LINT & LINT
[2010] FamCA 121
•22 February 2010
FAMILY COURT OF AUSTRALIA
| LINT & LINT | [2010] FamCA 121 |
| FAMILY LAW – PROPERTY SETTLEMENT – Involvement of third parties; family members and family run business entities – Oppression proceedings against third parties reached settlement on day one of trial – Identification of contributions – Wife sought a dual contribution and dual pool approach, as parent/homemaker and a special contribution to settlement of third party issues – Dual pool approach rejected – Consideration of asset pool including familial loans and debts and valuations on familial company assets – Contributions assessed at 62.5/37.5 in favour of the husband – s 75(2) adjustment of 7.5% in favour of the wife – Consideration of wife’s legal fees in pursuing settlement of third party issues – Husband to pay portion of wife’s fees expended on third party issues |
| Corporations Act2001 (Cth) s 232 Family Law Act 1975 (Cth) s75(2) |
| DJM & JLM (1998) FLC 92-816 Lorriman and Lorriman (2004) FamCA 1010 |
| APPLICANT: | Mr Lint |
| RESPONDENT: | Ms Lint |
| FILE NUMBER: | BRF | 1875 | of | 2006 |
| DATE DELIVERED: | 22 February 2010 |
| PLACE DELIVERED: | Brisbane |
| PLACE HEARD: | Brisbane |
| JUDGMENT OF: | Warnick J |
| HEARING DATE: | 14-18 December 2009 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr North, SC |
| SOLICITOR FOR THE APPLICANT: | Murdoch Lawyers |
| COUNSEL FOR THE RESPONDENT: | Mr Kirk, SC with Ms Brasch |
| SOLICITOR FOR THE RESPONDENT: | Hemming & Hart |
Orders
That by way of alteration of property interests between the husband and the wife;
The husband pay the wife the sum of $2,846,899 within 30 days of the date hereof.
O Pty Ltd
That within thirty (30) days of the date hereof:
(i)the wife shall sign all documents (prepared by and at the expense of the husband) and do all acts and things necessary so as to:
(a)Transfer and assign to the husband all of her right, title and interest in the share capital of company, O Pty Ltd.
(b)Transfer and assign to the husband all of her right, title and interest in and to any loan account with O Pty Ltd.
(ii)the husband do all acts and things necessary so as to release the wife from any liability to O Pty Ltd and indemnify the wife and keep the wife indemnified against any such liability.
N Pty Ltd
That within thirty (30) days of the date hereof;
(i)the wife shall sign all documents (prepared by and at the expense of the husband) and do all acts and things necessary so as to:
(a)Resign from any offices she holds in N Pty Ltd.
(b)Transfer and assign to the husband all of her right, title and interest in the share capital of company, N Pty Ltd.
(c)Transfer and assign to the husband all of her right, title and interest in and to any loan account with N Pty Ltd.
(ii)the husband do all acts and things necessary so as to release the wife from any liability to N Pty Ltd and indemnify the wife and keep the wife indemnified against any such liability.
T Pty Ltd
That within thirty (30) days of the date hereof;
(i)the wife shall sign all documents (prepared by and at the expense of the husband) do acts and things necessary so as to:
(a)Authorise in writing the release by Hemming and Hart Lawyers to T Pty Ltd of all monies held in their trust account on behalf of the corporation.
(b)Transfer and assign to the husband all of her right, title and interest in the share capital of company, T Pty Ltd.
(c)Transfer and assign to the husband all of her right, title and interest in and to any loan account with T Pty Ltd.
(ii)the husband do all acts and things necessary so as to release the wife from any liability to T Pty Ltd and indemnify the wife and keep the wife indemnified against any such liability.
The T Trust
That within thirty (30) days of the date hereof;
(i)the wife do all acts and things necessary including signing all documents so as to relinquish any power (at law or at equity) that she holds with the said Trust and further renounce her interest (if any) as a beneficiary of the said Trust.
(ii)the husband, in his capacity as a director of the trustee company (T Pty Ltd) do all acts and things necessary so as to release the wife from any liability that she has to the T Trust including but not limited to any liability for any monies owed to the Trust that the wife might have and further the husband indemnify and keep the wife indemnified against any such liabilities.
The Lint Family Trust
That within thirty (30) days of the date hereof;
(i)the wife do all acts and things necessary including signing all documents so as to relinquish any power (at law or equity) that she holds with the said Family Trust and further renounce her interest (if any) as a beneficiary of the said Family Trust.
(ii)the husband, in his capacity as trustee of the Family Trust do all acts and things necessary so as to release the wife from any liability that she has to the Family Trust including but not limited to any liability for any monies owed to the Family Trust that the wife might have and further the husband indemnify and keep the wife indemnified against any such liabilities.
Indemnity/Releases
Upon the transfer of the wife’s shareholding in O Pty Ltd, N Pty Ltd and T Pty Ltd to the husband, he shall do all acts and things necessary to:
(a)Secure the wife’s unconditional release from any guarantees she has provided in support of liabilities of the entities.
(b)Indemnify the wife against any proceedings, suits or claims of whatsoever nature arising from the wife’s involvement in the entities after that date.
(c)Indemnify the wife in relation to any tax liabilities, including personal tax liabilities that may be incurred by the wife in relation to any declaration of dividends or distributions from any of the entities for the financial year ended 30 June 2007 and thereafter, including arising from the operation of these orders.
Assets to be retained by wife
That the wife retain and the husband abandon any claim to the wife’s interest in:
(a)The property located at V, more particularly described as Lot … on Registered Plan …, County of …, Parish of …;
(b)Her Mazda 3 motor vehicle registration CRU 51;
(c)The furniture and contents in V property;
(d)Her superannuation entitlements.
(e)Any payments made to the wife from separation to date, including agreed part property settlement.
Assets to be retained by husband
That the husband retain and the wife abandon any claim to the husband’s interest in:
(a)The husband’s interest in the unit in …, Italy;
(b)The Ducati motorcycle registration …;
(c)His superannuation entitlements;
(d)His interest in the Lint Family Trust;
(e)His interest in the T Trust;
(f)His interest in T Pty Ltd;
(g)His interest in O Pty Ltd;
(h)His interest in N Pty Ltd;
(i)The loan owed to the husband by the Lint Family Trust;
(j)Any payments made to the husband from separation to date, including agreed part property settlement;
(k)Real property at W, in the State of Queensland;
(l)Household chattels in his possession, power and control.
That unless otherwise specified in this order:
(a)the husband and the wife are each entitled to be the sole legal and beneficial owners of all items of property including money, motor vehicles, insurances, equities, superannuation entitlements and personal effects currently in the possession or control of each of them respectively;
(b)Each party be solely liable for and indemnify the other against any liability encumbering any type of property to which that party is entitled pursuant to these orders.
Preparation of documents, costs and stamp duty
Unless otherwise stated in these orders, that the transferee spouse be responsible for the preparation of documents, the costs of preparation of documents and any stamp duty in relation to all transactions, contemplated by these orders.
That the parties execute all deeds or instruments and do all acts and things necessary to give validity and operation to the deed or instrument to give effect to these orders.
That if either party shall refuse or neglect to sign any document or do any such thing as may be reasonably required to give effect to those orders within fourteen (14) days of the service of a demand upon him or her to execute such document or to do such thing, the Registrar or Deputy Registrar of the Family court at Brisbane is empowered to sign such document and to direct such things to be done in the name of the party in default.
IT IS NOTED that publication of this judgment under the pseudonym Lint & Lint is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth)
| FAMILY COURT OF AUSTRALIA AT BRISBANE |
FILE NUMBER: BRF1875 of 2006
| MR LINT |
Applicant
And
| MS LINT |
Respondent
REASONS FOR JUDGMENT
Mr and Ms Lint seek orders by way of property settlement following the breakdown of their marriage. As in most such cases, determination involves four steps:
·identification of, and (most times) valuation of, the property and financial resources of the parties;
(Particular arguments in this case relate to whether there should be one pool only, or whether an amount received in settlement of claims – primarily under the Corporations Act2001 (Cth) for oppression, but also for purchase of shareholdings of the husband in “family” corporations - should be treated separately; and, whether certain “liabilities” of the husband to family members or entities should be included in an asset “pool” or not.)
·identification and assessment of contributions of the parties;
(In particular, the wife asserts a “dual” contribution, as primary parent and as wage-earner, and an overwhelming contribution to the settlement of the claims referred to above.
The husband asserts that assistance from his family was significant.)
·identification and assessment of factors relevant under s 75(2) of the Family Law Act 1975 (Cth) (“the Act”);
(Questions of any expectation of the husband of inheritance, disparity in earning capacities and the burden of on-going care of children, albeit into adulthood, are factors here.)
·consideration of the justice and equity of the proposed orders.
In this case, after some comments on the credibility of each of the parties and the husband’s father, I deal with the question of identification of contributions first, as I consider that course best leads to and explains items in the asset table, then with the compilation of the asset table, and only then with assessment of contributions, because if some liabilities are excluded from the asset table, and are then attributed to one party, that may represent a significant contribution by that party, and/or a factor to be considered under s 75(2).
The husband seeks a distribution of a single asset pool, 70 percent to him and 30 percent to the wife.
The wife seeks 80 percent of the settlement amount and 55 percent of the other pool of assets, which, Mr Kirk, her senior counsel, submits, is equal to approximately a 60/40 division in her favour of all assets.
CREDIBILITY
I would not unhestitatingly accept the evidence of either party. There were a number of instances which led me to that assessment, but in respect to the wife in particular, I regarded her evidence about whether she had been offered part-time work after separation as less than frank. I do not accept that she forgot about an offer. She had raised with her solicitor whether she might accept the offer or not.
With regard to the husband, I thought his attempted explanations of why he had not sought the wife’s consent and/or signature to a document evidencing borrowings from his father in 2007, less than forthright.
There are relatively minor points of difference between the parties, for example, about earnings of each at the time of cohabitation, the quantum of some monies coming from the husband’s parents and whether some amounts were repaid. Sensibly, not all of these issues were explored in the trial. Where a decision was necessary, I have varied in my reasons for accepting one version over another, in some instances simply accepting the evidence of the person more directly involved in the transaction as being the party more likely to know.
It was difficult to assess the husband’s father’s evidence, because he was not fluent in English. Making allowance for that as best I can, I still regarded him as trying to “second guess” the significance of questions he was asked and, rather than directly answering the question, to construct answers to bolster his and the husband’s claims about events.
IDENTIFICATION OF CONTRIBUTIONS
(a) initial contributions
The husband’s father and the husband’s mother, Mrs Lint Snr, had commenced a business, operated through corporations, in 1974. That business came to focus on storage, trading under the name “Lint Stores”. The husband had started working for the business in about 1978.
The husband and wife commenced cohabitation in September 1986; (they married in February 1987).
By that time, the husband was an office administrator employed in the storage business on a salary of $30,000.00 per annum.
At commencement of cohabitation, the husband had a motor vehicle and minimal savings. He swears that he had significant holiday and long service leave entitlements, as he had been working for his parents’ company for eight years. There was an issue about whether the value of these entitlements was received in 1994 or 2003 (or both) but no doubt that an entitlement to the period of employment prior to cohabitation was received at some stage during it.
The husband also had 120 “D” class ordinary shares in Lint Holdings Pty Ltd, one of the companies associated with the storage business.
Also, in August 1986, just prior to cohabitation, the husband had contracted to purchase a residential property for $68,000.00. His parents provided him with $10,000.00 and his father guaranteed a loan from a bank for the balance of funds.
At around the commencement of cohabitation, the wife changed employment from hotel receptionist to a clerical position with a timber business. In either position she earned about $20,000.00-$25,000.00 per annum. She had no assets.
(b) work and homemaker/parental contributions during cohabitation
The wife ceased work a couple of months prior to the birth of the first child, B, born in November 1990.
The wife deposes that B was “a difficult baby”. Initially, this manifested itself through his poor sleeping patterns. As he grew, it manifested itself in a number of other ways, including his unsettled nature.
For about twelve months, the wife’s cousin fulfilled the role of “nanny”.
The wife deposes to the husband’s working day in the storage business as being from 5.00am to 6.00-7.00pm and thus, that the primary child rearing burden fell on her. However, she acknowledges that of an evening the husband would sometimes attend to B.
In about mid-1991 (or in early 1992 as the husband thought), the wife began working at a Bowls Club, two or three nights per week, for three or four hours a night. She usually started at 7.00pm “once [the husband] returned from work to look after [B]”. In one of her affidavits, the wife says that before the Bowls Club job, she was working part-time from home.
The parties’ second child, K, was born in February 1993. The wife took about six months off work after the birth.
Not long after K’s birth, B, who was about two and a half years old, was diagnosed with autism. The parties arranged occupational and speech therapy for B three times a week and again, though this posed a further burden on the wife, she also deposed:
[The husband] attended the doctor’s appointments and appointments at the Autistic Centre but I took [B] to his occupational and speech therapy three times per week.
The wife also deposes at length to the tasks involved in assisting B and dealing with B’s behaviour generally, including towards K. The wife describes typical days at different times in the children’s lives. The husband does not accept that some of the activities particularlised were by any means daily ones.
However, the husband concedes that during the early part of the marriage following the birth of the first child, the wife did the majority of the parenting, outside of her work hours.
Around 1993, the wife took up, as part-time work, the task of re-constructing the books of the Lint Stores business and she also worked part-time at the Bowls Club. She said she was effectively working full-time. In his first affidavit, the husband says that the wife “…had returned to full-time employment prior to [K’s] birth in a clerical position. …”
In circumstances more fully described later, in March 1994, the husband ceased working for Lint Stores. By that stage he had become “effectively the general manager”. He found other employment in July 1994. That same year, he also commenced construction of premises for a new storage business, Z Storage.
In the first half of 1995, the husband’s father agreed to provide some funding for the Z Storage project, if the husband returned to work at Lint Storage. That arrangement was put into effect.
The husband says that, at or shortly after October 1995, when Z Storage commenced, the wife began working in the business. On the face of the affidavits of each party, there seemed to be dispute about the wife’s role at the business from time to time and the duration of her work there. But by the end of the trial, and indeed largely by the last affidavit of each party, no significant differences remained.
The wife says she managed the business from its establishment.
The husband says that he:
“…continued to support the day to day running of the business and its operations until about 2000.”
He gives evidence that he attended every morning at Z Storage in the first three years and every Saturday; after that, he only attended on Saturdays and at some other times. Until May 2003, his attendance at Z Storage was outside his normal working hours with Lint Storage.
In April 2003, the husband resigned as a director of Lint Storage and Lint Holdings. He did not resign as an employee, but his employment was terminated shortly after, while he was away.
After August 2003, the husband began to work part-time at Z Storage. He also began a part-time remedial massage course, with a view to establishing a career in that area. [During this time I accept, he had greater involvement in the parenting of the children.]
In August 2004, because a senior office employee resigned, the husband began attending the storage business, five days a week. Some “work” tensions and possibly “marital” tensions developed between the parties.
Also, in 2004 the husband began to seriously investigate a development that came to be called “the U Site”, which involved purchasing land adjoining the Z Storage premises, where there was some land unused, amalgamating the parcels and constructing strata-titled industrial premises, for sale. I accept that the wife had only minimal involvement in this development.
The husband says from the beginning of 2005, the wife would only attend about two days a week at the business premises, but she would take work home. The wife places this turn of events five months later, at the time of separation. Nothing turns on the difference.
As to homemaking contributions, the husband deposes that he was responsible for the maintenance of the outside of the matrimonial homes and yards; the wife was responsible for the upkeep of the interiors. However, he says the wife had hired help from 1997 onwards. The wife does not deny this, but points out that the hired help was a cleaner once a fortnight.
Ascending above argument about details, the husband describes himself as having been a workaholic for many years. The wife adopts that description.
The husband acknowledges that the wife worked particularly hard in her roles of parenting, homemaking and working, but is anxious to speak of his sharing of the load of parenting. He also acknowledges that the wife was a “great partner” in supporting him in his work and that she undertook the practical management of Z Storage.
(c) other financial activities, including monies received from husband’s family
The husband deposes, and I accept, that in 1990, he received from his employer company $15,000.00, in addition to his usual salary. In that year, he also received his shares in Lint Storage Pty Ltd. In her second affidavit, the wife tabulates documentary evidence of dividends received by the husband during the marriage, though says that apart from dividends received in 1994, she does not recall dividends being received. However I do not reject the summary of the documentary material, because of her lack of recall of what it demonstrates.
As earlier indicated, in March 1994, the husband “left” Lint Storage. I accept that the husband received a “payout”, which was about $126,000.00 after tax. With those funds the mortgage over the matrimonial home was paid out and about $50,000.00 went towards an extension to the home. The balance of the funds, together with the wife’s earnings from her part-time work, was used to support the family until the husband found work in July 1994.
As also earlier seen, the Z Stores development began in 1994. Land was purchased. In his affidavit of evidence in chief (filed 7 May 2009) the husband deposes that when the Z Storage development commenced, his mother “agreed to give me $180,000.00 so that I would have funds to contribute towards the project”.
In her affidavit in reply, the wife said:
[The husband’s mother] lent [the husband] and I $175,000.00 in or about 1995 which was repaid to her within 2-3 years. We paid it off by making payments to [the husband’s mother] whenever we had extra money. I remember that [the husband] would often comment, whenever we had spare money from [Z Storage] of the need to repay his mother.
In his reply to what the wife said, the husband said that his mother:
…was not repaid…within 2-3 years and rather was repaid only to the extent to approximately $20,000.00. I admit that I would often comment whenever we had spare monies that [Z Storage] needed to repay my mother.
In cross-examination, the husband acknowledged that he had kept no records of repayment to his mother and could not remember the source of any monies repaid. He relied solely on memory to assess that $20,000.00 had been paid. I note, however, that the wife’s evidence of repayment of the entirety is not supported by any suggestion of record keeping or identification of particular sources of repayment. I find that, though the money was categorised by the husband’s mother as an advance, most of it has not been repaid and it is unlikely that it now will be.
In May 1995, four entities were established in connection with the Z Storage project: “the Lint Family Trust” which was a discretionary trust of which the husband and wife were trustees and the husband appointor; T Pty Ltd, a company in which the husband and wife were directors and shareholders; T Unit Trust, the trustee of which was T Pty Ltd, and which trust owned the land the business was situated on. A company, O Pty Ltd, began trading as Z Storage, from the company premises.
The amount of the funding for the Z project, referred to earlier as part of an arrangement for the husband to return to Lint Storage, and provided at the instigation of the husband’s father, was $600,000.00. These funds were provided by EV Lint Pty Ltd which traded as Lint Storage. That company received 600,000 “B” class units in the T Unit Trust.
When further funding was needed to complete the Z premises, EV Lint Pty Ltd provided a further $112,071.54, interest-free.
The husband’s parents separated in 1997. The mother received the father’s shareholdings in EV Lint and Lint Holdings. After the husband’s father’s departure, the husband and his brothers were appointed directors of the companies. The company name, EV Lint was changed to Lint Storage Pty Ltd. The business was managed by the three brothers, though the majority of shares was owned by the husband’s mother.
On the separation of his parents, the husband’s mother commenced residing in Italy for half of each year. She purchased property there, a unit for herself and one in the names of her three sons. The sons’ unit has been vacant since June 1997, when it was purchased.
In late 1997, the parties’ first matrimonial home was sold for $180,000.00 and another home purchased at V for $295,000.00; $190,000.00 was borrowed from Westpac Bank.
In about 2000, Z Storage premises were substantially expanded.
In October 2001, the husband and other shareholders in the companies entered into a shareholders agreement. That agreement provided:
If at any time during the term of this Agreement one of the shareholders institutes proceedings or has proceedings instituted against it under the Family Law Act 1975 (Cth) in any court (“Divorcing shareholder”) then the provisions of clauses 9.2(a) to 9.2(f) inclusive shall apply, the intention of the parties being that the Company continues to be run as a “family company” without the disruption or disharmony that a divorce would have on both the Divorcing shareholder and the Company, and accordingly the other Shareholders shall be entitled to buy out the Divorcing Shareholder’s interests in the Company to preserve and maintain the “family business”.
When, in April/May 2003, after a dispute with his brothers R and T, the husband left Lint Storage, he received entitlements, being $165,800.00 before tax. With those funds he reduced the mortgage on the V home, purchased a motor vehicle for $63,000.00 and supported the family.
Shortly after his resignation in May 2003, the husband sought from his brother R receipt of annual financial accounts and continuation of his dividends. He also enquired about “pay out” of his “entitlements”. After writing to lawyers in August and again in September 2003 – and again to his brother, brought no response, he engaged lawyers, who in August and September 2004, attempted to negotiate with the other shareholders in relation to the acquisition of the husband’s shares.
(d) events between separation and trial
The husband and wife separated in late May or early June, 2005.
(i) parenting of the children
At the time of separation B was 15 years old and in year ten; K was 12 and in year seven. Both children have continued to live with the wife. K has spent little time with the husband since separation and none since May 2007. B has spent more time with the husband than that but nonetheless, not frequently or for extended periods. Though B turned 18 at the end of 2008, and has started an apprenticeship, I accept the wife’s evidence of the degree of attention which is still needed, and given by her, to assist B to negotiate life.
(ii) financial circumstances of the husband and wife; and other relevant events
At the time of separation the husband and wife were each receiving salaries from O Pty Ltd, of about $48,000.00 per annum gross. O Pty Ltd paid for their vehicles and phone expenses. The husband deposed that by July 2005, he had taken over the full-time running of the business, but both parties continued to receive salaries.
There seems to be issue between the parties about who paid the house mortgage, at least between separation and December 2005, an issue which I do not resolve, but doubt that resolution would in any event, affect the outcome. The husband paid school fees for private education of B in the sum of about $12,688.00 per annum.
The first attempt on the wife’s behalf to ascertain the nature and value of the husband’s shareholdings were made in August 2005, by letter from the wife’s solicitors to the husband, asking for disclosure of basic documents. The husband responded that the wife should approach R Lint. Solicitors for Lint Storage became involved, but little progress was made.
The husband says (and I accept) that the actual negotiations leading to contracts for The U project only commenced in earnest in the second half of 2005.
In November 2005, the husband re-instructed solicitors to pursue his entitlements arising out of his shareholding in Lint Storage and provided his solicitors with funds of $10,000.00 towards fees.
On or about 29 November 2005, the husband received $500,000.00 by way of loan from his mother. He purchased a unit in which to live in Brisbane, for $322,000.00, including stamp duty and expenses. He advanced $126,000.00 to the unit trust to meet the first payment for building of “The U”. The balance was used for personal expenses, including legal fees. No interest is payable on the loan. It was to be repaid within 12 months, but has still not been repaid.
In December 2005, at her request, the wife’s salary was increased to $80,000.00 to provide funds to support herself and the children. The husband’s wage was also increased to that amount.
The husband paid expenses (but not the mortgage) for the house at V and private school fees, which had reduced to $10,488.00 per annum.
On 19 January 2006, the husband’s lawyers wrote to lawyers for Lint Storage, seeking access to sufficient records to enable preparation of a valuation of the husband’s shareholding for two purposes; a property settlement with the wife and with a view to disposition of his shareholding.
At about this time, the wife took over payment of most accounts. The husband started having $200.00 per week deducted from his wage and added to the wife’s wage to cover contribution towards the costs of the children. The husband said that from that time, until May 2007, in addition to the school fees, he paid rates and electricity for the house at V. The husband asked the wife not to return to employment in July 2006, but she was paid a salary until May 2007.
On 17 February 2006, the husband’s solicitors had provided the wife with a number of documents relating to his interests in Lint Storage and advised:
We are concerned that neither party should institute proceedings at this stage given the consequences of Clause 9.3 of the Shareholders’ Agreement.
On 30 June 2006, the wife commenced proceedings, in relation to parenting issues, in the Family Court of Australia.
In correspondence in July 2006, the solicitors for the wife pressed for the husband to exercise his rights to information from the Lint companies. His solicitors acting in relation to his shareholding responded that, for around 10 months, they had been negotiating with the solicitor for the companies, for the companies to agree to a valuation of the shareholdings of the companies and that agreement had been reached for a valuation to be prepared by H Partners.
In his response filed in August 2006 to the wife’s application, the husband sought orders by way of property settlement. Following the failure of a further attempt by the wife to obtain documents from the solicitors for the companies, on 15 September 2006, the wife filed an amended application seeking among other things, to set aside the shareholders’ agreement earlier referred to. Thus, the “third parties”, the husband’s two brothers, the husband’s mother, Lint Holdings and Lint Storage, became parties to the proceedings in this Court.
The course of the proceedings and the ultimate settlement of the parties’ claims against the third parties will be discussed in some detail later. However, for purposes of the present chronology, in February/March 2007, a report by Mr H, of H Partners, became available. It ascribed no value to the husband’s shareholdings.
In March 2007, the husband purchased a residence in Sydney, borrowing the entirety of the purchase price. He intended to live there, with his partner, with whom he had begun a relationship a year before. Tragically, she was killed in a car accident in March 2007. I accept that the husband was in a state of acute mental distress for at least two months after.
Within that period in April and May 2007, the parties negotiated settlement of financial matters. Agreement for property settlement was reached by about 18 April 2007. A number of steps followed.
The husband and wife filed a Child Support Agreement providing that the husband pay $10,000.00 for nominated periods for B – B was due to (and did) finish school in 2007 - and $10,000.00 per annum to the end of February 2011, for K. The wife would pay for school expenses and health insurance. However, K had not been attending private school since September 2006.
On 3 May 2007, the husband paid $100,000.00 to the wife, as an advance on property settlement. On 11 May 2007, in resolution of the proceedings, the parties entered into final orders by consent. The wife was to receive an unencumbered home and about $2,500,000.00.
However, a week after the orders were made, the husband filed an application to review them, effectively resulting in those orders losing force.
At about the time of the consent orders, the salary to the wife ceased. The husband subsequently refused to reinstate it.
An order setting aside the consent orders was eventually made, on 13 October 2008.
Since the separation, each party has received very substantial sums which they are agreed be treated as part property settlement in their hands. These sums amount to about $1,500,000.00. Much of this amount went to each party’s legal fees.
After the effective collapse of the consent orders of 11 May 2007, both parties received further – though not identical – very substantial sums. Some of these amounts were received pursuant to consent orders, which left the “classification” of the payments to the trial judge. In so far as dispute about the treatment of these funds continues, it will be discussed later, when the composition of the asset pool is determined.
In addition to the funds referred to immediately above, the wife received $30,000 from funds in trust for the children, in August 2007. She also received from the husband $20,000.00 in July 2007, and in July 2008, in accordance with the child support agreement.
Some monies were also provided to assist purchase of a car by B.
By early 2007, the initial financiers of The U project were not prepared to continue the arrangements and, towards mid year, the husband’s father, through a corporation under his control, paid out the initial financiers and tax owing by the family trust. The sums provided were $827,456.00 to the financier and $409,257.00 for GST.
In 2007, the husband began a two-year arts course.
Up until about July/August 2007 the husband worked 40 hours per week in the Z Storage business, but he then reduced his involvement to some 20 hours per week. He employed a general manager at $120,000.00 per annum plus a share of profit, that share expected to be about around $60,000.00, plus accommodation.
The husband completed his arts course in December 2008. He has earned less than $1,000.00 from arts, since then.
In July 2009, the husband (and his new partner, with whom the husband had been in a relationship since August 2008) moved to Sydney. The relocation was to assist the husband pursuing his artistic career. However, the husband continued to devote about 16 hours per week to the Z business, as well as visiting the premises two to three days a month. He continues to take a base salary of about $159,000.00 per annum.
On the first day of hearing, the claims (which, as will be explained later, were made by both the wife and the husband) against the third parties, were settled. The third parties have paid the husband $3,143,370.00, (held in trust) and $20,000.00 to the wife in respect of costs of her claims.
ASSETS/LIABILITIES
(i) One pool or two?
As earlier indicated, Mr Kirk, counsel for the wife, submits that the amount achieved in settlement of the claims against the third parties ought be placed in a separate pool, because the wife made the overwhelming contribution to that asset.
Of course, even if Mr Kirk’s proposition about contribution is accepted, it does not follow that there ought be two pools. While in such circumstances the placement of an asset aside from the other assets may assist in an assessment of contributions, disparate contributions to particular assets can be, and often are, properly assessed, though all the assets are included in one pool.
In any event, I do not accept the fundamental proposition made by Mr Kirk.
My reasons for rejection of the two pools approach appear later, under the assessment of contributions.
Neither party submits that superannuation interests should be dealt with separately. The amounts are comparatively small and no discreet contribution issues arise.
I assess the asset pool for division as follows:
| Assets | |
| V Property | 700,000.00 |
| Husband’s ⅓ interest in Italian unit | 43,000.00 |
| W property | 625,000.00 |
| Husband and wife’s interest in Family Trust | 4,780.00 |
| Interest in T Trust (“A” & “B” class units) | 6,046,921.00 |
| Joint interest in O Pty Ltd | 200,000.00 |
| Joint interest in N Pty Ltd | (703.00) |
| Wife’s Mazda | 18,500.00 |
| Husband’s Ducati | 8,000.00 |
| Wife’s chattels | 17,388.00 |
| Husband’s chattels | 11,029.00 |
| Part property settlement (wife) | 809,060.00 |
| Part property settlement (husband) | 645,366.00 |
| Legal fees paid (Wife) | 49,809.00 |
| Legal fees paid (Husband) | 69,932.00 |
| Settlement with third parties | 3,143,370.00 |
| Wife’s superannuation | 29,487.00 |
| Husband’s superannuation Husband’s bank account | 92,102.00 6,936.00 12,519,977.00 |
| Liabilities | |
| Bank of Queensland mortgage on husband’s house at W | 128,857.00 |
| Loan owed to O Pty Ltd | 204,576.00 |
| Loan owed to Family Trust | 1,682,491.00 |
| Loan owed to T Trust | 298,154.00 |
| Loan owed to husband’s mother | 500,000.00 |
| Tax on settlement with third parties | 103,359.00 2,917,437.00 $9,602,540.00 |
(ii) Disputed items
(a) the mortgage on the W property, and
(b) post-separation payments to wife
Mr Kirk argues that the mortgage amount to be included in the asset table should be what it was in August 2008, namely $96,131.00. The mortgage now is $128,857.00. While the evidence about the reasons for the increase was not clear to me, it may well be that significant part is due to payment of child support. In any event, the increase is not due to the acquisition of, or improvement in equity in, any asset included in the asset pool. The increase is due to expenditure, possibly living expenses or the like. The husband’s evidence was that he used the mortgage account as the transactional account for his salary and its expenditure.
As to post-separation payments to the wife, there was originally issue between the parties as to all of the amounts received by the wife since the collapse of the consent orders in May 2007. These totalled $354,942.00.
However, in final submissions, Mr North SC for the husband, did not pursue the add-back to the asset pool of any post-separation payments to the wife, save for those agreed and/or spent on legal fees, and save for a payment to the wife of $93,056.00, in November 2008.
I consider these two issues - the mortgage and treatment of capital received – together for, at least from the wife’s side, arguments about the treatment of expenditure from capital since May 2007 bear upon both issues. The wife argues that the capital she received should not be added-back, because it had been expended on living expenses. This argument seems to have been conceded, in relation to most of the capital, because add-back of most is not sought. In my view, any argument based on the use of the $93,056.00 would also fail, because there is nothing about its expenditure to distinguish that sum from others received since May 2007.
However, I also think it follows from the wife’s argument, that the increase in the mortgage, which is effectively expenditure from capital, if spent on reasonable living expenses – and nothing has been shown otherwise - must also be “allowed”, by including the mortgage at present level, in the asset pool.
The only argument then to be determined is whether, as the husband contends, the $93,056.00 received by the wife should be included because of the basis upon which it was offered to and accepted by, the wife.
Mr North submits that the $93,056.00 should be added-back because:
…
(a)The sum of $93,056 paid pursuant to an agreement between the parties on or about 19 November 2008 as conceded by the wife in her evidence that she agreed to the release of that sum on the basis of an acceptance that it was to be taken as part property settlement.
I reject this submission.
The agreement to which Mr North refers was not enshrined in court orders. In any event, even if the sum paid was “technically” to be treated as partial property settlement, having regard to the needs of the wife and the expenditure of the sum towards those needs, I would not write it back into an asset pool for division by final orders, without otherwise making adjustments to prevent the wife solely bearing the “loss” of it. Thus there is no point writing it back into the asset pool.
(c) waste caused by the husband’s rejection of an offer made by the third parties on 4 December 2009
On the above date an offer was made on behalf of the third parties to the husband to settle the oppression claims against them. The terms of this offer, including an additional clause added later on the day that the offer was put, were:
(a)That the Husband transfer his shares in Lint Storage and Lint Holdings as directed;
(b)That the consideration for the transfer would be $4,460,235.00;
(c)That the dividend to be paid to the Husband would be fully franked;
(d)That the $500,000.00 owing to the husband’s mother by the Husband would be repaid; and
(e)That the figure of $712,071.54 paid by Lint Storage to the T Trust would be repaid, and the units in the T Trust owned by Lint Storage Pty Ltd transferred to the Lint Family Tust.
(f)The husband assign any shares he receives in the future in Lint Storage and Lint Holdings as directed (including any shares he receives from his mother’s estate).
The offer was rejected.
The essential terms of the Deed of Settlement entered into on the first day of trial were as follows:
2.On 15 January 2010:
(a) [R Lint] will give to [the husband] a bank cheque for $2,704,879 payable to [the husband];
(b) [The husband] will give to [Lint Storage] an executed transfer of his one ordinary dividend share in [Lint Storage] in favour of [Lint Storage] in exchange for a bank cheque for $695 payable to [the husband];
(c) [The husband] will give to Holdings an executed transfer of his 120 D class shares in Holdings in favour of Holdings in exchange for a bank cheque for $437,796 payable to [the husband];
(d) [R] will give to [the wife] a bank cheque for $20,000 payable to [the wife] in respect of the costs of her s.106B application and costs reserved by the orders of 21 February 2008.
In exhibit 21, the wife’s expert accounting witness, Mr X, set out a comparison of the offers, as follows:
Offer One
$
Settlement Deed Payment [R Lint] to the Husband 2,704,879 Payment [R Lint] to the Wife 20,000 Buyback Consideration 4,460,235 - [Lint Storage] 695 - Holdings 437,796 Less: Debt to [husband’s mother] (500,000) (500,000) [T] Debt (712,072) (712,072) Tax on Buyback/Dividend (1,051,341) (103,359) 2,196,822 1,847,939
As seen, Mr X calculates the difference between the offers at $348,883.00.
The wife suggests that that amount has been wasted by the husband’s rejection of the first offer. I do not accept that submission. The offers were not the same. The first offer crystallised the T debt and the time for its repayment and that of the monies to the husband’s mother. Moreover, the husband assigned any shares he might receive in the future in Lint Storage and Lint Holdings, including receipt by way of inheritance from his mother. The question of the prospective inheritance of the father from his mother’s estate is discussed later. I do not accept that the prospect of such an inheritance was a worthless consideration on the husband’s part.
In any event, the question for my determination is not so much whether or not there is some difference between the worth of the two offers but rather, whether the husband’s rejection of the first offer was of such a character that he ought be called to account for the difference by way of an adding back of that difference into the asset pool.
Having regard to what I have said of the points of difference between the two offers, I do not consider such an argument made out.
(d) value of the T Trust – the units held by Lint Storage
Mr Kirk argues that the 600,000 “B” class units held Lint Storage in the T Unit Trust are effectively valueless, because they carry no entitlement to any distributions, nor to capital, unless they are redeemed or on a winding up, in which event they are each worth $1.00. However, there is no obligation on the husband to redeem the “B” class units, nor present intent to wind up the Trust..
Lint Storage has written off the $600,000.00 ascribed to the units.
However, Mr C, a chartered accountant, in calculating the value of the “A” class units, takes account of the existence of the “B” class units and their worth on a winding up. Thus, he deducts the $600,000.00. However, Mr C does not suggest that that $600,000.00 is the market value of the “B” class units. There is therefore an artificiality about the exercise which Mr C has performed. I do not suggest by that that it was not a proper exercise according to accounting principle, but it does not recognise the probabilities in relation to future benefit from the T Unit Trust.
In my view, having regard to the totality of the dealings of the Lint extended family over the years, there is a real prospect that no payment will ever by made to Lint Storage on account of the units it holds.
Further, in my view, as between husband and wife, this prospect is best handled by adopting a figure for the value of the husband’s units in the T Unit Trust which disregards the amount of $600,000.00 for the “B” class units, but, in assessing s 75(2) factors, recognising that at some time the husband may have to pay from the T Unit Trust, the sum of $600,000.00 or some lesser sum to Lint Storage; or alternatively, that in any future distribution of “family wealth”, the benefit received by the husband will be taken into account.
(e) loan from the husband’s father
As to this transaction, the husband, in is first affidavit, deposed:
54.Following my reconciliation with my father [Mr Lint Snr], he became aware of the financial position of [The U] development and offered to loan me funds to utilise to pay GST for the [Lint] Family Trust which was overdue and to pay out Bank of New Zealand who were continuing to pressure me to refinance both [The U] and [Z] Storage facilities.
55.On 3 May 2007 my father [Mr Lint Snr] through his company, [I Corporation] Pty Ltd transferred $827,456.73 to Bank of New Zealand which paid out the debt owing by The [Lint] Family Trust to Bank of New Zealand in respect of The [U] Development. On 25 May 2007, [I Corporation] Pty Ltd provided funds to The [Lint] Family Trust to meet that entity’s outstanding liability for GST to the Australian Taxation Office in the sum of $409,257.00.
56.At the time, I advised my father that I was prepared to enter into a formal Loan Agreement between [I Corporation] Pty Ltd and the [Lint] Family Trust but although documents were prepared by his lawyers, I was unable to execute those documents as both [the wife] and I are the trustees of the trust. Those funds remain owing to [the husband’s father] on the balance sheet of the [Lint] Family Trust. The loan agreement was changed to reflect [the husband] as the borrower and executed on 21 August 2007.
57.On 22 November 2007, I received correspondence from […] Lawyers on behalf of my father [Mr Lint Snr’s] company [I Corporation] Pty Ltd demanding repayment of the principal of the loan from my father which amounted to $1,236,713.73 as well as the interest for the period from 3 May 2007 to 3 November 2007 totalling $149,692.93. I have been unable to repay those monies.
The date that the $827,456.00 was provided by the husband’s father was of course, in the midst of the settlement activity between husband and wife. The money to pay GST was provided just after the husband resiled from the consent orders.
The wife challenges the husband’s assertions about the transaction, but essentially, the question between husband and wife is whether the alleged loan should be taken into account in the asset pool.
In the wife’s affidavit sworn a few days before the husband’s first affidavit she deposes, as to events between she and the husband around May 2007:
135.On 10 April 2007, [the husband] attended my home for a coffee to discuss property settlement matters. He told me that he “wanted to get all this sorted”.
136.He asked me what I wanted to resolve property settlement matters. I told him that I had spoken to my financial planner and needed $2.5 million in cash to retain my current income once my wage was ceased from [Z Storage]. He said “I am not sure how I can get that kind of money”. I suggested that he speak to his father. [The husband] told me that he had only recently commenced speaking to his father and wasn’t sure whether he could do that. I encouraged [the husband] to ask his father, but told him that it was ultimately his decision.
137.The next day, [the husband] sent me an email making an offer to settle the matter which became the basis of the Orders signed by [the husband] and I and made by this Honourable Court on 11 May 2007. …
138.I specifically refer to the last paragraph of this email where [the husband] advised that his father was going to pay him money to discharge all of the secured debt over “[The U]” by 3 May 2007. It was on this basis that the Orders were drafted so that I could have a first registered mortgage over the remaining units over “[The U]” by way of security for the repayment of $2.5 million.
139.During the conversation I had with [the husband] on 10 April 2007, [the husband] told me that the remaining debt on “[The U]” was $1.8 million. He told me he would have to get $1.9 million to be able to fund the property settlement. He confirmed via email that his father agreed to give him the money and that there was no expectation that he would have to repay his father this money. [The husband] confirmed the fact that he would not have to repay his father any money in his email dated 11 April 2007. The email reads in part, “I can do this as dad is prepared to clear the remaining debt over [The U] by the 3/5/07. This leaves us with an asset to sell of over $3.2 mil less the sale of unit 5, so an asset of $2.65M. Dad will do this for me without requiring any repayment or custody over any assets.
In cross-examination of the husband, he was directed to his explanation of being unable to execute a loan agreement at the time the father provided the monies in question because both he and the wife were trustees of the trust. The husband was unable to explain why, if he held that belief, he did not approach the wife to execute a loan agreement. He also could not explain the inconsistency between his alleged belief as to the identity of the trustees of the trust and what he had deposed to in paragraph 45 of the same affidavit, namely that on 10 May 2005 on the advice of accountants, the trusteeship of the family trust was changed to T Pty Ltd.
Moreover, I do not accept his explanation of the statement he made in the email of 11 April 2007 to the wife to the effect that he was not required to repay money his father intended to lend him. He suggested that he made the statement to the wife because at the time he intended to commit suicide and thus would not be repaying his father and/or that he was focusing on resolving matters with the wife. In my view, the manner in which he expressed himself in the email to the wife is not consistent with either of those explanations.
There is some evidence that neither the husband or his father really regard the loan agreement as governing the transactions involved. In paragraph 9.13 of his affidavit in reply, the husband says:
…I say that at no stage have I indicated a willingness to pay my father or his company [I Corporation] Pty Ltd interest on the monies advanced to me by [I Corporation] Pty Ltd…I have made no admission that I agree to pay interest on those funds.
My assessment of the husband’s father’s evidence was that he had no intention of enforcing any provision for the payment of interest. While he maintained he needed for his own purposes repayment of the capital, I did not think he was convincing, nor that anything he said indicated he was likely to take steps to recover capital.
I do not think that, more probably than not, the husband will be required to repay his father. I intend therefore not to include the liability in the asset pool for division between husband and wife.
(g) rental wastage/lots 3 and 16 The U
The U was completed in about February/March 2007. Fourteen units out of twenty-two were presold. The husband marketed the remainder. He sold five over the course of 2007. One was sold in 2008 to the lessee, two units remained.
With respect to these units, the husband deposed in his first affidavit that at that time (May 2009) both units were vacant and on the market for sale or lease. He further deposed that in early 2008 the real estate agent with whom the units were placed suggested that the units be fitted out to improve the prospects of achieving sale or lease. The husband wrote to the wife proposing a fit out, with funds released from monies held in trust. The wife agreed only to a fit out if there was a prospective tenant seeking it.
In her affidavit filed much the same time, the wife referred to the same exchange between herself and the husband and remarked that she had received no notification from the husband since 21 April 2008 in relation to why the commercial units remained unleased. In her affidavit filed shortly before the trial, the wife recounted that she and the husband had agreed in mid-June 2009 that she take over the marketing of the units for the purposes of sale. She then recounts what she did. This included visiting the premises and noting a handwritten advice attached to unit 3 that it was for lease and signs saying that units were for sale. She noted that on a particular website both units were listed for sale but not for lease. The wife met with the real estate agents with whom the properties were listed and informed the agent she intended to be “very proactive in marketing the units”. Within a matter of days, an offer which led to a contract, was received for both units.
For the husband’s part, he gave evidence that in April 2009, in an endeavour to stimulate interest in the agents in effecting sales, he gave a sole agency.
I reject the submission that the events as described lead to the conclusion that the husband was somehow wasteful or reckless in relation to the way he dealt with the unsold lots. There was no suggestion that he acted out of some bad faith, nor in my view is there any implication of that approach, or of wanton behaviour, from the mere facts that the units were under contract within a week of the wife receiving authority to sell them and from fragmented information, such as that on a particular website or particular signage, there was no reference to both sale and leasing.
(h) realisation costs, Z Storage
Neither party seeks an order for the sale of Z Storage and indeed the husband seeks to “receive” it (land and business). However, he deposes that he wishes to sell it. He sets out at some length previous steps taken to sell the enterprise. I accept his evidence about that and his present intention to sell. I accept that he wishes to redirect his capital.
Nonetheless, I do not regard a sale in the immediate future as highly probable, firstly because of the difficulty selling so far, but also because the business provides a good income for the husband, with modest effort on his part, at a time when he is unlikely to obtain much income from the artistic career he currently pursues.
On balance, I think a sale within the next few years more likely than not but just what realisation costs or taxation will then be payable, I consider difficult to predict.
I consider it best to take account of the prospective expenses as a s 75(2) factor.
the value of the husband’s and wife’s interests in O Pty Ltd
The issue as to value turns on the determination of the hours worked by the husband in the business, which affects the monetary worth of that role, to him and a purchaser, and thus affects the goodwill. As Mr Kirk puts it:
“2.The wife adopts a value of $343,495.00, which reflects the goodwill generated by the Husband working for the entity six hours per week. The husband adopts a value of $131,495.00, which reflects the goodwill generated by him working 20 hours per week.”
(para 2, further submissions for wife)
Only the husband has given evidence of the hours he works. The wife’s position is an assertion; albeit, she points out, one in respect of which she brings experience of the business’ operation to bear.
Nonetheless I do not accept the husband’s evidence, because;
· of the reservations already expressed about his credibility;
· in the absence of particulars of his activities, when he knew the subject was contentious, I regard his claim as improbable;
· he is committed to pursuing a career in the arts;
· the business employs a very well paid general manager.
But if I do not accept the husband’s evidence, what finding do I make? I am not prepared to speculate on the hours the husband actually works, but do consider it more probable than not that he has exaggerated to a “worthwhile” extent. I intend to increase the value for which he contended by about 50 percent, to $200,000.00.
(j) Wife’s legal costs in respect of proceedings against third parties
I have not deducted these as Mr Kirk argues I should, but intend, for reasons set out in the discussion of assessment of contributions, that the husband “reimburse” the wife for his share of the fees.
ASSESSMENT OF CONTRIBUTIONS
As to initial contributions, the husband had greater assets than the wife at the commencement of cohabitation, even without attributing any value to his shareholding in the business’s corporate structure. However, I do not think initial disparity now sounds to any degree. The differential is not precise, but in any event is small in the context of not only the net assets available for distribution, but measured qualitatively against the significant other contributions made in a long marriage.
As to benefits received from the husband’s family, in summary, the parties directly or indirectly have had the benefit of:
·$10,000 towards the purchase of the first matrimonial home
·the father’s guarantee of the bank loan for that home
·$15,000 received by the husband in 1990, above his salary
·shares in Lint Storage
·$180,000 provided by the husband’s mother, only $20,000.00 of which has been repaid with the balance unlikely to be repaid
·$600,000 towards the establishment of Z Storage, unlikely to be repaid
·$112,000.00 approximately, provided interest free to Z Storage
·two lots of termination monies received from Lint Storage, more probably than not representing duplication of entitlements to some degree
·husband’s share in unit in Italy
·$500,000.00 loan on favourable terms from the husband’s mother
·$1,236,714.00 loan (quite possibly not to be repaid) from husband’s father
These represent a major contribution attributable to the husband.
As to work and parenting/homemaker contributions, I do not think that resolution of any of the quibbles about particular aspects of contribution, whether within a party’s primary area of activity, or by way of assisting the other, is necessary to evaluate contributions. Each party acknowledges the enormous effort of the other in that party’s primary sphere of activity.
The only significant issue in relation to the assessment of these contributions is whether those of the wife should be regarded as “dual” contributions, as against the husband’s “single” contribution. I do not accept contributions should be so regarded, because:
·to do so overlooks or insufficiently treats the four years of cohabitation prior to the birth of the first child;
·the husband’s intermittent, but more than slight, contribution to parenting;
·“outside” assistance to the wife, albeit modest, in her homemaking/ parenting role;
·that the wife has not worked since, at the latest, mid 2006, while the husband has;
·most importantly, that the evidence establishes, not that the wife was in two places at once, or attended to tasks 24 hours, or the bulk of that, a day, but that in a fulsome way, she combined varied activities, whereas the husband, in a fulsome way, worked in the storage businesses.
As to the wife’s contributions to the settlement of her and the husband’s claims against the third parties, as earlier noted those parties were joined when, in September 2006 the wife sought an order that the shareholder’s agreement be set aside. As also seen, by then, steps were already underway for a valuation of the husband’s shareholding.
On 18 September 2006 the husband sent an email to his former solicitors, Dibbs Abbot Stillman, saying that he supported the wife’s actions and instructing them to send copies of correspondence with the third parties to the wife’s lawyers.
At about the time the wife joined the third parties, she engaged Messrs X and F, of XF accountants, to advise her, as, among other concerns, she had doubts about the terms of Mr H’s engagement. Agreement was reached between the wife and the third parties that X and F be able to critique Mr H’s valuation and indeed, carry out their own valuation.
Additionally, the solicitors for the third parties proposed that XF Accountants be engaged as joint experts by husband and wife, but this proposal was rejected by the wife “as we had already had lengthy discussion with [XF Accountants] as an adversarial expert”. The husband was made aware of that exchange.
When Mr H’s report was received in February 2007, the wife took up with the solicitors for the third parties concerns she had about the adequacy of the valuation exercise. Not long after, negotiations for settlement between husband and wife occurred.
Following the breakdown of the settlement between husband and wife, the solicitors for the wife pressed on with their own investigation of the husband’s shareholding. They renewed attempts to obtain documents from the third parties. This objective was not easily achieved, and involved an application to court. When documentation was received, in late March 2008, Mr Declan Kelly SC was briefed to advise, which he did on 22 May 2008. The same day, correspondence was sent to the husband’s solicitor inviting him to commence proceedings against the third parties pursuant to s 232 of the Corporations Act 2001. Subsequently, a copy of Mr Kelly’s opinion was given to the husband’s solicitors, to assist in deliberations.
On 24 June 2008 Mr X’s critique of Mr H’s report became available. A copy was sent to the husband’s solicitors. The critique indicated a need to prepare a valuation report, for which further documents would be necessary.
On 24 September 2008, Mr X provided a draft valuation. He suggested some matters still needed attention before finalisation.
A final report was disclosed to all parties at the first day set for trial, 13 October 2008. The trial did not proceed. On 27 October 2008, the wife filed a “pleading”. The wife sought a declaration, under s 78 of the Act, about oppression, within s 232 of the Corporations Act 2001, and in relation to various actions by the third parties, or some of them, and the legal consequences thereof.
Of these claims, Mr Kirk said in his written submissions:
Left to run the proceedings without standing, all the wife could do was seek the declarations set out in her pleading filed 27 October 2008 that the 2nd to 6th respondents had, inter alia, engaged in oppressive conduct.
However, on 17 November 2008 the husband filed a pleading seeking orders against the third parties, relying on s 232 of the Corporations Act 2001.
By no means have I set out in the above account all of the steps taken by the wife but I consider the essential conduct adequately described.
On 8 December 2009, the husband paid $76,000.00 towards the wife’s costs, so that he could have access to Mr X.
I do not accept the thrust of the submissions for the wife. She undoubtedly made a valuable contribution to settlement achieved with the third parties, but it was not in my view an overwhelming contribution. Indeed, if she is “reimbursed” for the husband’s share of the costs attributable to the pursuit of the third parties, I think thereby her contribution is significantly lessened. In reaching this conclusion (because of which I also do not place the settlement sum in a separate “pool”), I take account of:
(i)The husband held his shares in Lint Holdings before cohabitation began.
(ii)The husband received his shares in EV Lint (later Lint Storage) in 1990, by gift.
(iii)The husband made a major work contribution to the Lint Storage business over most of the period of cohabitation.
(iv)The wife made significant indirect contributions to the husband’s capacity to work for Lint Storage.
(v)Significant financial benefit flowed to the husband from his shareholdings and positions at Lint Storage.
(vi)Following the husband’s cessation of directorship and employment with the companies, while the wife and he were together, he made approaches to his family to come to a financial arrangement in respect of his position with the companies. That he did so delicately and warily may have been prudent and certainly does not indicate a lack of interest in the attempt.
(vii)The husband was an active participant in obtaining the report from Mr H.
(viii)The husband and wife settled the proceedings, following receipt of Mr H’s report, valuing the husband’s shareholdings at nil.
(ix)Though, following the breakdown of the May 2007 settlement, the wife pursued the question of the value of the husband’s claims, the husband was aware of progress and took his own advice as matters unfolded. I do not accept that had the wife done nothing, the husband would have done nothing. Therefore, I do not accept that “but for” the wife’s action, no settlement would have been received. Within about one month of receiving Mr X’s final valuation – which finally quantified the “interest”, the husband had instituted proceedings against the third parties.
(x)In so far as the wife took “risk” by joining the third parties, she may not necessarily have been prudent in so doing. As Mr North points out, all of the wife’s efforts in relation to valuing the chose in action which the husband had against the third parties, was to the advantage of, and in preparation for her own case, which she could have presented without joining the third parties.
(xi)The husband’s alleged “strategy of standing back, letting the wife do all the running and then only acting when forced” may be a strategy which the wife at once criticises, but of which she also seeks to take advantage, by having weight placed in the assessment of s 75(2) factors, on the husband’s expectations and/or possibilities of receiving benefit from his family. His “strategy” may have preserved or enhanced his expectations of benefit.
As to the post-separation period, neither party has exploited earning capacity to the fullest. However, the husband has continued to operate Z Storage, which has provided a good income. On the other hand, he probably could also have engaged in additional, better-paid pursuits than training and seeking work as an artist.
I find that the wife refrained from fulsome efforts to obtain employment, even of a part-time nature.
Consequently, both parties have needed to call on substantial capital.
Though The U was substantially developed post-separation by the husband, it does not represent a significant contribution to the asset pool.
Certainly, the burden of child rearing has fallen almost exclusively on the wife, for now over four and a half years since separation.
Of course, as earlier seen, some very significant assistance from the husband’s family has been received since separation.
In summary, I do not regard the work and homemaker/parenting efforts during cohabitation of one party, as outweighing those of the other. The most significant factor favouring one party is the assistance from the husband’s family, attributable to him. However, the fulsomeness of the parties’ other contributions tends to diminish the impact of assistance from the husband’s family, compared to what might have been expected otherwise. In addition, post-separation contributions, including the wife’s efforts in relation to the claims against the third parties, but most particularly in parenting, favour the wife.
I assess contributions to the net assets in the table, 62.5 percent to the husband, 37.5 percent to the wife.
SECTION 75(2) FACTORS
The wife, who is 45 years old has suffered from epilepsy since she was 17, but she said that her condition is managed with medication. She did not otherwise complain of ill-health.
In October 2007 the wife enrolled in a course in Business Administration, Certificate III, but she only completed a small part of it. She wishes to complete that certificate and the next, which would allow her to seek work as a bookkeeper or office administrator, earning $40,000.00 - $60,000.00 per annum. However, I accept she would need another two years or so to complete the course and that her availability for full-time work depends on “being able to get [B] to a point of self sufficiency…”.
B is an apprentice. The husband acknowledges that B’s autism will not improve though he did not concede that it would worsen and asserted that B’s coping strategies were likely to improve. Even so, his future capacity for self-sufficiency is uncertain.
K has completed grade 11 at V State School. I don’t know what will happen about child support once the orders for property division are carried out. I expect the parties will either by agreement or otherwise, contribute appropriately. In any event, the period of infancy remaining for K is short. However, I note that the wife expects some financial burdens for K while she pursues tertiary qualifications and for B, at least until he finishes his apprenticeship.
The husband is 46 years of age. He is in good health.
As seen the husband intends to pursue an artistic career. One could not predict what he might earn. Nonetheless, the husband said that he is confident that he can obtain employment and support himself. He acknowledged that, if he wished, he could obtain through employment in the storage industry what he now takes from Z Storage, or the sort of package paid to Z Storage’s manager.
In DJM & JLM (1998) FLC 92-816 the Full Court of this court discussed the different test of “earning capacity” that might apply in child support cases, as against the test in spousal maintenance cases and that in property cases. The court said:
17.38Once earning capacity has been established by making findings about ability and opportunity, there remains in spousal maintenance cases, the questions posed by ss 72 and 74 as to what is ‘reasonable’ and what is ‘proper’. In property cases, the question is ‘what is appropriate?’.
I consider that in this case, given the husband’s concessions and that he offered no necessity for his career change, I should regard his earning capacity as what he can earn in the storage industry.
The husband rents accommodation in Sydney. He continues to reside with his partner. I do not know much of her current situation, but when they resided together in Brisbane she worked three days a week as a nanny and contributed to financial expenses.
As to expectations of the husband of inheritance from his mother’s and/or his father’s estates, I observe firstly, on the fluctuating relationships which the father has had with his parents, and his current estrangement from his mother. I note the requirement in the rejected offer from the third parties about the effective abandonment sought from the husband of future “entitlement” to shares in the storage business. Any expectations of the husband might well be dashed by the influence on his mother in particular, of his brother R Lint, who might well consider that the husband has received his entitlement to the storage business. Such an attitude might also be reinforced by the husband and wife’s establishment of Z Storage and the assistance received in that respect.
I note that in her first affidavit the wife recorded that the husband told her, “that [R] told him you are not getting a payout because you have got [Z Storage] and you don’t need one”. Though the wife also said that about the same time the husband said “…When Mum dies, everything will be equal”, if nothing else the volatility of the circumstances is demonstrated.
The worth of the storage business, effectively in the hands of the husband’s mother may be in the tens of millions of dollars. She has other assets in Australia and Italy. She is 73 years of age.
The worth of the husband’s father is not clear. A balance sheet for “his” family trust, of which the husband is a beneficiary, shows fixed assets of about $5,000,000.00 net worth. The husband is a beneficiary, on equal footing with his siblings, in his father’s current will. The husband’s father is 78 years of age. He has recently had bypass surgery, but I am not to know whether that improves his life expectancy or not.
The husband said he didn’t consider he would necessarily receive anything from his mother’s estate. He last spoke to his mother in late 2007. He thought he had a friendly relationship with his father.
In relation to the treatment of expectations of inheritance, in Lorriman and Lorriman, (2004) FamCA 1010, the Full Court said at [47], [48]:
It seems to us that generally the issue of a future inheritance may be more relevant to the defence of claim for an adjustment under s 75(2) then in support of such a claim. It is not appropriate for this Court to be effectively rewriting the Will of the intended testator so as to give a benefit to a person he or she does not wish to benefit. If the wife’s parents wish to provide a bequest or a legacy to the husband they are free to do so. But if they equally do not wish to provide him with any request or legacy it should only be in unusual circumstances that the Court would effectively make an order which would have the indirect effect of creating such a testamentary disposition.
As indicated, one might readily rely upon an anticipated disposition to defeat a claim for an increased share based on capital or income disparity, both present and into the predictable future. However, it is more difficult to justify an adjustment in favour of the party who would not otherwise be receiving that adjustment unless they were pressing circumstances which would indicate that the reasonable requirement of the party would not be met from a contributions based assessment.
I have not included in the asset pool the $600,000.00 for the “B” class units held by Lint Stores in the T Unit Trust, or the $1,236,000.00 that the husband “owes” his father. Though recognising that the husband has received weighting in the contributions assessment on account of my findings about the probabilities of repayment, nonetheless he possibly will have to meet some call in respect of each of these arrangements and/or may have them “set against” any inheritance he might otherwise receive.
Having regard to that observation, also to the uncertainty of inheritance, especially from the husband’s mother, to the remarks of the court in Lorriman and the fact that I am here considering benefits that may come to the husband from his own family, I conclude that only slight consideration in favour of the wife should be given to this set of circumstances.
I take account of the probability, at some time, of some realisation costs and taxation in the sale of the Z Storage business.
I recognise that, on the contributions assessment, the husband has a greater estate than the wife, but both estates are sizeable and I think the disparity of itself of little moment.
In my view, the disparity in earning capacities, including the uncertainty of the wife’s working future and the on-going contribution likely to fall on the wife to the welfare of the family are the significant factors and require adjustment to the contributions assessment in the wife’s favour.
In assessing percentage, I have regard to the size of the asset pool, and the monetary result of any adjustment.
I consider the wife’s contribution-based entitlement should be increased by 7½ percent.
THE PROPOSED DIVISION AND ORDERS
Forty-five percent of $9,602,540.00 is $4,321,143.00. The wife is to retain (or has received) without opposition from the husband:
| V property | 700,000.00 | |
| Wife’s chattels | 17,388.00 | |
| Wife’s Mazda | 18,500.00 | |
| Part property settlement | 809,060.00 | |
| Legal fees paid | 49,809.00 | |
| Wife’s superannuation | 29,487.00 | 1,624,244.00 |
| Cash payable by husband | 2,696,899.00 |
The wife seeks to receive as part of her settlement, preferably the W residence, but if not, the unit at M, (now held by the T trust). She would hold this real property as an investment and transfer to her would avoid acquisition costs.
The husband opposes transfer of either parcel. He still uses the W property. Use of the M unit is part of the package for the manager at Z Storage.
I think the reasons of each party no more or less sound than those of the other and that therefore the property should stay as presently held.
The payment to the wife can be met from the monies received from the third parties.
To the amount calculated should be added a sum, initially calculated at 55 percent of the (net) costs paid by the wife in respect of the third party proceedings. Those net costs I calculate at $359,587.00, given that she was to receive $20,000.00 towards costs from the third parties.
Fifty-five percent would amount to $197,773.00 but I would adjust that down, to recognise that the husband made some payment to solicitors in relation to the third party issues and paid $76,000.00 towards Mr X’s fee. I think the husband should pay to the wife $150,000.00.
As to the husband, 55 percent of $9,602,540.00 is $5,281,397.00. the husband will receive or retain:
| Interest in the Italian unit | 43,000.00 | |
| W property | 625,000.00 | |
| Interest in family trust | 4,780.00 | |
| Interest in T trust | 6,046,921.00 | |
| Interest in O Pty Ltd | 200,000.00 | |
| Interest in N Pty Ltd | (703) | |
| Ducati | 8,000.00 | |
| Husband’s chattels | 11,029.00 | |
| Past property settlement | 645,366 | |
| Legal fees paid | 69,932 | |
| Settlement with third parties | 3,143,370 | |
| Husband’s superannuation | 92,102.00 | |
| Husband’s bank accounts | 6,936.00 | 10,895,733.00 |
He will take on the following liabilities:
| W property mortgage | 128,857.00 |
| Loan to O Pty Ltd | 204,576.00 |
| Loan to family trust | 1,682,491.00 |
| Loan to T trust | 298,154.00 |
| Loan to husband’s mother | 500,000.00 |
| Tax on settlement | 103,359.00 |
| Payment to wife | 2,696,899.00 |
| 5,614,336.00 | |
| 5,281,397.00 |
Plus, the husband will pay the wife $150,000.00.
ARE THE ORDERS JUST AND EQUITABLE?
In a case where the assets available for distribution are large and neither party will be left in need, I discern no factors, beyond those already identified, which may affect the justice and equity of the proposed orders.
I certify that the preceding one hundred and ninety-nine (199) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Warnick.
Associate:
Date: 22 February 2010
Key Legal Topics
Areas of Law
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Family Law
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Equity & Trusts
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Property Law
Legal Concepts
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Remedies
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Fiduciary Duty
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Constructive Trust
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Costs
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