxious in the witness box. Instead, he appeared wary and somewhat cynical. At times, he was reluctant to make concessions when it was appropriate that he do so. At other times his answers were unresponsive, evasive or lacking in candour.
Generally speaking, extracting financial information from the husband was a very difficult exercise. I find that he was reluctant to make relevant disclosures unless he felt that there was no other option. I find that the husband was not prepared to make full and frank disclosure of his financial position – or, alternatively, that he was not prepared to make anything approaching full disclosure until the dying stages of the proceedings. Clearly, if the husband had been open and frank in relation to his financial position at an early stage, then the Court’s time could have been used more efficiently. Similarly, much of the posturing that characterised both parties' cases could have been avoided and, significantly, what I assume were very substantial legal and accounting fees could have been markedly reduced.
The conduct of the husband’s case in relation to financial matters can be characterised by the use of two short expressions. The first is "too little, too late"; the second is (as in Nemeth, discussed above) "Go and find out for yourself." In my view, those expressions adequately describe the type of scenario faced by the wife and by the Court.
The appeasement communications (and, in particular, the "completely poor" email) elegantly encapsulate the husband's attitude to the proceedings. Regrettably, he showed himself to be a person who cannot be trusted to be open and honest in relation to financial matters.
I find that the husband's evidence cannot and should not be relied upon where it is in conflict with the wife's evidence.
The husband's evidence
I do not propose to set out the husband's evidence in detail. I shall, however, deal with some matters.
The wife suggested that the husband had signed her name on documents associated with the establishment of the [L] Family Trust and the [L] Superannuation Fund. The husband denied that he had signed her name. There was no suggestion that the wife was unaware of the establishment of the entities and the question of whether or not she actually signed the documents was not relevant to any matter in issue in the proceedings. Indeed, the wife confirmed that the husband would sometimes write her signature on documents with her knowledge and consent.
The husband asserted that he had assisted as much as he could in relation to providing information regarding his financial position. I do not accept his evidence in that regard and have made findings about his attitude and behaviour elsewhere in these Reasons.
To the extent that the husband asserted that he did not know about the relevant entities in the [I] Group, or understand their interrelationship, I do not accept his evidence in that regard. The husband could have, and if necessary should have, obtained all necessary information from
Mr G.
The husband made efforts to blame others, such as his solicitors and Mr G, for failures to provide relevant information to Mr F and the wife. I do not accept his denial of responsibility for his failure to make full and frank disclosure of his financial position. To use a colloquialism, "the buck stopped with him".
In response to questioning as to why evidence from Mr G was not obtained prior to the first day of the trial, the husband professed ignorance. He also said that he did not think that Mr G's evidence would be relevant. He said that he is not a lawyer and that he is "under instructions" from his lawyer. Again, I do not accept the husband's evidence in this regard and find that he was well aware of the need to make full and frank disclosure. I find that his attitude is amply reflected in the appeasement documentation, and I do not accept the husband's explanation to the effect that his comments in the "completely poor" email were flippant.
The husband confirmed that his understanding is to the effect that the [O] Group is to be floated publicly in 2012. He suggested that he did not think that it was relevant to advise the Court of that information. I do not accept his evidence in that regard and find that he well knew that the floating of the Group would be relevant for the valuers and for the Court to know.
The husband confirmed that he would be comfortable if child support were to be assessed on the basis that he is currently earning $120,000 per annum.
The husband accepted the wife's evidence as to the amount that she spends on the children, and accepted that that amount is reasonable. He added, however, that he cannot afford to pay it.
The husband had no explanation as to why he did not disclose an ANZ bank account or accounts. He said that he "just did not disclose (the account or accounts".
When cross examined about the HSBC account that he closed when in Singapore, the husband confirmed that he "had another entity that received income into that account". He also confirmed that he had not disclosed the existence of that entity (being [C]) and that he had not disclosed his overseas income from this source. I find that the husband's failure to disclose these matters was deliberate.
In relation to exhibit W7, being a document disclosing his income at slightly less than $150,000 per annum, the husband suggested that some form of mistake had been made. He later confirmed that, because of conflicting information, the Court cannot know which information is correct and which information is not correct. Similarly, he confirmed that his bank statements cannot be relied upon as accurately reflecting his income.
He was also cross-examined about a document produced in June 2011 recording his earnings as being $20,800 per month. The husband appeared to be (metaphorically) grasping for straws when attempting to answer Mr Sweeney's questions about the document. He said that it was no more than a forecast and then confirmed that he had developed the document when he was looking for funding for the business. He confirmed that he produced it for the purpose of "making things as realistic as possible" for a private investor. When it was then suggested to him that he tells people what he thinks that they should hear, taking into account the purpose the husband wants to achieve, the husband denied the suggestion – but I reject his evidence in that regard.
He suggested that the wife could earn something in the order of $90,000-$100,000 per annum if she were to return to her employment in the [omitted] industry. He said that her base salary would be in the order of $50,000-$60,000 per annum, but with bonuses and the like she could earn the higher amounts. Having regard to the husband's attitude to the litigation (which I have described elsewhere in these Reasons), and his lack of credibility generally, I do not accept the husband's evidence in this respect.
The wife's evidence
I do not propose to set out the wife's evidence in detail. I shall, however, deal with two matters.
The wife confirmed that she has a background in the [omitted] industry. She has not worked in that industry, however, since 1999. She has no formal qualifications.
The wife said that if she worked a 10 to 12 hour day in the [omitted] industry, she could earn something in the order of $65,000 per annum. She acknowledged that she will earn less in [omitted] that she could earn in the [omitted] industry. From her point of view, however, working with [omitted] is a "passion" that she wishes to pursue.
Valuation of the husband's business interests/shareholdings
Mr F and Ms D are suitably qualified and experienced chartered accountants. Their qualifications and experience were not in dispute; nor was it in dispute that each could be accepted by the Court as an expert valuer of the husband's business interests in the broadest sense.
Mr F swore an affidavit on 26 June 2011, to which is attached his valuation report dated 16 December 2010. Ms D swore an affidavit on 4 July 2011, which annexes a report (dated the same day) setting out her critique of Mr F's report.
On 7 July 2011, Mr F and Ms D signed a document headed "Joint Statement by Experts". Leaving aside more formal matters, the joint statement is as follows:
2.0 Matters arising from conference of experts
2.1 Having conferred in relation to their reports, Mr F and Ms D are unable to agree on the valuation of the interests held by the husband (or [L] Family Trust) in [I] or [V].
2.2 Mr F notes that at the time of preparation of his report he was not informed about the interest held by [I] in [I] (UK) Ltd and has only recently been provided with any information in respect of this entity. Mr F also notes that he has recently been provided with the financial statements for the year ended 30 June 2010 for [I] and [V], which detail a material change in the financial performance of those companies in the 2010 financial year. On the basis of this information Mr F is of the opinion that the value of the interest held by the husband in [I] and [V] must be updated.
2.3 Ms D maintains that she has not been provided with sufficient information upon which to prepare a valuation of the interest held by the husband in [I] or [V] nor has she been provided with the 2010 financial statements for those entities or their subsidiaries.
On 22 July 2011 (that is, approximately a week after the trial commenced), Ms D prepared and signed a document headed "Joint Statement by Experts (#2)". Leaving aside more formal matters, the statement is as follows:
1.5 Ms D and Mr F prepared a joint statement on 7 July 2011 and have subsequently prepared further valuation reports in this matter ...
2.0 Matters arising from conference of experts
2.1 Having conferred in relation to their reports, Mr F and Ms D note that there remains a great deal of uncertainty surrounding the value of the interests held by the husband in the entities due to the piecemeal and conflicting information provided to them both.
2.2 In order to provide the Court with some guidance as to the minimum value of the interests held by the husband in the companies, Ms D and Mr F have agreed to apply a 25% minority discount to the estimates of pro rata value set out in their updated reports.
2.3 Applying a 25% minority discount to the values set out in Ms D’s report yields a total value of $161,000. Applying a 25% discount to the values detailed in Mr F's report yields a value of $133,500. In view of the uncertainty, Ms D and Mr F agree that the value of $150,000 is an appropriate estimate of the minimum value of the interest held by the husband in [I] and [V] at 30 June 2010.
Upon receipt of the second joint statement, Mr F deleted the word "minimum" in the last sentence of paragraph 2.3. He then signed the statement. Thus, the position of the experts at that time was that Mr F appeared to be of the view that the relevant value is $150,000, while Ms D was of the view that the relevant value is a minimum of $150,000.
I do not propose to summarise the report and critique attached to the experts' affidavits. The documents are available to be read. But the resolution of the question of the value that should be attributed to the husband's shareholdings does not lie in those documents. It lies, instead, in the oral evidence of Mr F and Ms DD.
Mr F's evidence
Mr F's evidence (or, perhaps, that part of it which I consider most relevant) was to the following effect:
a)He was not asked to prepare a valuation of the husband's interest in [M].
b)He had a number of contacts with Mr G between 2009 and the commencement of the trial in 2011. He had also been provided with, and read, Mr G's affidavit sworn 13 July 2011. I had ruled at the commencement of the trial, however, that the husband could not rely upon this affidavit.
c)He had placed some reliance upon what he had been told by Mr G – because, in effect, he had little alternative but to do so.
d)He confirmed that he had prepared a total of three reports relating to the valuation of the husband's shareholdings, and that it is very rare for him to have to prepare so many reports.
e)He did not dispute that he had received instructions on "a need to know basis", and accepted that the information provided to him had been piecemeal, incomplete and inconsistent. He also said that Mr G disappointed him, and that he (Mr F) may not have been told the full story. He felt that Mr G, who he regarded as central to the valuation exercise, was not being totally open with him. He also felt, however, that on the information provided to him, his valuation is correct.
f)He conceded that the original letter of instructions requesting him to prepare a valuation (being the letter dated 20 August 2010 from the husband's solicitors) was deficient in that it made no mention of [V], or various other relevant entities.
g)When Mr Sweeney referred to the comparatively large number of other entities flowing into (or conceivably out of) or otherwise associated with [I] UK, he conceded that access to "the financials" for those entities would be fundamental to the valuation process that he had undertaken. Mr F summarised the position as follows:
Without knowing what flows from the top, you can't value what's at the bottom.
h)He said that, as far as he was concerned, the agreement with Ms DD was to the effect that the valuation of the husband's shareholdings in the relevant entities (excluding [M]) was "$150,000 period".
i)He confirmed that he relied on information provided by the husband and Mr G, and that he was not told about certain of the entities forming part of or associated with the [I] Group. For example, he had heard nothing of the [O] Group until Ms D told him about it, and he was not aware that there are or had been plans to "float" [O] (indeed, he said that, based on what he had been told, he was surprised that a float could be contemplated). Similarly, and as indicated above, he was not provided with all "the financials" that he considered relevant.
j)He said that he was advised that [I] has a 45% interest in [I] UK, and that he relied on that representation when preparing his valuation. The representation was made by Mr G on or about 5 July 2011 and forms the subject of a file note made by Mr F. Mr Sweeney then showed him exhibit W1, which comprises a chart describing the business structure of [I] as at October 2010. The document, which was sourced in Mr G, reveals that [I] has a 50% interest in [I] UK. The cross-examination continued:[32]
[32] see 26 July 2011 transcript, page 112
Mr Sweeney: Again, that is just another example of inconsistent information, isn't it?
Mr F: Doesn't look good. ...
Mr Sweeney: No. It looks like someone is being misled or just wrong. It has got to be Mr G, right? Right?
Mr F: Yes
k)He conceded that, as part of the valuation process, he was obliged to consider the relevant entities' expenses (as they appear in the profit and loss statement) and make adjustments where the expenses are considered to be excessive or otherwise inappropriate. In other words, he was obliged to normalise the expenses. In preparing his valuation for the purposes of these proceedings, however, he did no more than check with the husband as to whether there were expenses that needed to be queried, and whether there were any other matters that the husband thought that Mr F should know about. Alternatively, he did no more than check these matters with Mr G. In the light of –
i)the husband's approach to the issue of full and frank disclosure;
ii)the appeasement communications and the "completely poor" email;
iii)Mr F's comments regarding his disappointment with Mr G and his opinion to the effect that Mr G had not been completely open with him,
Mr F's approach in this regard was unwise. It fell far short of the standard that should ordinarily apply to an expert witness of
Mr F's experience and seniority. Indeed, it fell far short of the standard that should ordinarily apply to any expert witness.
l)His explanation for not normalising what would appear to be an abnormal or extraordinary amount relating to accounting expenses was illogical and unpersuasive. He took the view that what might otherwise appear to be an excessive amount for accounting expenses did not have to be normalised "because the person doing the work was Mr G" and because "he was running the company".[33] In my opinion, it is clear beyond argument that it is precisely because of these factors that the allowance for accounting expenses should be normalised.
m)He did not normalise other expenses or explore what might be described as trends (such as a near doubling of contract payments from one year to the next) for the simple reason that his single, general request to Mr G (or perhaps to the husband or his solicitors) as to whether there were any abnormal, extraordinary or non-recurring items of income or expenditure in the accounts was answered in the negative. In my view, Mr F abrogated his responsibility as an independent expert by failing to exercise his own judgment in relation to matters of this nature. I find that this is a very significant failure or shortcoming, particularly in the light of the declarations contained in the joint statements to the effect that his opinion had been prepared as a result of the exercise of his independent professional judgement and had not been influenced by any instruction or request from the parties or their legal representatives.
n)He conceded that, on the basis of [I]’s 2010 profit and loss statement (which is contained in exhibit W5), and if he had had access to the management accounts for [I] for the period subsequent to 30 June 2010 – and assuming that those accounts demonstrated a continuing positive trend – his valuation would have been well in excess of $150,000. He also confirmed that similar considerations apply to [V] (where the profit from ordinary activities before income tax had leapt for approximately $8,600 in 2009 to approximately $187,000 in 2010). In the case of [V], however, he did not embark upon an averaging exercise; he simply adopted the 2010 results.
o)When it was put to him in cross examination that the husband had acknowledged having received dividends from [I], but that [I]’s financial statements did not disclose any provision for such dividends, he was unable to explain why that might be the case.
[33] see 26 July 2011 transcript, page 115
Income, property and financial resources, earning capacity and capacity for employment
I have already dealt with the property and liabilities of the parties as at the date of trial. The net "pool" is approximately $893,360, although I have found that that is clearly a minimum figure. The "pool" includes the parties' superannuation entitlements, totalling approximately $204,000.
As explained above, I am satisfied that the value of the husband's shareholdings in the relevant entities is likely to be significantly in excess of $150,000 and quite possibly as high as $450,000 to $480,000, or thereabouts (if not higher). Given, as well, that the likelihood is that the group (in the form of the [O] Group) is likely to be floated in the not too distant future, I am satisfied that the value or potential value of the husband's shareholdings in the entities – over and above the minimum value of $150,000 – is a significant and relevant financial resource from the husband's point of view. In other words, I find that he has a financial resource of indeterminate value over and above the allowed for minimum value of the shareholdings. In very broad terms, and doing the best that I can with the evidence available to me, it is likely that this financial resource is worth something in the order of $300,000 (if not more).
I have already referred to the fact that Mr Williams confirmed that the husband will accept personal liability for what he described as an extra $10,000 owing in respect of the CBA Viridian line of credit. It follows that the overall financial resources of the husband should fairly be reduced by approximately $10,000. In the broader scheme of things, however, the existence of this liability has no bearing on the outcome of the property settlement proceedings. After all, I have concluded that the husband has a financial resource of indeterminate value (but which is likely to be worth a minimum of approximately $300,000) over and above the allowed for minimum value of the shareholdings in the [I] Group/[O] Group. The husband's personal liability in respect of the Viridian line of credit would only have the effect of reducing that financial resource from a likely minimum value of approximately $300,000 to a likely minimum value of approximately $290,000.
I am satisfied that the husband has a significantly greater income and a very significantly greater income earning capacity than the wife. The husband's evidence regarding his income and his income earning capacity was less than persuasive. For example, I do not accept his evidence to the effect that he allegedly earns less by way of total package remuneration than does an employee who is effectively his second-in-command. The suggestion was that the husband earns approximately $8,000 per month while his second-in-command earns approximately $11,500 per month. Mr Williams seemed to suggest that because the payment made to the employee is "a gross payment" and "is paid to another organisation that engages (the employee) as a sponsor", and because the husband "is not able to deduct PAYG tax because it is not legal for him to do so", the employee is not actually earning more than the husband. To the extent that I could understand Mr Williams' suggestion, it clearly has no merit, because the comparison from the employer's point of view must be between the gross payment to one person versus the gross payment to the other. Irrespective of how the packages are paid, Mr Sweeney's point – that the Court should be very sceptical about evidence to the effect that the husband's income package is inferior to a subordinate's income package – is clearly well made.
Other evidence regarding the husband's income is equivocal or inconsistent. For example, Mr Sweeney submitted that the husband's annual leave summaries reveal that he has an annual salary of $148,000 and that, irrespective of his true salary, he also receives bonuses and commissions, and possibly dividends, which have not been adequately disclosed.
Mr Sweeney also emphasised the existence of an entity known as [C], and submitted that the evidence reveals that this entity operates overseas and receives income from overseas on behalf of the husband – which income the husband did not reveal in his financial statement.
Mr Williams conceded that the husband should be assessed for the purposes of child support as if he were earning the maximum assessable rate (which Mr Williams seemed to suggest is currently in excess of $120,000 per annum). Further, the husband conceded that he expects to earn something in the order of $250,000 per annum within the next three to five years.
In addition to the above evidence, it is clear that the husband elected to leave [I] in early 2010, at a time that he was earning a total package of approximately $200,000 per annum. He was not obliged to leave [I]; in other words, he was not "pushed" from the firm. Had the husband remained at [I], it is reasonable to assume that he would still be earning a package of a similar amount (if not more).
I am satisfied that the husband's decision to leave [I] had nothing to do with his responsibilities for the care of the children or his state of health. In effect, the husband ceased being an employee (albeit at a senior management level) and became self-employed.
I am also satisfied that the husband has the present capacity to earn a total package of approximately $200,000 per annum, if not more.
Indeed, Mr Williams conceded (with only moderate understatement) that:[53]
It is quite clear that (the Court) can find in this case that (the husband) has an earning capacity which peaked when he was with [I], and he has conceded that, if he was working with [I] now, he would be earning that type of money. And his money was something in the order of $150,000 plus, with everything included. And perhaps, on the fairest possible stretch of the evidence, perhaps up to $200,000.
In any event, despite his current taxation return, he concedes an earning capacity of that, even though the reality is ... that his business is not earning that and paying him that at the present stage. So he makes that concession.
[53] See 27 July 2011 transcript, page 233
I accept that the wife could earn a base salary of approximately $50,000 per annum, and perhaps up to $60,000 per annum, if she were to return to work in the [omitted] industry. I accept, however, that she would have to work relatively long hours in order to earn such a salary (and considerably longer hours in order to earn more than $60,000 per annum), and accept that such hours would not be compatible with her desire to continue what she perceives to be her role as a parent – in that she wishes to be available for the children outside school hours.
The wife confirmed that she could earn more in the [omitted] industry than she can earn as a [omitted] or in any other role that she would be able to fill after completing the course of study upon which she is currently embarked.
In all the circumstances, I am not prepared to conclude that it is unreasonable for the wife to have decided (after some 10 years away from the [omitted] industry) to embark upon a new career – particularly one for which she feels that she has "passion". Doing the best that I can with the evidence available to me, I find that the wife currently has a very limited earning capacity, but that when she completes her course of study she will have an earning capacity of something in the order of $50,000 per annum.
Children under 18
[X] and [Y] are both under the age of 18.
They live with the wife in the former matrimonial home, and will continue to live with her after she relocates following the sale of the home.
Final parenting orders were made, by consent, on 29 July 2011. The orders provide for the parties to have equal shared parental responsibility for [X] and [Y], who are to live with the wife and spend substantial and significant time with the husband. As indicated above, the orders are not controversial and can be read if further details are required.
The burden of caring for the children and dealing with their day-to-day concerns, issues and problems now falls primarily (although obviously not exclusively) upon the wife. It should not be forgotten – as the Full Court said in Clauson[54]:
The payment of child support in no way compensates the custodial parent for the loss of career opportunity, lack of employment mobility and the restriction on an independent lifestyle which the obligation to care for children usually entails.
[54] (1995) FLC 92-595, at page 81,911
Financial commitments
This factor is more relevant in relation to the parties' dispute regarding child support. It did not feature in the submissions of either party.
Responsibilities to support any other person
There is no evidence to suggest that the wife has an obligation to support anyone other than herself and the children.
The husband has a responsibility to support his partner (the extent that she is not able to support herself) and their very young child, [Z].
Eligibility for a pension, allowance or benefit
This does not appear to be relevant consideration.
Both parties have superannuation entitlements to which I have referred elsewhere in this judgment.
Reasonable standard of living
I accept that both parties are entitled to a comfortable standard of living. They have agreed that the former matrimonial home must be sold, and orders will be made to that effect. It follows that the wife will have to rehouse herself and the children.
Having regard to their respective earning capacities and the orders that I propose to make in these proceedings, I anticipate that each will enjoy a reasonable standard of living. On the basis the evidence currently before me, the husband will almost certainly enjoy a more comfortable standard living than the wife in the long term. That is because it has long been recognised and accepted that "in most cases the most valuable ‘asset’ which a party can take out of the marriage is a substantial, reliable, income earning capacity.[55]
[55] see Clauson (1995) FLC 92-595 at page 81,911, citing Best (1993) FLC 92-418 at page 80,295
Maintenance in the context of education or retraining
The wife has applied for an order for spousal maintenance. I have discussed this subject elsewhere in these Reasons. In my opinion, any entitlement the wife may have to spousal maintenance will be absorbed into her general entitlements by way of property settlement (and, in particular, the overall section 75(2) adjustment). In other words, and subject to the matters discussed later in these reasons, having regard to the adjustment that I propose to make to take account of the section 75(2) factors I regard the wife's claim for spousal maintenance as having been exhausted.
Effect of orders on creditors
This does not appear to be a relevant consideration, and neither party suggests that it is.
Contribution factors
I have dealt with the issue of contribution elsewhere in these Reasons. It does not appear to be relevant to the section 75(2) factors, and neither party suggests that it is.
Duration of marriage and its effect on earning capacity
This does not appear to be a relevant consideration, and neither party suggests that it is.
Need to protect party's role as parent
I have dealt with the primacy of the wife's obligation to care for and support the children, and referred to the consent orders dealing with parenting issues. Beyond the comments that I have already made, it would appear that this is not a relevant factor.
Cohabitation with another person
The wife has not repartnered and is not in a relationship with any person. The husband has formed a relationship with another person, and they have a very young child, [Z]. The financial circumstances relating to the husband's current relationship do not appear to be directly relevant to the issues currently before me. Neither party seems to suggest that they are relevant (or relevant to the outcome of the proceedings), and neither counsel addressed me in relation to them.
Bankruptcy provisions
These factors do not appear to be relevant, and neither party suggested that they are.
Child support
I indicated on a number of occasions during the course of the trial that the child support issues were inadequately prepared and poorly presented. I advised the parties that I would review the material available to me and endeavour to deal with their competing applications as they relate to child support. I warned them, however, that I may be unable to make sufficient relevant findings.
I have reread the material provided to me, and my notes of the trial. As foreshadowed, I find that I am unable to properly or effectively deal with the issue of child support. This is a matter that will have to be followed through via the Child Support Agency in the usual manner. Suffice it to say, however, that I am entitled to assume that the process will eventually result in the husband paying child support at an appropriate rate.
In large part, my inability to deal with the issue of child support was due to the "scattergun" approach adopted by both parties. On more than one occasion I directed counsel to my recent decision in Stirling & Dobson (2011) FLC 98-056 as a blueprint for the manner in which the child support application should be approached. Neither counsel saw fit, however, to modify his submissions to take account of the suggestion I had made.
Although I have not formally resolved the issue of child support, I propose to make the following comments:
a)Mr Williams conceded on a number of occasions that the husband is willing to be assessed for child support child support "at the top rate". Precisely what this concession means in the context of the current provisions of the child support legislation is unclear.
b)Mr Williams also conceded, however, that the husband's earning capacity is in the order of $200,000 per annum (or something close to that amount). Clearly, Mr Williams intended to concede, and should be treated as having conceded, that the husband should be assessed for child support on the basis that his child support income for all relevant periods is $200,000 per annum. Logically, and given Mr Williams' concession that the husband should be assessed for child support "at the top rate", it cannot matter to the husband whether his actual conceded income is, for example, 20% higher or 20% lower than the $200,000 per annum figure.
c)A further concession made by Mr Williams was to the effect that the $200,000 per annum figure should be regarded as adhering to all relevant child support assessments forming part of the wife's departure application. The conceded child support income amount applies until 30 June 2013.
d)As indicated above, the husband accepted the wife's evidence as to the amount that she spends on the children, and accepted that that amount is reasonable. He added, however, that he cannot afford to pay it.
e)At the commencement of the hearing before me, the wife sought a departure order to the effect that the husband should pay:
i)$300 per week per child (being a total of $600 per week);
ii)primary school fees and associated educational expenses;
iii)secondary school fees and associated educational expenses; and
iv)any gap payment in relation to the children's medical and dental costs.
f)Mr Sweeney indicated, however, the wife abandoned her claim in relation to school fees. The wife's case was run on the basis that the orders sought by her were to the effect that the husband should pay child support at the rate of $300 per week per child (being a total of $600 per week).
Other facts or circumstances
There appear to be no other facts or circumstances that are relevant to the issue of property settlement, and neither party suggested that there are.
Relevant financial agreements
This does not appear to be a relevant factor, and neither party suggested that it is.
Conclusion as to section 75(2) factors
Having regard to all the evidence before me, I am persuaded that it is appropriate to make an adjustment on the basis of the section 75(2) factors. I am so persuaded because the purpose of the section 75(2) adjustment is to assist the Court in the process of arriving at a just and equitable result. To refuse to make an adjustment in the present proceedings would be to run the risk of making orders which are neither just nor equitable.
In my opinion, the most significant of the section 75(2) factors are as follows:
a)the husband's income earning capacity is very significantly greater than that of the wife;
b)the husband has significant financial resources available to him (which I have found to have likely minimum value of approximately $290,000) and
c)the wife will continue to be primarily responsible for caring for, supervising and supporting the children (although I accept that the husband has equal shared parental responsibility for them and spends substantial and significant time with them).
When I have regard to the above matters, together with all the other matters discussed under the general heading of the section 75(2) factors, I conclude that an appropriate adjustment of the parties' entitlements on the basis of contribution alone is to increase the wife's entitlement by something between 15% and 20%. It would be intellectually dishonest for me to choose either of those figures, and hence I propose to adopt the midpoint of the two, being 17.5%
It follows that the overall distribution of the property between the parties should be on the basis of 67.5% (being 50% for contribution factors plus 17.5% to take account of the section 75(2) factors) to the wife, and 32.5% to the husband.
In G & G (2004) FamCA 1179, the Full Court said (in relation to an exercise of judicial discretion such as that which I have performed in the previous paragraph):
73. …(Words) will often (perhaps always) fall frustratingly short of an incontestable explanation for any particular exercise of discretion – or, for that matter, for a finding by an appellate court that a particular exercise was wrong. All the relevant factors can be described, with modifiers in abundance, but still the analysis will beg the question, “Yes, but why that figure and not another?” or “Why was that the range rather than some other parameters?”
74. The deficiency is unavoidable. When there are a number of “right” results available, the explanation for the choice of one over others can never be incontestable. Nor can the reasons for saying that a result is outside a range be beyond challenge. The very nature of a discretionary exercise that ascribes mathematical consequences to a batch of actions and events amenable only to descriptive evaluation, means that it is impossible to place beyond argument the explanation for all the steps to the ultimate selection of result. ...
81. …(In) respect of virtually every exercise of discretion, by definition, it will not be possible to deliver a judgment which excludes reasoned argument that another result was available.
For what it is worth, I concur with the Full Court’s view as expressed in the passage from G & G quoted above. The “balancing exercise” that the court must perform is rarely an easy or non-contentious one.
Just and equitable?
Under section 79(2), the court is required to be satisfied that the order to be made is just and equitable – and not simply that the underlying percentage division of the net value of the parties’ property is appropriate. In other words, in the consideration of whether the overall result of property settlement proceedings is just and equitable, it is the justice and equity of the actual orders, and not of the percentage distribution itself, which must be considered.[56]
[56] see Russell (1999) FLC 92-877
Although I am of the view that the testing of any proposed orders by reference to s.79(2) is not a fourth substantive step (properly so called) in the property settlement exercise, and although I have considered the justice and equity of the overall “split” under the general heading of Conclusion as to s.75(2) factors, I propose to (metaphorically) step back and consider whether the outcome achieved by my consideration of the parties’ contributions and the section 75(2) factors has brought about a just and equitable result.
The Full Court has cautioned against assessing the section 75(2) factors in percentage terms, without considering the real impact of any proposed adjustment. In other words, the real impact in money terms is "the critical issue".[57]
[57] see Clauson (1995) FLC 92-595
In the present case, the section 75(2) adjustment equates to approximately $156,340 (being 17.5% of approximately $893,359). I am satisfied that such an adjustment is proper. Indeed, I am also satisfied that the adjustment is proper when regard is had to the differential between the wife's overall entitlement (being 67.5%) and the husband's overall entitlement (being 32.5% per cent), which differential equates to 35% of the property pool (or approximately $312,675).
I am very conscious that justice and equity must be done to both parties, and I am satisfied that the split that I have proposed achieves that result.
It follows that the wife should receive property to the value of approximately $603,017 (being 67.5% of $893,359) and the husband should receive the balance (being property to the value of $290,342) were.
Structure of the orders
As indicated above, one of the Court's obligations – whether as some form of fourth substantive step or as part of the section 75(2) factors – is to consider the justice and equity of the actual orders that it proposes to make to give effect to the overall "split" that it has found is appropriate in all the circumstances.
It is apparent that I have concluded that the wife should receive 67.5% of the net property currently available for distribution between the parties. In money terms, that means that the wife should receive property to the value of $603,017.
The parties have agreed that their superannuation entitlements should be equalised. The total value of the parties' superannuation entitlements is $204,281. Half of that amount is $102,140.50. It follows that of the total amount of $603,017 that the wife is to receive pursuant to this judgment, $102,140.50 will be in the form of superannuation. The balance (being $500,877) will be in the form of property other than superannuation.
If the wife receives or retains:
a)the whole of the net proceeds of sale of the former matrimonial home (being items 1(a), (b), (c) and (d) of the property schedule), totalling $496,866;
b)her [omitted] motor vehicle, less the debt associated with it (being items 5(a) and (b) in the property schedule), comprising a liability of $4,088; and
c)her Centrelink debt (being item 6 in the property schedule), comprising a liability of $10,000,
then it is clear that she will be receiving total net assets to value of $482,778.
I have concluded, however, that the wife should be entitled to net assets to the value of $500,877 in the form of property other than superannuation. The difference between $500,877 and $482,778 is $18,099.
Thus, in order to achieve a 67.5%/32.5% overall split in the wife's favour, the wife should retain the net proceeds of sale of the former matrimonial home, her motor vehicle and the debt associated with it, her Centrelink liability, and one half of the parties' overall superannuation entitlements. In addition, the husband should pay to her the sum of $18,099.
From the husband's point of view, the effect of these Reasons is that he should receive 32.5% of the "pool", or net property to the value of $290,342. If he were to retain:
a)his interest in the property in Property P (being item 2 in the property schedule – valued at $55,000);
b)his shareholding in the [I] Group/[O] Group and [M] (being items 3(a) and (b) in the property schedule – with a total minimum value of $168,000);
c)his [omitted] motor vehicle (being item 4 in the property schedule – valued at $15,000);
d)his credit card liabilities (being items 79a) and (b) in the property schedule – comprising a total liability of $31,700); and
e)one half of the parties' total superannuation entitlements (totalling $102,140.50),
then it is clear that he would be retaining property to the total net value of $308,440.50. On that basis, of course, he would have to pay the wife the sum of $18,099
Mr Sweeney made it clear that the wife did not seek that the husband pay any lump sum amount to her. In other words, he suggested that she would be prepared to forego the payment of $18,099 that I have found that the husband should make to her. If that approach were to be adopted, it is apparent that the wife would receive approximately 65.5% of the total "pool", instead of 67.5%.
On the other hand, the wife has steadfastly maintained her claim for spousal maintenance. As discussed below, the total amount of the wife's claim in this regard is approximately $26,000. In my opinion, it seems illogical, and neither just nor equitable, to forego an entitlement to approximately $18,100 by way of property settlement and, at the same time, press a claim for $26,000 or thereabouts by way of periodic spousal maintenance.
In all the circumstances, I have concluded that it is neither just nor equitable within the contemplation of section 79(2) of the Family Law Act 1975, to accede to the approach suggested on behalf of the wife. In my opinion, the husband should be required to pay the sum of $18,099 to ensure that the wife receives her full entitlement by way of property settlement. For the reasons set out in the following sections of this judgment, the wife's application for spousal maintenance can then be dismissed.
Spousal Maintenance – The Law
The distinction between property settlement and spousal maintenance orders was drawn in Anast & Anastopolous (1982) FLC 91-201. Relevantly, the Full Court distinguished a party’s entitlement to a property settlement based on contributions and the general factors arising under section 75(2) on the one hand, and a party’s entitlement to be maintained within the meaning of section 72 on the other. It held that an entitlement to an order under section 79 (including the section 75(2) factors) should be assessed before the question of entitlement to maintenance within the meaning of section 72 is considered. In some cases, a party’s property settlement entitlement (under section 79) will “exhaust” that party’s claim for spousal maintenance. In other cases, a maintenance entitlement under section 72 will remain, even after property entitlements under section 79 have been determined.
In Clauson (1995) FLC 92-595, the Full Court was at pains to clarify the distinction between a claim for spousal maintenance (properly so called) and that component of a s.79 property settlement order which attracts the terms of section 75(2). After describing the general approach which should be adopted in property settlement applications, the Full Court said:[58]
The result of the s.79 order may be such that the applicant for maintenance can no longer be described as being “unable to support himself or herself adequately” because he or she may have sufficient assets which, with or without income arising from the investment or use of those assets, will provide an adequate level of support. It also defines the other party’s capacity to meet any order.
[58] at page 81,907
The Court has broad powers in considering what may be a proper or appropriate order for spousal maintenance. Although periodic maintenance is the most common form of spousal maintenance, section 80 makes it clear that, in exercising the powers under Part VIII of the Family Law Act 1975, an order may take a variety of different forms. It follows that the Court may make an order for periodic spousal maintenance, lump sum spousal maintenance, or a combination of both. In making such an order, it is to be borne in mind that maintenance is not confined to a subsistence level of support, but is intended to provide such assistance as is reasonable in the circumstances of the particular case.[59]
[59] See Mitchell (1995) FLC 92-601.
In Vautin (1998) FLC 92-827, the Full Court said:
…in the exercise of the power to order lump sum maintenance caution is usually appropriate because of the apparent finality of lump sum orders and the difficulties in making predictions into the future. However, it is a power, the exercise of which may be appropriate in particular cases. It may be ordered, amongst other reasons, to meet non-periodic expenditure for the maintenance of that person where there is an established need and a capacity to pay. It is not confined to cases of the capitalisation of periodic maintenance and/or where periodic maintenance is unlikely to be paid because of concerns about the capacity or willingness of the liable parent to pay…
In Bevan (1995) FLC 92-600, the Full Court stated that an award of spousal maintenance requires:
a)a threshold finding under section 72;
b)a consideration of sections 74 and 75(2);
c)no fettering principle that pre-separation standard of living must automatically be awarded where the respondent’s means permit; and
d)discretion exercised in accordance with the provisions of s.74, with “reasonableness in the circumstances” as the guiding principle.
Spousal Maintenance – Discussion
I have already described the result of the property settlement proceedings in broad terms. The wife will receive property to the total value of just over $603,000, including superannuation valued at approximately $102,140. She will receive a little under $497,000 from the net proceeds of sale of the former matrimonial home, but will also have to meet liabilities in respect of her motor vehicle and in respect of her debt to Centrelink.
From the funds available to her, the wife will have to rehouse herself and the children.
The wife seeks orders that the husband pay her $250 per week by way of spousal maintenance until 30 June 2013. Mr Sweeney indicated that the wife only sought spousal maintenance from the date of the trial. In money terms, therefore, the total amount sought by the wife by way of spousal maintenance is the equivalent of $250 per week for approximately two years, or $26,000.
Mr Williams argued that the wife's entitlement by way of property settlement (which he accepted should be 65% of the property of the parties available for distribution – although calculated on a different basis to that adopted in these Reasons) should "exhaust" the wife's entitlement to spousal maintenance. The husband's case was that the wife has the capacity to earn a reasonably significant income, and perhaps in excess of $50,000 or $60,000 per annum. He queried the wife's decision to study for [qualification omitted] and argued that she was not properly or adequately or reasonably exercising her earning capacity.
In my opinion, there is insufficient evidence to enable me to make clear findings regarding the considerations discussed in Bevan (see above). To that extent, it is arguable that the wife's claim for spousal maintenance should simply fail. As I have indicated above, however, I propose to deal with the matter in a different way.
Instead of the wife effectively "forgiving" the husband the amount of $18,099 that I have determined that he should pay in order to achieve an overall split of 67.5%/32.5% by way of property settlement, I find that it is just and equitable, and proper in every respect, that the husband should pay that sum. Given the fact that he will not be receiving any money from the net proceeds of the sale of the former matrimonial home, however, and that the evidence before me does not reveal that he has any readily available source of funds to meet the payment of $18,099 to the wife (apart from his income), I have determined that the husband should pay the relevant amount to the wife on a periodic basis.
I propose to order that the husband pay the wife the sum of $175 per week for two years, commencing from the date of the making of orders pursuant to this judgment (or very shortly thereafter). I recognise that the total amount the husband will be paying is $18,200, or approximately $100 more than the $18,099 that I have found to be owing by way of property settlement – but given that the husband will be permitted to pay the relevant amount by weekly instalments, it seems to me that he will suffer no detriment or injustice.
On the basis that the wife is to receive her full entitlement by way of property settlement, I am not persuaded that the wife has a need for spousal maintenance. Put another way, I am unable to make the threshold finding under section 72 of the Family Law Act required as the first step before awarding spousal maintenance. It follows that there is no need for me to consider the other steps required before an award of spousal maintenance can be made (including the husband's capacity to pay). The wife's application for spousal maintenance will be dismissed.
Summary of proposed orders
It is clear from these Reasons that there should be orders to the following effect:
a)All extant applications in relation to child support are to be struck out.
b)As and by way of property settlement:
i)The wife is to receive or retain:
· the whole of the net proceeds of sale of the former matrimonial home (being items 1(a), (b), (c) and (d) of the property schedule);
· her [omitted] motor vehicle, less the debt associated with it (being items 5(a) and (b) in the property schedule);
· her Centrelink debt (being item 6 in the property schedule); and
· one half of the parties' total superannuation entitlements.
ii)The husband is to receive or retain:
· his interest in the property in Property P (being item 2 in the property schedule);
· his shareholding in the [I] Group/[O] Group and [M] (being items 3(a) and (b) in the property schedule);
· his [omitted] motor vehicle (being item 4 in the property schedule);
· his credit card liabilities (being items 7(a) and(b) in the property schedule); and
· one half of the parties' total superannuation entitlements.
iii)The husband must pay the wife the sum of $18,200, at the rate of $175 per week for 104 weeks – commencing on Friday 24 February 2012.
c)The wife's application for spousal maintenance is to be dismissed.
I shall now hear Counsel as to the precise orders necessary to give effect to these Reasons.
I certify that the preceding two hundred and ninety (290) paragraphs are a true copy of the reasons for judgment of Walters FM
Date: 17 February 2012
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