Linford & Ennis (No 2)
[2024] FedCFamC2F 1510
•30 October 2024
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 2)
Linford & Ennis (No 2) [2024] FedCFamC2F 1510
File number(s): HBC 899 of 2022 Judgment of: JUDGE TAGLIERI Date of judgment: 30 October 2024 Catchwords: FAMILY LAW – Property – both parties seeking orders for adjustment of financial interests – de facto husband’s phoenix operation post-separation of previously jointly operated business – disputed identification of assets and liabilities – contest about add backs for parental loans, post-separation inheritance largely dispersed, reduction of business account balance – limited positive findings about add backs – allegations of incomplete or non-disclosure by de facto husband – dispute about adjustments for future needs – adjustments made for future needs and egregious conduct including non-disclosure pursuant to section 90SF(3)(r) Legislation: Family Law Act 1975 (Cth) ss 90SF(3), 90SM(1), 90SM(4), 90SM(5) Cases cited: Alden & Alden (No 3) [2023] FedCFamC1F 791
Bennouna & Radnell [2023] FedCFamC1F 220
Bevan & Bevan (2013) FLC 93-545
Bryson & Bryson [2024] FLC 94 179
Candle & Falkner [2021] FedCFamC1A 102
Holland & Holland [2017] FamCAFC 166
Jabour & Jabour [2019] FamCAFC 78
Kouper & Kouper (No 3) [2009] FamCA 1080
Kowaliw & Kowaliw [1981] FamCA 70
Mayne & Mayne (No 2) [2012] FLC 93-510
NHC & RCH [2004] FamCA 633
Orozco & Bonilla [2023] FedCFamC1F 1018
Robb & Robb (1995) FLC 92-555
Robertson & Wells [2022] FedCFamC1F 1046
Trevi & Trevi (2018) FLC 93-858
Weir & Weir (1993) FLC 92-338
Division: Division 2 Family Law Number of paragraphs: 110 Date of last submission/s: 29 July 2024 Date of hearing: 24, 26 & 27 June 2024 Place: Hobart Counsel for the Applicant: Mr Matta Solicitors for the Applicant: Parke Lawyers Counsel for the Respondent: Mrs Mooney SC Solicitors for the Respondent: JC Legal Group ORDERS
HBC 899 of 2022 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN: MR LINFORD
Applicant
AND: MS ENNIS
Respondent
ORDER MADE BY:
JUDGE TAGLIERI
DATE OF ORDER:
30 OCTOBER 2024
THE COURT ORDERS THAT:
1.Within sixty (60) days of the date of these Orders, Ms Ennis (“the Respondent”) will provide proof of Mr Linford’s (“the Applicant”) discharge from any liabilities associated with the mortgages to the following properties:
(a)The property situated at F Street, Suburb G in Tasmania and more particularly described in Certificate of Title Volume … Folio … ("the Suburb G property");
(b)The property situated at DD(1) Street, Town P in Tasmania and more particularly described in Certificate of Title Volume … Folio …; and
(c)The property situated at DD(2) Street, Town P in Tasmania and more particularly described in Certificate of Title Volume … Folio …
and (b) and (c) together being “the Town P properties”.
2.Contemporaneously with the discharges referred to in paragraph 1 of these Orders, the following occur:
(a)The Respondent pay the Applicant the lump sum payment of Two Hundred and Thirty Six Thousand Dollars ($236,000) ("the Payment");
(b)The Respondent do all acts and sign all necessary documentation to transfer the Motor Vehicle 5 and Motor Vehicle 2 ("the Motor Vehicles") to the Applicant; and
(c)The Applicant provide proof of the Respondent's discharge of the outstanding loans and release of the Respondent’s personal guarantees secured against the Motor Vehicles.
3.The Respondent, at her sole expense, do all acts and things to ensure Motor Vehicle 6 currently registered to J Pty Ltd be transferred into the personal sole name of the Respondent.
Respondent to retain
4.The Applicant relinquish in favour of the Respondent, and transfer to her where necessary, any claim the Applicant may otherwise have to an interest in the following:
(a)The Suburb G property;
(b)The Town P properties;
(c)Any savings, money in the bank, investments of the Respondent;
(d)Any furniture, household effects or personal items in the possession of the Respondent;
(e)The $27,000 currently held in Trust with JC Legal Group;
(f)The Respondent's interest in Motor Vehicle 7, Motor Vehicle 8 and Motor Vehicle 9 currently in the sole possession of the Respondent;
(g)Any interest of the Respondent in the business, O Business, including but not limited to all plant, equipment, stock, bank accounts, fixtures and fittings, goodwill, debtors, loan accounts and undistributed profits; and
(h)Any entitlement of the Respondent to any superannuation, whether by way of a lump sum, pension or otherwise.
Applicant to retain
5.The Respondent relinquish in favour of the Applicant, and transfer where necessary, any claim the Respondent may otherwise have to an interest in the following:
(a)Any personal savings, money in the bank, investments of the Applicant;
(b)Any furniture, household effects or personal items in the possession of the Applicant;
(c)The contents of the warehouses at L Street, Suburb M;
(d)Any motor vehicle in the possession or registered in the Applicant's sole name;
(e)Any interest of the Applicant's in the business, B Pty Ltd trading as Linford Group, including but not limited to all plant, equipment, stock, bank accounts, fixtures and fittings, goodwill, debtors, loan accounts and undistributed profits;
(f)Subject to paragraphs 2 and 9 of these Orders the Surplus Assets detailed in Clause 1.10 of Mr EE’s Single Expert Report dated 3 June 2024.
(g)Any interest of the Applicant's in the business, W Business, including but not limited to all plant, equipment, stock, bank accounts, fixtures and fittings, goodwill, debtors, loan accounts and undistributed profits; and
(h)Any entitlement of the Applicant to any superannuation, whether by way of lump sum, pension or otherwise.
Default
6.In default of whole or part of the Payment to the Applicant by the Respondent, the parties do all acts and things and sign all necessary documents to effect the sale of the Town P Properties upon such terms and conditions (including reserve price) as are agreed and in default of agreement as to any matter then on terms, conditions, price and such real estate agent as shall be nominated by the President from time to time of the Real Estate Institute of Tasmania and upon completion of the sale, the proceeds of sale be applied in the following manner and priority:
(a)Firstly, to pay all costs, commission and expenses of the sale;
(b)Secondly, to discharge the mortgage secured over Town P Properties;
(c)Thirdly, payment of the legal costs and outlays relating to the sale, including conveyancing costs;
(d)Fourthly, the balance to be applied towards the Payment together with interest at the rate prescribed by the Federal Circuit and Family Court of Australia (Family Law) Rules 2021; and
(e)Fifthly, the balance, if any, to the Respondent.
7.From the date of these Orders, and pending the default sale:
(a)The Respondent have the sole right to use and occupy the Town P Properties to the exclusion of the Applicant;
(b)The Respondent pay, be solely liable for and indemnify the Applicant absolutely against all outgoings (including any arrears) of or with respect to the Town P Properties including, but not limited to, all mortgage instalments, municipal and water rates, maintenance, utilities and other outgoings;
(c)The parties be restrained by injunction from further encumbering the Town P Properties or allowing it to be encumbered or charged by any third party save and except to effect compliance with these orders; and
(d)The parties will continue to hold their interests in the Town P Properties upon trust for the other.
8.In the event the Respondent defaults in refinancing the Suburb G Property or Town P Properties, or any of them, pursuant to paragraph 1 herein, then the parties do all such things and sign all documents to sell the relevant property or properties which the Respondent has not refinanced on the same terms and conditions set out in paragraph 6 herein.
J Pty Ltd
9.Contemporaneously with the settlement of paragraphs 1 and 2 of these Orders, the parties do the following in relation to J Pty Ltd:
(a)The Respondent do all acts and things and sign all documents, at the Applicant's expense, as may be required to:
(i)Resign from any position the Respondent holds in J Pty Ltd;
(ii)Transfer to the Applicant any shares or beneficial interest held by the Respondent in J Pty Ltd;
(iii)Transfer all bank accounts, including providing all user names and passwords to the Applicant; and
(iv)Transfer or assign to the Applicant any loan to J Pty Ltd.
(b)The Applicant pay and indemnify the Respondent, and keep the Respondent indemnified in relation to all liabilities of whatsoever nature or kind and how so ever and when so ever arising (past, present or future) in relation to J Pty Ltd, including but not restricted to taxation liability, costs, claims and penalties; and
(c)The Applicant obtain a release or discharge for the Respondent as to any guarantee, loan or liability the Respondent may have provided in relation to J Pty Ltd, including personal guarantees over the encumbered J Pty Ltd vehicles.
10.Pending settlement pursuant to paragraphs 1, 2 and 9 of these Orders:
(a)The Applicant have exclusive use and possession of the vehicles and equipment of J Pty Ltd; and
(b)The Applicant be solely responsible for payment of all costs and expenses referrable to J Pty Ltd, including the monthly repayments to the motor vehicle loans of the company, insurance premiums, maintenance and repair costs of motor vehicles, machinery and plant & equipment and general running expenses;
FF Pty Ltd
11.In the event the Respondent, or her agent, recovers any monies from FF Pty Ltd then:
(a)The proceeds, less any reasonable legal fees incurred, be divided equally between the parties; and
(b)The Respondent provide with the Applicant with all documents in relation to the recovery against FF Pty Ltd undertaken by, or on behalf of, the Respondent within 14 days of such request.
Miscellaneous
12.Save as otherwise set out in these Orders, the parties each be responsible for and forever indemnify the other against all liabilities held in their sole name or held jointly with any third party, including but not limited to:
(a)Taxation liabilities assessed in their personal name or in the name of any entity, business or trust which is to be retained by one party pursuant to these Orders past, present or future; and
(b)Any personal guarantees given by one party in respect of the debts of the other party.
13.Unless otherwise specified in these Orders, and save for the purpose of enforcing any monies due under these or any subsequent orders:
(a)Each party be solely entitled to the exclusion of the other to all property and financial resources (including choses-in-action and motor vehicles) in the name of or possession of such party as at the date of these Orders;
(b)Each party hereby foregoes any claim they may have to any superannuation and/or work-related benefits or entitlements belonging to or earned by the other;
(c)Any joint tenancy of the parties in any real or personal estate is hereby expressly severed;
(d)Insurance policies remain the sole property of the owner named therein;
(e)Each party be solely liable for and indemnify the other against any liability encumbering any item of property to which that party is entitled pursuant to these Orders and/or held in that party's sole name;
(f)Each party releases the other from any and all personal debts owing or alleged to be owed by the one to the other; and
(g)Each party pay, be solely liable for and keep the other indemnified against any and all liabilities in that party's sole name, including but not limited to any and all credit card liabilities for which that party is the primary cardholder.
14.That in the event that either party refuses or neglects to execute any deed, document or instrument necessary to give effect to all or any of these orders, then a Registrar of the Federal Circuit and Family Court of Australia shall be appointed pursuant to s 106A of the Act to execute such deed, document or instrument in the name of the said party and do all acts and things necessary to give validity and operation to the deed, document or instrument upon the Registrar being provided with verification of such refusal or failure by way of affidavit.
Note: The form of the order is subject to the entry in the Court’s records.
Note: This copy of the Court’s Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 10.14(b) Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 10.13 Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).
Part XIVB of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish an account of proceedings that identify persons, associated persons, or witnesses involved in family law proceedings.
IT IS NOTED that publication of this judgment by this Court under a pseudonym has been approved pursuant to subsection 114Q(2) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
JUDGE TAGLIERI
These are proceedings pursuant to Part VIIIAB of the Family Law Act 1975 (Cth) (“the Act”) and relate to financial matters between the parties, Mr Linford (“the applicant”) and Ms Ennis (“the respondent”), who were in a de facto relationship. Each party seeks orders, albeit different ones, for property adjustment pursuant to s 90SM of the Act. The defended hearing between the parties was conducted on 24, 26 and 27 June 2024.
The parties’ case outlines reveal that immediately prior to the commencement of the defended hearing on 24 June 2024, they were in dispute about many issues relevant to the ultimate question of what property adjustment orders should be made.[1] In particular, the identity and value of the parties’ assets, liabilities and superannuation, their respective contributions to the same, add backs and any adjustments required for future needs or other factors.
[1] Case outlines emailed to the Court by the applicant on 21 June 2024 and by the respondent on 23 June 2024.
By the close of the parties’ cases and because the Court had made explicit Orders about the disclosure of information and documents on 24 June 2024, the disputed issues had narrowed somewhat. The parties had agreed the terms of a revised joint balance sheet (“Revised Balance Sheet”),[2] which revealed that the disputes concerning the parties’ assets and liabilities were:
(a)Whether there ought to be an add back of the sum of $157,295 for money in the NAB Business Everyday Account #...55;[3]
(b)Whether the sum of $12,564 should be included in the assets of the parties, being the anticipated tax refund due to the respondent;
(c)Whether there ought to be an add back of $70,000 said to represent unexplained expenditure of an inheritance received by the applicant; and
(d)Whether the sum of $78,829, said to be money loaned to the applicant by his mother, should be included as a liability.
[2] Filed by the parties on 29 July 2024 and marked by the Court as Exhibit C3.
[3] Being the operating account for business J Pty Ltd, the business operated jointly by the parties pre-separation.
The parties also remained in dispute about their respective contributions and the adjustments warranted for future needs.
The applicant relied on two affidavits, being his trial affidavit filed 4 June 2024 and a reply affidavit dated 23 June 2024, which were read into evidence. These affidavits had been electronically uploaded to the Court file without their annexures and consequently, the annexures were marked separately as exhibits.[4] The applicant also relied on evidence from his mother, Ms C, whose affidavit of 23 June 2024 was read into evidence unopposed and the annexures to which were also separately marked as exhibits.[5] In addition, a financial statement completed by the applicant was received in evidence.[6]
[4] Exhibits A2, A3, A4 and A8 to A14.
[5] Exhibits A5, A6 and A7.
[6] Exhibit A1, financial statement sworn 23 June 2024.
The respondent’s trial affidavit affirmed 18 June 2024 was read into evidence subject to concessions that parts of it were inadmissible.[7] The respondent had also filed a tender bundle but only some of the documents within it were tendered into evidence and read.[8] During the defended hearing the respondent’s counsel also caused other documents to be tendered, being:
·Exhibit R1, joint balance sheet provided to the Court on 26 June 2024;
·Exhibit R2, invoices from Mr GG dated 11 March 2023, 31 August 2023 and 19 June 2024;
·Exhibit R3, bundle of invoices from O Business to various service providers dated during the course of the parties’ relationship;
·Exhibit R4, coloured schedule and NAB source documents; and
·Exhibit R10, the applicant’s financial statement dated 28 September 2023.
[7] Exhibit C1, Schedule of Objections.
[8] Exhibits R5 to R9.
LEGAL PRINCIPLES
There is no issue about the Court’s jurisdiction to make orders adjusting the parties’ property, liabilities and superannuation.[9] The agreed facts establish that the parties were in a de facto relationship between late 2015 and January 2022, during which they accumulated financial interests that they agree are intermingled and, due to their relationship being irretrievably broken down, need to be separated and adjusted.
[9] Pursuant to s 90SM(1) of the Act.
Both parties invited the Court to make final orders altering their property interests and I am satisfied that it is just and equitable for the Court to do so.
The adjustment of property interests is to be undertaken according to the statutory considerations in s 90SM(4) of the Act, including ss 90SF(3)(a)-(m), and 90SM(5). Otherwise, the method or approach to be taken by the Court is usefully summarised in Robertson & Wells [2022] FedCFamC1F 1046 at [22] to [28].
AGREED OR NON-CONTENTIOUS FACTS
Based on unchallenged evidence of the parties, the Court is satisfied of the following and finds accordingly:
(a)The applicant is 51 years of age and the respondent 44 years of age;
(b)The parties’ relationship commenced in September 2015 and ended in January 2022, meaning that they were in a de facto relationship for over 6 years;
(c)The parties did not have children together but the applicant has four children from previous relationships, two of whom are adults, and the respondent has one son from an earlier relationship who is currently 15 years old;
(d)During the relationship, the applicant’s younger children typically spent time and lived with the parties on every alternate weekend and for half of the school holidays;
(e)The respondent’s son lived with the parties full-time and spent irregular time with his biological father;[10]
[10] Respondent’s affidavit filed 18 June 2024 at [8].
(f)At the commencement of the relationship the respondent owned the property at F Street, Suburb G (“Suburb G”), subject to mortgage;
(g)The applicant did not own any real property at the commencement of the relationship but did own a motor vehicle;
(h)The parties each had some superannuation at the commencement of the relationship, but after a call for the production of documents relating to the applicant’s Super Fund 2, it was established that the applicant brought in approximately $42,085.25, not the $70,000 referred to in his affidavit of 4 June 2024.[11] There is also unchallenged evidence of a very small superannuation balance of $82 in the applicant’s Super Fund 1;[12]
(i)The company J Pty Ltd was jointly established by the parties early in their relationship, and traded as a business called “K Group”;
(j)Each party was a director of J Pty Ltd until approximately 2018, when the respondent was left as the sole director of the company.[13] Both parties are equal shareholders in J Pty Ltd;
(k)Both parties worked in J Pty Ltd and K Group but they dispute the extent of their respective contributions;
(l)The initial working capital and the plant and equipment required for J Pty Ltd to conduct the K Group business was largely from $52,000 of borrowed funds,[14] which was secured by mortgage over Suburb G;
(m)The applicant unilaterally assumed operation of J Pty Ltd and the K Group business post-separation,[15] by moving the operations of the business to trade under another company, B Pty Ltd, whilst continuing to use the assets, staff and customers of J Pty Ltd. The applicant is the sole director and shareholder of B Pty Ltd, which now operates a business trading under the name “Linford Group”;
(n)Separate to the K Group business, during the relationship the parties were also in business as sole traders. The applicant conducted a retail business;[16] and
(o)During the relationship, the parties borrowed funds to acquire real estate in Town P which was operated as a business known as “O Business”. The respondent continues to operate this business.
[11] As corrected in the applicant’s affidavit dated 23 June 2024 at [15].
[12] Applicant’s affidavit dated 23 June 2024 at [15].
[13] Applicant’s affidavit filed 4 June 2024 at [31].
[14] Noting the applicant states that $5,000 was borrowed from his parents to put towards J Pty Ltd but this is disputed by the respondent. See applicant’s affidavit filed 4 June 2024 at [22] and respondent’s affidavit filed 18 June 2024 at [36](b).
[15] In approximately March 2023.
[16] Respondent’s affidavit filed 18 June 2024 at [23].
THE PARTIES’ EVIDENCE
Much of the respondent’s evidence was corroborated by documentary evidence while that of the applicant was not or was sometimes contradicted by documents tendered in evidence. For example, the applicant denied he had an “accountant” whilst later agreeing that B Pty Ltd was helped “from time to time” by a “bookkeeper” – Mr GG. However, Mr GG’s invoices of work performed demonstrates that he is an accountant and gave the applicant advice in relation to establishment of the company structure and ASIC advice that is beyond the remit of a bookkeeper and consistent with accountancy advice.[17] Further, the applicant maintained that the respondent had consented to the payment of expenses from the business account when plainly, noting the application to the Court by the respondent for interim injunctions filed 23 March 2023, she had not.
[17] Transcript of cross-examination of the applicant dated 26 June 2024 at p 18; and Exhibit R2.
The applicant made late disclosure and only produced some relevant documents after Orders were made on the first day of the defended hearing on 24 June 2024. This made the hearing more complex and confusing than it ought to have been, leading to uncertainty about the positions adopted by the parties. This uncertainty was only partly clarified several weeks after the end of the defended hearing when they filed the Revised Balance Sheet and Statement of Agreed Facts.[18]
[18] See [16] of these reasons.
I find that the applicant’s delayed disclosure of relevant financial documents and apparent reluctance to provide information about how he had operated B Pty Ltd was at best misguided but more likely evasive and indicative of a lack of full frankness and transparency.
On occasion each party diminished evidence that was unhelpful to their case but the respondent was more willing to make proper concessions. Where the parties’ evidence does not align and is not corroborated by documentary evidence, I tend to prefer the evidence of the respondent for the above reasons.
FINDINGS – ASSETS, LIABILITIES, SUPERANNUATION AND ADD BACKS
Value of the K Group business
The value of the K Group business previously conducted by the parties under J Pty Ltd and later by the applicant under B Pty Ltd was the subject of some debate at the start of the hearing, despite the existence of a single expert report by Mr EE dated 3 June 2024.[19] Ultimately, the parties reached agreement about how Mr EE’s opinion was to be interpreted after both counsel conferred with Mr EE. The Court was informed that the parties were agreed the business was valued at $312,653 as at 30 June 2023,[20] but the implication this agreement had on add back contentions and disputes about vehicles included in the valuation was unclear.
[19] Exhibit A11.
[20] Exhibit C3, Revised Balance Sheet and Exhibit C4, Statement of Agreed Facts filed 29 July 2024 at [11].
In closing submissions, counsel submitted that a number of residual controversies had been resolved but it seemed to me that counsel were at cross-purposes or unclear about what, if any, additional agreement they had reached. Accordingly, I made Orders at the close of the defended hearing on 27 June 2024 as follows:
1. Counsel for the parties confer and produce a minute of order in relation to the agreed position they have adopted in relation to [who] will retain the vehicles referred to in [Mr HH]’s report dated 9, 11 and 17 January 2024.
2. Within 14 days of the date of these Orders, the parties file an agreed statement of facts about how the value of the vehicles referred to in the report of [Mr HH] relate to and effect the valuation of the business by [Mr EE], including particular reference to the vehicles that are addressed as “surplus” to business needs in [Mr EE]’s report.
3. Within 20 days of the date of these Orders, the parties file an updated common balance sheet, to reflect further agreements made during the course of the defended hearing.
4. Within 20 days of the date of these Orders, the parties file a minute of orders identifying those orders that are sought by consent, and each party separately file a minute of additional final orders sought.
…
The Statement of Agreed Facts received from the parties in compliance with the above Orders identifies that certain assets are agreed to be surplus to the operations of the K Group business but had been taken into account in the valuation conducted by Mr EE.[21]
[21] Exhibit C4, Statement of Agreed Facts filed 29 July 2024.
The Statement of Agreed Facts also identifies agreement that Motor Vehicle 6 owned by J Pty Ltd was not included in the business valuation but is in the applicant’s possession and being used by B Pty Ltd. Further, a different vehicle owned by J Pty Ltd but in the possession of the respondent and not used in the business was valued and is accounted for in the agreed business valuation. As the parties agree that these two vehicles are of the same value and only one is reflected in the agreed business valuation, the second was included as item 19 of the Revised Balance Sheet.[22] They agree it should be included as an asset of the parties to ensure that both vehicles are factored in and further, they also agreed that they will each retain the particular vehicle in their possession.
[22] Exhibit C3, Revised Balance Sheet.
NAB Business Everyday Account #...55 add back
The respondent seeks to add back the sum of $161,241 as an asset to the Revised Balance Sheet in relation to the J Pty Ltd business account. How this is comprised and what evidence supports the add back is unclear. That is because the sum originally sought to be added back was $209,947,[23] but by the time the Revised Balance Sheet was filed the sum was reduced to $161,241.[24] The difference said to be what was now agreed expenditure from the J Pty Ltd business account including tax liabilities.[25] By inference, this means that the add back being pursued is for loan repayments for vehicles, expenses and direct debits paid from the J Pty Ltd business account which the respondent asserts should have been paid by B Pty Ltd from March 2023.[26]
[23] Exhibit R1, Balance Sheet emailed to the Court on 26 June 2024 at item 12.
[24] Revised Balance Sheet at item 13.
[25] Notation to Revised Balance Sheet.
[26] Respondent’s affidavit filed 18 June 2024 at [84] to [86].
The applicant’s answer to this add back claim is that having agreed the value of the business and accepted Mr EE’s method of valuing it, there is no occasion to make any add backs relating to the reduced funds in the J Pty Ltd bank account because the value of the business is agreed.
Without expert evidence from Mr EE, another suitably qualified valuer of businesses or an accountant, it is impossible to know on the evidence before the Court if or how the reduction of the cash at bank in the J Pty Ltd business account impacted the agreed value for the business. There is also no specific evidence about whether Mr EE had records and information about the balance of that account at separation, as at March 2023 or at the effective date of his valuation, being 30 June 2023.[27]
[27] Noting the parties agree that the only financial records and statements provided to Mr EE for the purposes of his report are those set out at [6] of the Statement of Agreed Facts file 29 July 2024.
Where the parties have agreed the value of the business at 30 June 2023 and accepted a Capitalisation of Profits method of accounting to value the business as distinct from any other method that may distinctly identify cash at bank as an asset impacting the agreed value of the company, the Court ought not speculate about the effect of reduction of a bank balance on the valuation of the business. The Court would fall into error if it were to include a particular sum attributable to the bank balance in the absence of evidence supporting the add back as a distinct asset. Notably, the valuation methodology is said to include normal working capital.[28]
[28] Exhibit A11, Report of Mr EE, at [4.1].
The onus of proof relating to the add back of funds in the J Pty Ltd business account rests with the party claiming the add back, namely the respondent.[29] The respondent did not call Mr EE or seek to clarify how, if at all, the change in the account balance, as an asset of the business, affected the business’ value when it came to be conducted by the applicant through B Pty Ltd, a corporate entity distinct from J Pty Ltd, the account holder for the bank account.
[29] Weir & Weir (1993) FLC 92-338.
In these circumstances, I am not satisfied on the balance of probabilities that any add back relating to NAB Business Everyday Account #...55 is warranted.
Inheritance add back
Item 22 of the Revised Balance Sheet shows there is a dispute about whether $70,000, being part of an inheritance of $103,121.17 the applicant received post separation from his grandmother in early 2023, should be added back as an asset.
There is no dispute that the applicant received the inheritance post separation but he maintains that the funds have been almost fully expended and ought not be added back.[30] However, his own evidence is that some of the inheritance was applied for the benefit of others or advanced as loans.
[30] Applicant’s affidavit filed 23 June 2024 at [53].
The money loaned to others from the inheritance is not to be ignored as it has a tangible value as money due to the applicant at the time of hearing and should be treated as an asset for the purpose of identifying the property of the parties to be subject to adjustment.[31] The above reasoning is entirely consistent with uncontroversial and well-established principles.[32] There is no evidence that the loans of $18,000 to his new partner have been forgiven.
[31] Trevi & Trevi (2018) FLC 93-858 at [29].
[32] See, eg, Orozco & Bonilla [2023] FedCFamC1F 1018; Holland & Holland [2017] FamCAFC 166; Kouper & Kouper (No 3) [2009] FamCA 1080; Mayne & Mayne (No 2) [2012] FLC 93-510; and Bevan and Bevan (2013) FLC 93-545.
It was also an agreed fact that $30,000 of the inheritance had been loaned by the applicant to B Pty Ltd.[33] Notably, because a Capitalisation of Profits method of valuation for the K Group business was adopted and this excluded loan liabilities,[34] it is in my view appropriate to include the liability as a separate item in the balance sheet. No evidence was adduced by anyone to assist the Court in dealing with this issue in an alternate way.
[33] Applicant’s affidavit filed 23 June 2024 at [53] and transcript of cross-examination of the applicant dated 26 June 2024 at p 10, lines 22-23.
[34] Exhibit A11, Report of Mr EE, at [4.1].
Other expenditure for the benefit of the applicant’s new partner and her daughter to assist with migration requirements is discretionary and may be considered an excess by the respondent, but it cannot in my view be described as wasteful or reckless such that it should be added back.[35]
[35] Kowaliw & Kowaliw [1981] FamCA 70 at [10].
Likewise, small gifts to family members are reasonable and I am satisfied they were not made to disadvantage the respondent. Similarly, expenditure on holidays and expenses in Country E does not seem out of the ordinary, especially as I infer that it includes the cost of airfares.
Accordingly, the loans made from his inheritance and due to the applicant should be added back as they are assets, meaning that $48,000 will be added back, being the loans to the applicant’s new partner and B Pty Ltd.[36] But this finding is made in the context that the respondent has not contributed to this asset and this will be relevant to the overall assessment of the parties’ contributions.
[36] Applicant’s affidavit filed 23 June 2024 at [53], being $18,000 in loans to his partner and $30,000 in loans to B Pty Ltd.
In the Revised Balance Sheet the loan to the applicant’s new partner is agreed and included as an asset as a separate line item.[37] Accordingly, to ensure that there is no doubling up, the sum to be added back for the purposes of determining what the assets of the parties are at item 22 of the Revised Balance Sheet should be $30,000.
[37] Item 16 of the Revised Balance Sheet.
Tax refund due to the respondent
The applicant sought an add back for a tax refund said to be due to the respondent, in the sum of $12,564. There was little evidence about this topic but the evidence of the respondent persuades me that the refund will be received and will offset her tax liability, thereby reducing it.[38] Therefore because the value of the refund is known and it is conceded it will reduce a tax liability, it is in my view inequitable to ignore it. I find that it should be taken into account to reduce the tax liability of the respondent to $15,626 in item 30 of the Revised Balance Sheet.[39]
[38] Respondent’s affidavit filed 18 June 2024 at [58].
[39] Reducing the original value of item 30 from $28,190 to $15,626.
Loans from applicant’s mother
The applicant sought to persuade the Court to make a finding that $78,829 ought to be included as a liability in the Revised Balance Sheet.[40] Drawing from the evidence of the applicant’s mother, Ms C, I infer that this sum is made up of:
(a)$8,000 outstanding on the loan to the parties in 2019 to pay GST for the purchase of two properties at Town P;[41]
(b)$8,000 outstanding on a loan to the applicant in 2022 for a motor vehicle;[42]
(c)$57,829.85 for loans to K Group in late 2022 and early 2023 relating to the purchase of motor vehicles and equipment for the company;[43] and
(d)$5,000 outstanding on a loan made to Linford Group, via the applicant, in February 2023 to assist in establishing a new company.[44]
[40] As submitted by counsel for the applicant in closing submissions: see transcript dated 27 June 2024 at pp 46-49.
[41] Affidavit of Ms C filed 23 June 2024 at [8].
[42] Affidavit of Ms C filed 23 June 2024 at [10] to [11].
[43] Affidavit of Ms C filed 23 June 2024 at [13].
[44] Referred to in the affidavit of Ms C filed 23 June 2024.
The applicant sought to corroborate his evidence about the loans made by Ms C by calling her as witness. Although her affidavit evidence was not particularly challenged,[45] the totality of her evidence is quite unsatisfactory.
[45] Affidavit of Ms C filed 23 June 2024, which was taken as read by the Court unopposed.
In her June 2024 affidavit, Ms C gave various figures for amounts still owing to her, being those referred to at [34] of these reasons, but she also agreed in cross-examination that only $19,451 was owing to her at September 2023,[46] and her affidavit evidence demonstrates no additional loans were made to the applicant or the business after that date.
[46] Being the amount included in the applicant’s financial statement filed 28 September 2023 at p 11.
Further, Ms C stated that $40,000 was lent early in the parties’ relationship,[47] there is corroborative evidence for only $35,000.[48] I find that it is more likely that $35,000 was lent at this time because no explanation was provided about the absence of verifying bank records for the other $5,000.
[47] Affidavit of Ms C filed 23 June 2024 at [4] to [6].
[48] Exhibit A5, being annexure MSC1 to Ms C’s affidavit.
Further, the statements at [14] and [15] of her affidavit are unreliable, noting the absence of a bank record corroborating a further loan of $5,000. As Ms C could demonstrate withdrawals for most other loans by bank record,[49] I am not satisfied that she made a further cash loan and if she did, she ought to have produced a corroborative record.
[49] Noting no statement was produced for the $8,000 said to be owing from the applicant at [11] of Ms C’s affidavit filed 23 June 2024 or the $5,000 referred to in these reasons at [37].
Most money said to have been lent to the applicant by Ms C post separation was to enable him to continue operating the logistics business and to cover his legal costs. The loans post separation were to the applicant alone and, I infer, without knowledge of the respondent. It is clear from Exhibit A7 that the lending was for the operations of B Pty Ltd by the applicant.[50] In circumstances of the findings below regarding the “phoenixed” operation of the K Group business, the applicant has failed to persuade me that the respondent should bear any liability for the alleged borrowing from Ms C in this period.
[50] Being annexure MSC4 to Ms C’s affidavit filed 23 June 2024.
The respondent conceded in cross-examination that the sum of $8,000 relating to the O Business purchase expenses was still owing and accordingly, I find that the indebtedness to Ms C is for $8,000.[51]
[51] Affidavit of Ms C filed 23 June 2024 at [6]; and Exhibit A6, annexure MSC2 to the affidavit of Ms C.
Due to the anomalies in and unsatisfactory nature of Ms C’s evidence and because the applicant carries the onus of proof in persuading the Court to include outstanding loans as a liability in the Revised Balance Sheet,[52] I am not satisfied that the sum of $78,829 is to be included as a liability. The applicant has failed to persuade me that the amount claimed is an accurate true liability owed to Ms C. However, noting the concession referred to above at [40] the sum of $8,000 will be added back as a liability of the parties to Ms C.
[52] Weir & Weir (1993) FLC 92-338.
Initially the applicant sought to include as a liability his borrowing from Ms C for legal fees. However, by the close of the case this was no longer so. During oral closing submissions counsel for the applicant conceded that borrowing to pay legal costs relating to proceedings in this Court was not a proper liability.[53] None of the loans for legal costs should be included as a liability for the purpose of identifying the parties’ net assets as the law is clear in this respect.[54]
[53] Transcript of closing submissions dated 27 June 2024 at p 46.
[54] See, eg, Bennouna & Radnell [2023] FedCFamC1F 220 at [56] and NHC & RCH [2004] FamCA 633 at [55].
Findings as to identity of assets
In view of the findings at [15] to [42] of these reasons and the agreement reflected in the Revised Balance Sheet, the identity of the assets, liabilities and superannuation of the relationship are provisionally found by the Court to be those set out in the table below at [45].
Despite the Statement of Agreed Facts, there remains some ambiguity about whether the value of the “surplus assets” and liabilities relating to them are in fact allowed for in the agreed net value of the business in the Revised Balance Sheet at item 15. Given that the parties did not see fit to include a separate line item in the Revised Balance Sheet for the “surplus assets” and a separate line item for the indebtedness attaching to Motor Vehicles 2 and 5, the only inference I can draw is that the net value of the surplus assets is accounted for elsewhere. This is quite unsatisfactory because the parties are still likely to require the Court to make orders about the surplus assets. I will give the parties opportunity to address me before final orders are pronounced.
The item numbers in the table have been updated to correct numbers in the Revised Balance Sheet that were duplicated and therefore do not necessarily match the item numbers set out in the preceding reasons which adopted numbering in the Revised Balance Sheet.
DESCRIPTION
OWNERSHIP
COURT’S VALUE
ASSETS
1
F Street, Suburb G
R (100%)
$620,000
2
DD(2) Street, Town P
R (100%)
$550,000
3
DD(1) Street, Town P
R (100%)
$650,000
4
JJ Bank – O Business #...18
R (100%)
$7,619
5
NAB Bank Account #...52
R (100%)
$11,725
6
NAB Bank Account #...85
A (100%)
$815
7
NAB Bank Account #...32
A (100%)
$2,904
8
CBA Goalsaver
A (100%)
$2,750
9
Funds in Trust with JCLG
R (50%)
A (50%)
$27,000
10
CBA #...76 Joint account A and Ms KK
A (joint)
$316
11
CBA #...84 Joint account A and Ms KK
A (joint)
$16,763
12
CBA #...92 Joint account A and Ms KK
A (joint)
$6,522
13
NAB Business Everyday Account #...55
J Pty Ltd
$3,946[55]
14
J Pty Ltd & B Pty Ltd Value agreed as at 30 June 2023
R (50%)
A (50%)
$312,653
15
Loan owed to Applicant by Ms KK
A (100%)
$18,000
16
O Business
R (100%)
$25,000
17
W Business
A (100%)
$42,000
18
Motor Vehicle 6
J Pty Ltd
$18,000
19
Motor Vehicle 9
R (100%)
$1,500
20
Motor Vehicle 8
R (100%)
$2,500
21
Motor Vehicle 7
R (50%)
$750
22
Inheritance add back for Applicant
A (100%)
$30,000
TOTAL ASSETS EXCLUDING SUPER
$2,350,763
LIABILITIES
23
Suburb G Mortgage
R (50%)
A (50%)
$137,428
24
DD(1) Street, Town P Mortgage
R (50%)
A (50%)
$324,350
25
DD(2) Street, Town P Mortgage
R (50%)
A (50%)
$289,548
26
LL Bank Visa
A (100%)
$4,075
27
MM Company Personal Loan
R (100%)
$4,486
28
NN Company Loan
R (100%)
$7,179
29
Loan from Ms C being monies loaned to Applicant other than monies for legal fees
R (50%)
A (50%)
$8,000
30
ATO Tax Debt
R (100%)
$15,626
TOTAL LIABILITIES
$790,692
Net assets excluding superannuation
$1,560,071
SUPERANNUATION
31
Super Fund 1
R (100%)
$24,322
32
Super Fund 1
A (100%)
$17,989
33
Super Fund 2
A (100%)
$77,215
TOTAL SUPERANNUATION
$119,526
[55] Accepting this value as it is conceded at a minimum as the balance of the account for the purposes of Exhibit C3, the Revised Balance Sheet.
It is worth noting that in making the determinations about add backs which each party sought, I have been guided by the established principles expressed by the Full Court in Candle & Falkner [2021] FedCFamC1A 102 at [58]. Further, where add back contentions have been rejected, because of the noted limitations in the expert opinion of Mr EE, including that none of the records considered had been audited and that the parties had unresolved disputes concerning adjustments, the onus on a party to persuade has weighed considerably in the findings made above.[56]
CONTRIBUTIONS
[56] Exhibit A11, Mr EE report, at [2.7] and [2.8].
Initial contributions
The respondent asserted that her initial financial contributions were “significantly superior” to those of the applicant at the commencement of the relationship.[57] In closing submissions, her counsel submitted that significant weight ought to be given to the respondent’s ownership of Suburb G, which was the springboard for the creation of other assets during the relationship.[58] She argued that by comparison, the applicant had limited assets of a motor vehicle, with a total value of about $13,500, and superannuation.
[57] Respondent’s amended case outline emailed to the Court on 23 June 2024 at p 6.
[58] Transcript of closing submissions dated 27 June 2024 at pp 15-16.
It is agreed that the respondent borrowed $52,000 secured against Suburb G to establish J Pty Ltd but there is no probative evidence about the equity in that property at the commencement of the relationship. At its worst, the respondent’s unchallenged evidence demonstrates that at the commencement of the relationship, there was at least $72,000 equity in the property.[59] However, this does not allow for any possible change in the property’s value between 2013 and when the parties commenced their relationship in 2015.
[59] Respondent’s affidavit filed 18 June 2024 at [19].
In addition, I accept that the respondent likely had some savings, but I cannot accept that their value was $35,000 without corroborative record because I consider it unlikely that she would have accumulated this amount in savings as well as repaying her parents in about two years on a modest income,[60] while also being largely responsible for her son’s financial support. No bank statements corroborating the amount were produced by the respondent, when it is reasonably expected that they would be kept or accessible, or the subject of an application for production of documents.[61]
[60] Respondent’s affidavit filed 18 June 2024 at [20].
[61] As the respondent claims that documents were in storage at the warehouse from which the applicant was conducting the K Group business and to which she did not have access.
Despite the above findings, I do not accept the mathematical exercise set out in the applicant’s case outline as I have no reason to reject the respondent’s evidence that her parents had been repaid by the commencement of the relationship.
In my view it is beside the point that J Pty Ltd then repaid the loan of $52,000 or that the applicant’s mother could have lent the money.[62] The business was in fact established because the respondent’s equity in Suburb G was used as security for the required borrowings. The repayment of the loan during the relationship ought to be treated as an equal contribution.
[62] As was submitted on behalf of the applicant: transcript of closing submissions dated 27 June 2024 at p 28, lines 29-34.
I agree that borrowing money per se is not a contribution,[63] but having equity to facilitate a borrowing which then creates other assets through the parties’ efforts is, in my view, a tangible contribution of a financial nature. The submission that the contribution was available by way of a loan from the applicant’s mother ignores the reality of what in fact occurred.
[63] Transcript of closing submissions dated 27 June 2024 at p 29, lines 22-25.
For clarity, I do not accept the respondent’s evidence that she contributed $200,000 at the commencement of the relationship. Instead, the nature of the initial contribution was equity in the property of about $72,000 and the borrowing capacity and security Suburb G provided. The respondent’s evidence that the contribution was $200,000 is inadmissible lay opinion and the required expert opinion as to the likely equity in the property at the time was not adduced.[64]
[64] Bryson & Bryson [2024] FLC 94 179 at [36].
The submission on behalf of the respondent referred to above at [47] ignores what was not challenged during the trial, namely that the applicant had $42,000 in superannuation at the commencement of the relationship.[65] Taking this into account and noting the respondent had very little superannuation at the time, the evidence of the parties demonstrates that their initial contributions were very similar. While the respondent had equity in Suburb G, the applicant had $42,000 in superannuation. The relationship was fairly short and the equity brought in by the respondent permitted the establishment of J Pty Ltd.
[65] Applicant’s affidavit filed 23 June 2024 at [15] and applicant’s case outline filed 21 June 2024 at [7.3].
There was contested evidence about chattels, vehicles and other items of property each party brought into the relationship. The state of the disputed evidence does not permit any finding that the value brought in by each in this way was particularly different. The impression given by the evidence is that whatever each party brought in the nature of chattels, vehicles or other items, there was little material difference. However, the contribution by the respondent of a home with furniture and all necessary equipment was beneficial to the applicant.
I find that the respondent made slightly more initial financial contributions, however it is important not to fragment the assessment of contributions or seek to mathematically identify a firm differential as the evidence does not permit this to be done accurately.
Contributions during relationship
In relation to contributions during the relationship, I have carefully considered the evidence of the parties. The applicant diminished the respondent’s work in J Pty Ltd and around the household,[66] while the respondent frankly acknowledged the applicant’s work and contribution to the business. I prefer the respondent’s evidence about the nature and extent of her contributions to the business because she was willing to make concessions when proper whereas the applicant was not.
[66] Applicant’s affidavit filed 4 June 2024 at [28] and [32], applicant’s affidavit filed 23 June 2024 at [27](f) and [27](g), and transcript of applicant’s cross-examination dated 26 June 2024 at pp 58-64.
I also prefer the evidence of the respondent about each of the parties’ contributions to O Business. In contrast to the corroborative evidence he provided for the non-financial contributions to Suburb G,[67] the applicant provided no corroboration for the statements at [51] of his affidavit filed 4 June 2024. The invoices tendered by the respondent corroborate her claims about the use of third parties to undertake many works.[68] Further, as the applicant worked long hours in the K Group business including being interstate, I am not satisfied he did the works to O Business stated in his evidence.
[67] Annexure MRL-6 of the applicant’s affidavit filed 4 June 2024, which was marked by the Court as Exhibit A13.
[68] Exhibit R3.
As I am not persuaded to include all borrowings from Ms C as a liability for the reasons previously given, it is to be recognised that the interest free loans are to be characterised as a contribution on the part of the applicant.[69] However, in closing submissions, counsel for the applicant did not press for a specific further adjustment for such contribution, contrary to that which is stated in the case outline.
[69] Per the applicant’s case outline filed 21 June 2024 at [41].
I am satisfied that the parties had the benefit of interest free loans provided to them by their parents which respectively represents a contribution by each of them. In particular, I accept the evidence of the respondent that her parents lent $20,000 to facilitate the purchase of property at O Business.[70] Although this was disputed by the applicant,[71] I prefer the evidence of the respondent for reasons given elsewhere.[72] Almost all money borrowed from Ms C pre-separation has likely been repaid by the parties based on my findings.[73] The money lent by the respondent’s parents has also likely been repaid. In circumstances where neither counsel made submissions about a particular percentage adjustment for contributions related to borrowings from their parents and because the parties mutually benefitted from contributions of this nature from both their parents, I am not persuaded I should make any such adjustment.
[70] Respondent’s affidavit filed 18 June 2024 at [36](k).
[71] Applicant’s affidavit filed 23 June 2024 at [27](j).
[72] See [11]-[14] of these reasons.
[73] See above at [40] of these reasons and the affidavit of Ms C filed 23 June 2024 at [8].
Paragraph 34 of the respondent’s affidavit was not contested and suggests that the early release superannuation withdrawals made by her ought to attract an adjustment in her favour. As the respondent concedes that she did not have a superannuation balance at the commencement of the relationship, the only inference open is that the balance of her superannuation account at the time of the withdrawals accumulated during the relationship and from funds derived from the parties’ businesses. As such and because no particular submissions were made about this evidence, I am not persuaded that an adjustment in favour of the respondent is warranted.
As I have included as assets the money due to the applicant representing funds he lent from inheritance money he received, it is to be recognised that he has contributed $48,000 to the net asset pool.
Non-financial contributions
I prefer the respondent’s evidence about the extent of her non-financial contributions in the home and in caring for the children because it is unlikely that the applicant was available due to the hours he worked in the K Group business. The applicant states that the respondent’s hours in the business were less than his and this is consistent with her availability to carry the load on the “home front”. This included taking major responsibility for caring for the applicant’s sons when they spent time in their home.
I have had regard to the submissions at [16] to [20] of the applicant’s case outline regarding contributions to the K Group business,[74] O Business and parenting. In relation to those submissions:
(a)To the extent that income of the K Group business was distributed unequally, there were accounting and tax benefits for the parties collectively and no probative evidence that the respondent kept income she received for herself, as opposed to for the benefit of the “family unit”.
(b)As to contributions by way of financial support of the parties’ children, while I accept the submission at [18] of the applicant’s case outline,[75] the evidence I prefer establishes that the respondent also largely contributed to the care and parenting of the applicant’s sons.[76] These contributions tend to balance one another.
(c)Preferring the evidence of the respondent, I consider that she predominantly managed and operated O Business, regularly organising and paying others to do repairs, improvements and maintenance.[77]
[74] Conducted through J Pty Ltd during the relationship and during through B Pty Ltd afterwards.
[75] Relying on Robb & Robb (1995) FLC 92-555.
[76] Respondent’s affidavit filed 18 June 2024 at [49].
[77] Including the bundle of invoices relating to O Business which was received and marked as Exhibit R3.
It was common ground that the applicant had undertaken renovations or work to Suburb G.[78] However, the parties disputed whether this was a contribution to be considered in favour of the applicant. The respondent adduced evidence about the renovation and work being defective and of considerable cost being required to rectify the property.[79]
[78] Exhibit A13.
[79] Respondent’s affidavit filed 18 June 2024 at annexure MSE-10, p 74 onwards.
The state of the evidence does not permit a finding on the balance of probabilities that the applicant’s work constitutes either a positive or negative contribution by him. It is notable that the parties agreed the value of the property and accepted the views of the single expert that the property be valued on an as-is basis.[80] There was no expert or probative evidence about an increase or diminution in the value of the property because of the nature of the work undertaken and which I infer the respondent did not oppose being done. Further, neither counsel made submissions about this topic in closing submissions and accordingly, given the state of the evidence and absence of submissions it is unnecessary to address this topic.
[80] Exhibit A8, Valuation Report for Suburb G.
For the above reasons, although the parties contributed in different ways to the businesses, household, maintenance and care of their children, overall I assess their contributions during the relationship as close to equal when considered in a holistic manner. They each contributed as best they could, worked hard and applied their respective skills where needed. That each applied different skills and abilities does not diminish their contributions in the context of their relationship as a whole and the established authorities.[81]
[81] See, eg, Jabour & Jabour [2019] FamCAFC 78.
The only disparity in contributions relates to the slightly higher initial financial contribution by the respondent.[82]
ADJUSTMENTS FOR POST-SEPARATION ISSUES
[82] See above in these reasons at [56].
K Group business and B Pty Ltd
I find on the undisputed evidence that for a short time post-separation both parties sought to work in the K Group business but this then became untenable due to actions taken by the applicant by diverting the customers and work of J Pty Ltd to B Pty Ltd and using the assets of J Pty Ltd to perform work.
The applicant’s actions meant that he excluded the respondent and thereby coercively took over operation of the K Group business via B Pty Ltd, and J Pty Ltd became dormant. The respondent was left to operate and manage O Business, which I infer the applicant did not seek to be involved with because there is no evidence as to this.
I accept the submissions of counsel for the applicant that the value of the K Group business was unlikely adversely affected by the actions the applicant took, except to the extent that it may have created tax liabilities and costs, which neither party adduced any evidence about. This is the only reasonable inference to be drawn from Mr EE’s assessment of the historical performance of the business between June 2021 and June 2023, which was not challenged and came into evidence by consent.[83]
[83] Exhibit A11 at p 12.
I consider that the submissions by the respondent about the applicant damaging the K Group business and making it less valuable are not borne out by Mr EE’s expert opinion. Instead, the submissions are premised on subjective inadmissible opinion or conjecture on the part of the respondent, who plainly and not unexpectedly is seriously aggrieved by the actions of the applicant.
To establish her contention, the respondent was required to adduce evidence from a suitably qualified expert demonstrating the reduction in value of the business. Mr EE was not called or cross-examined to offer any such opinion and no other expert evidence was relied upon by her.
In the respondent’s case outline, various propositions are put which, in summary, are that the applicant:
(a)Stole the K Group business or converted it to his own use and benefit;
(b)Caused the K Group business to become less valuable and misused or dissipated about $100,000 of funds at bank; and
(c)Failed to disclose material facts and documents to demonstrate what has occurred with the K Group business.[84]
[84] Respondent’s case outline emailed to the Court on 23 June 2024, pp 7-8 at [1]-[11].
These submissions were not wholly pursued in closing submissions because the additional, late disclosure of documents by the applicant had provided some explanations of the use to which the $100,000 had been put. However, the disclosure also raised other questions that remained unanswered, such as how accurate the financial information was that Mr EE used to form his opinion.[85]
[85] Exhibit R7, Balance sheet created by accounting software on 23 June 2024 for B Pty Ltd, and noting concessions made by the applicant during cross-examination: see transcript of the applicant’s cross-examination dated 26 June 2024 at pp 78-79.
The applicant’s evidence about income received from the K Group business after March 2023 and the W Business was unsatisfactory and did not seem reasonably plausible, including his explanations about potentially undeclared income.[86] I find that the true value of the applicant’s net income since March 2023 is likely to be more than the disclosed sum of $1,290 per week before tax.
[86] See, eg, transcript of applicant’s cross-examination dated 26 June 2024 at pp 13-18, 22, 73 and 81-82.
The submissions in the respondent’s case outline citing Alden & Alden (No 3) [2023] FedCFamC1F 791 together with counsel’s oral submissions are taken to be a contention that an adjustment should be made in favour of the respondent pursuant to s 90SF(3)(r) of the Act.[87]
[87] Applicable by virtue of s 90SM(4)(e) of the Act.
I mostly accept the respondent’s evidence about the matters referred to above at [69] and [70],[88] and they were in part conceded by the applicant’s evidence, albeit in the form of a reply trial affidavit.[89] In his oral evidence under cross-examination he stated that he was forced to do what he did to “save the business” because the respondent was rude, ruining relationships and improperly refusing to reimburse business expenses. There is no probative or independent evidence about these allegations, and I consider the applicant’s evidence self-serving and defensive. I find that he acted as he did to gain the advantage of operating a successful business alone, being a business he wished to retain.
[88] Respondent’s affidavit filed 18 June 2024 at [69], [87] and [88].
[89] Applicant’s affidavit dated 23 June 2024 at [46].
I find that the applicant’s actions in unilaterally taking over sole control of what had been the parties joint K Group business was wrong for several reasons. First, he coercively and unilaterally took control of a joint asset and deprived the respondent of working and managing it as she was entitled to at law as a director. Secondly, by converting and diverting the usual business of J Pty Ltd to B Pty Ltd, he coercively deprived the respondent of her usual source of regular income.[90] Thirdly, if the Court were to order that J Pty Ltd be wound up or that the assets and liabilities of that company be transferred to B Pty Ltd, it is quite possible that additional liabilities will arise, the quantum of which is unknown and there is no evidence at all about this topic.[91] This inference is supported by the fact that the applicant seeks an order in the terms of [19] of the parties’ minute of Joint Orders.[92] Fourthly, he failed to keep the respondent fully informed about the operations of the K Group business. All of the above necessitated interim proceedings before the Court, leading to the Court making prescriptive orders against him.
[90] Preferring the evidence of the respondent as it was not challenged, this income being approximately $67,000 per annum: respondent’s affidavit filed 18 June 2024 at [27].
[91] Transcript of the applicant’s cross-examination dated 26 June 2024 at p 37 onwards.
[92] Exhibit C2.
For the reasons set out above at [77] to [79], I am persuaded that an adjustment pursuant to s 90SF(3)(r) of the Act in favour of the respondent is warranted because:
(a)The applicant’s conduct was egregious and likely caused the respondent financial hardship because income from O Business alone had to be used to meet all mortgage repayments and necessary living expenses for the respondent and her son. This is in contrast to the situation prior to March 2023, when the respondent applied the income from O Business to meet mortgage commitments and used the income from J Pty Ltd to meet regular living expenses;[93] and
(b)The applicant failed to make full and frank disclosure in a timely manner, which was unjustified.
[93] Respondent’s affidavit filed 18 June 2024 at [27]-[28].
The parties health
The applicant’s evidence about limited work capacity was not particularly challenged and the report of Dr OO was received in evidence without objection.[94] Further, Dr OO was not sought for cross-examination. Accordingly, I accept at face value the evidence of Dr OO and find that the applicant suffers from a medical condition which may limit or preclude his ability to perform manual work in the future.
[94] Exhibit A14.
However, I infer from the evidence about the nature of the K Group business that the applicant will have flexibility in relation to what hands-on or manual labour he is required to perform. There does not appear to be any evidence that he continues to personally work interstate and manually handle heavy stock on a routine basis or is required to do so. I infer that the applicant will continue to manage and operate the K Group business and employ others to do the hard manual work. I am thus not persuaded that his earning capacity through the business is likely to be eroded in any material way despite his medical condition.
The respondent has no health issues impairing her earnings and earning capacity for work.
Earnings and earning capacity
Based on the applicant’s financial statements,[95] and concessions made in cross-examination, he earns a minimum of $1,290 per week before tax, not including ancillary benefits he receives through B Pty Ltd. Those ancillary benefits included payment of rent, water, electricity, phone and fuel which were not fully disclosed but became apparent during cross-examination.[96] The applicant’s evidence permits an inference that his income is considerably more than $1,290 per week or $88,400 per annum for two reasons:
(a)The value of ancillary benefits he personally receives from expenses paid through B Pty Ltd; and
(b)The income likely derived from W Business has not, in my view, been fully disclosed.
[95] Exhibits A1 and R10, being financial statements sworn 23 June 2024 and dated 28 September 2023.
[96] Transcript of the applicant’s cross-examination dated 26 June 2024 at pp 67-68 & 73.
The unchallenged evidence from cross-examination is that the respondent earns $1,260 per week and has the ancillary benefit of the Suburb G mortgage ($260 per week) being paid through O Business. The respondent did not resile from her evidence in chief that the totality of her taxable income was about $114,000 per annum from all sources.
However, I infer that the respondent’s parenting responsibilities can reasonably be expected to limit future earnings and capacity to earn to some degree for a finite period because she is the primary carer of her son.
On the evidence before the Court, the respondent seeks to retain the O Business properties and business and her income and future earning capacity from all sources, including the furniture reselling business, can be expected to be similar to her evidence discussed at [85] of these reasons.
In closing submissions, counsel for the applicant submitted that the parties’ earnings and future earning capacity were likely to be similar, so no adjustment was warranted for disparity. He referred to the notional market salary of $88,400 attributed to the applicant by Mr EE in his single expert opinion,[97] and suggested the respondent’s income and earning capacity was, if anything, superior.
[97] Transcript of closing submissions dated 27 June 2024 at pp 41-42 and Exhibit A11 at p 14.
I reject the submissions referred to at [88] of these reasons. Mr EE was assessing a theoretical value of the salary, rather than considering source evidence of the real value of the applicant’s remuneration. He also had limited information derived from the accounting software that likely did not particularise personal versus private use of various expenditure paid for by the business. The concessions made by the applicant in cross-examination satisfy me that his true earnings are greater than that which he has disclosed in his affidavit material and financial statements. Accordingly, an adjustment in favour of the respondent is warranted for some disparity in earnings.
It was also submitted that because the applicant was about 7 years older, his earning capacity would be inferior in the future. I do not accept this submission as I anticipate he will be capable of conducting the business beyond common retirement age.
Parenting responsibilities
The respondent is primary carer for her son, who is aged 15 years. There is no evidence about the applicant having care of his younger children now. I accept there is some small limitation in the respondent’s earning capacity. For this reason and because of the unchallenged evidence that she is mostly financially supporting her son alone, an adjustment in favour of the respondent pursuant to s 90SF(3) of the Act is warranted.
ASSESSMENT AND DETERMINATION
The parties each agreed that the Court ought to make an adjustment of their net financial interests. I am satisfied that this is warranted for the reasons given earlier.
The foregoing findings and reasons reflect that a small adjustment in favour of the respondent is justified for her slightly higher initial financial contribution.[98] All other contributions were relatively equal, except for the applicant’s post-separation inheritance funds which remain owing to him and are to be treated as an asset he brought in.
[98] See above in these reasons at [68].
The overall assessment of contributions in these proceedings has been challenged by incomplete and sometimes poor evidence. The submissions of counsel did not particularly assist the Court in overcoming these shortcomings and there was a great deal of ambiguity about what were agreed facts. Despite these difficulties, I have made necessary findings and endeavoured to avoid fragmentation of the assessment of various contributions by the parties made at different times. The inheritance contribution by the applicant balances the slightly higher contributions by the respondent in my view and on a contributions basis, I conclude that there ought not be any adjustment.
I have concluded that an adjustment in favour of the respondent is warranted for her somewhat smaller earnings and future earning capacity and future parental responsibilities.[99] I allow 1% in her favour pursuant to s 90SF(3) of the Act.
[99] See above in these reasons at [91].
An adjustment in favour of the respondent is required for the reasons set out at [69] to [80] herein. While I have not been persuaded that the actions of the applicant in assuming control of the K Group business to the exclusion of the respondent has caused the business to be less valuable, I am satisfied the actions caused harm in a broader sense as discussed above at [79] and caused emotional and financial stress for the respondent.
Further, the applicant providing late and incomplete disclosure of relevant information has effectively obscured the true value of income he has received since March 2023 and further has caused the Court’s function to be more difficult than it ought to be. The late and incomplete disclosure has prejudiced the administration of justice pursuant to s 90SM of the Act, a factor that I consider relevant pursuant to s 90SF(3)(r) also.
Noting the respondent was deprived of approximately $67,000 per annum after March 2023 and the egregious nature of the applicant’s conduct more broadly, for these reasons and those at [79] and [80] above, an adjustment of 4% in favour of the respondent is made pursuant to s 90SF(3)(r) of the Act.
The parties appeared to accept that a one pool approach should be adopted for the purposes of giving effect to the final adjustment of the parties’ net financial interests as determined by the Court. This is also inferred from the cash adjustment figures set out in the competing orders set out in the minute of Joint Orders. However, whether a one pool approach should be used may depend on resolving the ambiguity discussed at [44] of these reasons.
Assuming a one pool approach, the findings at [45] of these reasons reflect that the net value of superannuation and non-superannuation assets is $1,679,597 being:
Total assets (superannuation and non-superannuation)
$2,470,289
Less total liabilities
$790,692
Net equity (one pool)
$1,679,597
As the total adjustments in favour of the respondent are 5%, this represents her receiving 55% of the net equity, being $923,778 (rounded), while the applicant will receive 45%, being $755,819 (rounded). This represents a differential of $167,959. I consider this differential to be just and equitable as it reflects necessary adjustments in favour of the respondent but will still permit each party to maintain sufficient financial equity to reestablish themselves.
There will be a disparity in superannuation between the parties unless a superannuation split order is made but the parties have agreed that there ought not be one. I infer that this is because the respondent wishes to retain all real estate while minimising borrowings necessary to do so. As the respondent is younger, theoretically she has opportunity to add to superannuation in the future and may also convert equity in property to superannuation. For these reasons, I am satisfied that it is just and equitable not to make a superannuation split order.
The minute of Joint Orders filed by the parties identifies what orders they agree with for the purposes of giving effect to the Court’s determination.[100] However, there are a number of orders that the parties are in dispute about and the Court will need to make a determination about those and in turn how to give effect to the overall conclusion about final adjustment.
[100] Exhibit C2, Minute of Joint Orders filed 29 July 2024.
Although it appears agreed that the respondent should have the option of keeping all real estate, there is no reliable evidence before the Court of her capacity to borrow the required funds to discharge the mortgages and make a likely cash adjustment to the applicant on the basis he retains the K Group business, in the context of the final conclusion about adjustment.[101]
[101] Respondent’s affidavit filed 18 June 2024 at [60] and annexure SS-14.
There is also no agreement about how vehicles and loans used by the K Group business are to be dealt with noting that the respondent contends and I accept she should not remain liable for the loans if the vehicles are retained by the applicant as part of him retaining the business.
Regrettably, I will need to hear the parties submissions about how they now propose to give effect to the determination that the parties net superannuation and non-superannuation assets be adjusted to reflect a 55% to 45% adjustment in favour of the respondent.
ADDENDUM
Reasons for Judgment in these proceedings were circulated on 29 October 2024 in draft form as it was necessary to afford opportunity to the parties to address three issues.
The three issues were:
(a)Whether the assumption or inference about surplus assets and related liabilities at [44] of these reasons was correct;
(b)How the parties should pay any tax liabilities arising from their apparent agreement that the applicant should retain the K Group business, noting the minute of Joint Order provided by the parties;[102] and
(c)Whether the Court should make orders that the respondent retain the real estate identified at [45] of these reasons, in the absence of evidence that she had capacity to borrow the funds necessary, in circumstances where the Court’s conclusion was that the net assets and liabilities (inclusive of superannuation) be adjusted to reflect a 45% adjustment to the applicant and a 55% adjustment to the respondent.
[102] Exhibit C2.
On 30 October 2024, having considered the draft reasons and “MFI-1”, being a document which demonstrated the Court’s proposed mechanism for achieving the 45/55% adjustment in favour of the respondent, the parties by consent produced an agreed minute of order reflecting the terms of the Court’s Reasons for Judgment and advised they did not seek to re-open.
Having considered the agreed minute of order[103] and being satisfied it achieved the adjustment of 45/55% in favour of the respondent, the Judgment was finalised and Final Orders made.
[103] Marked by the Court at the listing on 30 October 2024 as “MFI-2”.
I certify that the preceding one hundred and ten (110) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Taglieri. Associate:
Dated: 30 October 2024
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