Logan & Logan
[2022] FedCFamC2F 1338
Federal Circuit and Family Court of Australia
(DIVISION 2)
Logan & Logan [2022] FedCFamC2F 1338
File number(s): PAC 428 of 2021 Judgment of: JUDGE OBRADOVIC Date of judgment: 6 October 2022 Catchwords: FAMILY LAW – Interim property – partial property distribution –– family trust – whether wife should continue to have access and exclusive use of luxury car – whether there should be a partial property distribution – whether loan from wife’s parents used to make mortgage repayments should be repaid – whether partial property distribution to the husband would defeat wife’s claim on final basis – wife to have exclusive use of motor vehicle – partial property distribution to wife and to husband. Legislation: Family Law Act 1975 (Cth) ss.72, 74, 75, 79, 117 Cases cited: Carlson & Carlson [2019] FamCAFC 245
Jabara & Gaber [2021] FedCFamC1A 26
Osferatu & Osferatu [2012] FamCA 408
Strahan & Strahan (Interim Property Orders) [2009] FamCAFC 166
Zschokke and Zschokke [1996] FamCA 79
Division: Division 2 Family Law Number of paragraphs: 73 Date of hearing: 12 April 2022 Place: Parramatta Appearing for the Applicant: Mr Bye Solicitors for the Applicant: Auslex Law Group Sydney Counsel for the Respondent: Mr Roberts Solicitors for the Respondent: Solari & Stock Lawyers ORDERS
PAC 428 of 2021 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN: MR LOGAN
Applicant
AND: MS LOGAN
Respondent
order made by:
JUDGE OBRADOVIC
DATE OF ORDER:
6 October 2022
PENDING FURTHER ORDER, THE COURT ORDERS THAT:
1.The respondent wife, Ms Logan (“wife”) shall have the exclusive use of the Motor Vehicle 1, registration …, which is owned by the Corporate Trustee Logan Pty Ltd which is the Corporate Trustee of the Logan Family Trust.
2.Within 7 days, the applicant husband, Mr Logan (“husband”) shall provide to the wife all passcodes for the ‘Motor Vehicle 1 in control' application and shall provide to her with authority to change the passcodes to enable her to have control of the application whilst she has the use of the vehicle. The husband is thereafter injuncted and restrained from accessing the 'Motor Vehicle 1 in control’ application whilst the wife has the use of the vehicle.
3.The husband shall in his capacity as director of Logan Pty Ltd pay all costs associated for the registration and insurance of the Motor Vehicle 1 motor vehicle registration … as and when they fall due.
4.The net proceeds of sale of the property located at B Street, Suburb C (Folio ID …) shall be distributed as follows:
(a)$30,000 to Mr D and Ms E;
(b)$30,000 to the husband by way of partial property distribution pursuant to section 79 of the Family Law Act 1975 (Cth);
(c)$100,000 to the wife by way of partial property distribution pursuant to section 79 of the Family Law Act 1975 (Cth); and
(d)The balance of the monies be held in a controlled monies account on the parties’ joint behalf and administered by the wife’s solicitors.
5.Costs are reserved.
6.The matter is listed for directions at 10am on 2 December 2022.
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).
Section 121 of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish 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 Logan & Logan has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
JUDGE OBRADOVIC:
These are reasons for judgment in respect of competing interim applications[1] for partial property distribution as between the applicant husband, Mr Logan born in 1980 (“husband”), and the respondent wife, Ms Logan born in 1980 (“wife”).
[1] For the Husband, his Further Amended Application in a Proceeding filed 8 April 2022; and for the wife her Amended Response to an Application in a Proceeding filed 10 March 2022
Competing Interim Applications
On 12 April 2022, being the day of the interim hearing, orders were made by consent for the sale of the former matrimonial home, being the property located at B Street, Suburb C NSW (“the property”), and for the mechanisms to effect such sale.
Shortly prior to the interim hearing, the wife indicated that she would no longer be pressing any application for spousal maintenance, an application that had formed part of the interim relief sought at the time the matter was set down for interim hearing.
Therefore, the issues that the Court is presently asked to determine are:
(a)The interim distribution of any sale proceeds; and
(b)The return of a motor vehicle currently used by the wife.
The husband seeks that $30,000 be released to each of the parties, that the wife receive $70,000 towards her legal costs (past and future) and that the husband receive $28,732 for future legal costs. Further, the husband seeks that the Motor Vehicle 1 currently in the wife’s possession be sold, and the proceeds be applied towards a corporate tax liability.
The wife seeks that $30,000 be released to her, that she receive $70,000 towards her legal costs (past and future), and $90,000 in repayment of a debt she alleges is owed to her parents. The husband resisted the payment of $90,000 to the wife’s parents as an interim distribution, however during the course of the interim hearing the husband did not oppose a repayment to the wife’s parents in the amount of $30,000, which he conceded was used to make mortgage repayments by the wife after separation. The wife also seeks sole use of the Motor Vehicle 1.
The wife opposes any distribution being made to the husband, submitting during hearing that any distribution being made to the husband would defeat the wife’s claim at final hearing.
There are a few agreed and/or uncontested facts between the parties and as far as relevant they are as follows:
(a)The parties commenced their relationship in or around 2000 and were married in 2002.
(b)The parties separated on a final basis on 11 February 2020, when the husband vacated the former matrimonial home.
(c)Sometime after separation, the husband ceased making mortgage repayments for the property and as a result the mortgage fell into arrears. In late 2021, the wife made a number of mortgage repayments and are as follows:
(i)On 14 October 2021 in the amount of $10,000;
(ii)On 15 October 2021 in the amount of $6,400; and
(iii)On 10 November 2021 in the amount of $2,200.
(d)There are three children of the marriage; X (“X”) born in 2010, currently aged 12, Y (“Y”) born in 2004, currently aged 17 years, and Ms F (“Ms F”) born in 2001, currently aged 21 years.
(e)At present, Y resides with the husband and spends time with the wife, and X resides with the wife and spends no time with the husband despite there being orders in place for time to occur.
Logan Family Trust
On 4 April 2017, G Pty Ltd (“G Pty Ltd”) was incorporated.[2] The “Logan Family Trust” (“the trust”) was also created on this date whereby the husband is the sole director and shareholder of the trustee company. Additionally, he is also the sole named beneficiary of the trust, although his spouse, children, grandchildren and other relatives (and entities associated with the beneficiaries) are also listed as beneficiaries.
[2] Expert Valuation completed by Ms H dated 11 August 2021, page 39 of the wife’s affidavit filed 15 November 2021 at [F.2]
The trust holds an investment in G Pty Ltd and also owns four motor vehicles used by G Pty Ltd, more particularly a Motor Vehicle 1.
There is significant dispute between the parties about the operation, value and capacity of G Pty Ltd to produce future earnings.
Before the Court is the joint Expert Valuation of Ms H dated 11 August 2021 (“the valuation”) pursuant to orders made on 24 May 2021. The husband contends that the factual basis of the valuation is no longer relevant as there has been significant change to G Pty Ltd’s financial position since the valuation was completed. The wife stands by the valuation.
As mentioned earlier, the husband is the sole director of G Pty Ltd, which is an engineering company.
The husband derives his income from G Pty Ltd, which the husband claims is approximately $80,000 per annum.
The husband suggests that he worked as “effectively a sole-trader” for much of the company’s existence and that G Pty Ltd has significant and large expenses due to the need to hire sub-contractors.
It is the husband’s case that G Pty Ltd is in arrears on the tax liabilities it has incurred including, PAYG Income Tax (“PAYG”) and GST. The husband states that the tax debt has continued to increase from when the valuation was conducted of the company, which was $172,380 at that time, with G Pty Ltd owing $284,000[3] as at the date of the husband’s Affidavit filed on 8 April 2022. The husband says that any proceeds of sale of the Motor Vehicle 1 which is received by him will go some way to meeting G Pty Ltd’s tax liability.
[3] Cf Annexure C of the husband’s filed 8 April 2022 which has the amount owing as $269,546.07.
It is the husband’s evidence that his weekly expenditure exceeds his weekly income and G Pty Ltd is not in a position to increase his income without placing the business at risk of insolvency.
On the other hand, the wife claims that she worked with the husband at G Pty Ltd in its initial years, and they were the only employees of G Pty Ltd at that time. The wife goes on to say that she worked for G Pty Ltd from the time of incorporation, earning between $800 and $1,100 per week or $80,000 per annum, until the husband “unilaterally” terminated her employment on 31 August 2020. The wife states that after her termination the husband began paying Y and Ms F $500 each per week.
Additionally, the wife says that the parties agreed to a valuation of G Pty Ltd, but that the husband reneged and withheld information from the Single Expert. The husband denies this.
The wife says that at the time of separation G Pty Ltd had “three key employees” who were on a “significant wage”. The wife claims that G Pty Ltd has now grown to where it has six full-time employees and additional casual staff. The wife also claims that “project managers are paid $100,000 per annum plus”.
The wife also alleges that the husband’s income is substantially higher than he has disclosed, being $177,000 as opposed to approximately $80,000, as the husband asserts.
The wife alleges that the husband has set up two additional companies being J Pty Ltd and K Pty Ltd, which may be being used as a means to hide the income of G Pty Ltd. The wife also states that these additional companies were not disclosed to the Single Expert for the preparation of the valuation. The husband says that these companies produce no income nor have they ever traded.
The shares in G Pty Ltd are held by the trust, which also owns four vehicles including the Motor Vehicle 1 which the wife has possession of since its purchase and which she regularly uses. The trust has been valued at $301,000. The expert, who valued the trust, noted that at the time of the valuation G Pty Ltd had a tax liability of approximately $170,000. At the time of the interim hearing, the husband asserted that the tax liability had grown to over $269,000. For the purposes of the valuation, the Motor Vehicle 1 had an agreed value of $110,000.
At the time of the valuation of the trust, G Pty Ltd had $316,187 in the bank, some $22,165 in non-current assets, including director’s loan to the husband of $51,000 and a loan to the trust of $77,032, it had $506,890 in accounts receivable, $502,872 in accounts payable, liabilities for payroll/employee entitlements of $49,425 and $172,380 owing to the Australian Taxation Office (“ATO”) as per its integrated client account. As at 31 March 2021, G Pty Ltd had net assets of $309,158, and its shares were valued at $309,000 for the purposes of the valuation of the trust.
In late March 2022, the husband received a letter from the ATO headed “Warning of possible director penalty notice (DPN) for unpaid company debt” for the amount of $213,242, comprised of GST and PAYG withholding tax. There is no explanation in the husband’s evidence as to why the tax liability owing as at March 2021 was not paid from the funds in the bank held by the company, nor how it is that the integrated client account with the ATO has increased to approximately $269,000.
The wife puts before the Court the business activity statements for G Pty Ltd for the 2021 financial year, which show total sales of the business being in excess of $2,244,000.
The Husband’s Evidence
The husband’s evidence is almost entirely silent on the issue of contributions.
The husband states that he currently resides with his new partner Ms L (“Ms L”), her four children and his daughter Y.
The husband states that Ms L was terminated from her employment in or around 4 April 2022 and since then has not found new employment. As such, the husband says that he is responsible for funding the household, including meeting all expenses, such as rent, groceries, electricity, school fees etc.
The husband claims that he has “exhausted” all his savings to fund his legal expenses, and has had to “borrow money from friends” to continue to fund his legal costs.
The husband seeks to have the motor vehicle which is currently in the wife’s possession, being the Motor Vehicle 1, recovered from the wife and sold so that it can be used to reduce the tax liability of G Pty Ltd. He has offered for some funds to be released back to the wife from the proceeds of sale of the motor vehicle, to be used by the wife to purchase another cheaper car.
The Wife’s Evidence
The wife states that she primarily contributed to the household by caring for the children and conducting domestic duties, between 2003 and 2017. However, she also says that she worked two days per week at various times between 2008 and 2011.
When G Pty Ltd was incorporated in 2017, the wife says that her parents gave her $50,000 to assist with starting up the business.
It is the wife’s evidence that in or around 2003 the husband and she purchased a property at M Street, Suburb N (“M Street, Suburb N”). The parties paid, on the wife’s evidence, approximately $260,000 for the M Street, Suburb N property including a deposit of $13,250, which was from monies held in their joint savings account. The M Street, Suburb N property was subsequently sold in 2010 for $315,000 returning a profit of about $70,000.
The wife goes on to say that the parties then purchased a vacant block in 2010 at O Street, Town P (“O Street, Town P”) for $265,00 with a deposit of $65,000, which was from the sale proceeds of the M Street, Suburb N property. The wife states that in or around 2012, O Street, Town P was sold for $302,000, returning a $100,000 profit.
The wife says that the parties resided with the paternal family between 2010 and 2012.
In or around November 2012 the wife states that the parties then purchased the former matrimonial home located at B Street, Suburb C NSW for $426,000 with a deposit of approximately $46,000. The parties resided in this home up until separation.
The wife provides further evidence, that the former matrimonial home was a “constant renovation” and that her and the husband carried out work to the property. Such work included “demolition, gyprocking, building wardrobes, architraves, gardening, painting and so forth”.
The wife says that she has suffered from mental health issues in the past, where she was prescribed sleeping tablets and anti-depressants. She says that she no longer takes anti-depressants.
The wife has been able to find employment since 15 March 2022 at Employer Q (“Employer Q”) and has capacity to earn approximately $47,000 per annum.
The wife is in receipt $200.34 per fortnight from government benefits, which has been reduced to $199.64 since she gained employment.
The wife says that she uses the Motor Vehicle 1 to transport herself to and from work and X to and from school, as well as to conduct any other transport requirements for herself. The wife also contends that the motor vehicle is capable of being controlled through an application on the mobile phone, which the husband has the passwords to. The husband has repeatedly refused to hand over the passwords to the wife, and the wife suggests that this is in an effort by the husband to exercise coercive and controlling behaviour. The husband denies this.
It is the wife’s evidence that she has borrowed substantial funds, being approximately $90,000, from her mother Ms E and her stepfather, Mr D to make mortgage repayments and fund these legal proceedings.
Relevant Legal Principles
The considerations necessary to making an order for partial property settlement pursuant to
s.79 Family Law Act (Cth) (“the Act”) derive from Strahan.[4] Two separate steps are involved[5].
[4] Strahan & Strahan (Interim Property Orders) [2009] FamCAFC 166; (2011) FLC 93-466 (“Strahan”)
[5] Jabara & Gaber [2021] FedCFamC1A 26 at [35] – [40] (“Jabara”)
The first steps it to identify and value the parties’ legal and equitable interests[6], and the second is to consider the nature of the property, the parties’ respective contributions and the effect of the application of any matters to which s.75 refers[7].
[6] Carlson & Carlson [2019] FamCAFC 245
[7] Jabara at [38]
When considering whether to exercise the power to make an interim property order, the overarching consideration is the interests of justice. The Court does not need to find any special or compelling circumstances. All that is required is that in the circumstances it is appropriate to exercise the power.
In order to establish an appropriate case for interim property distribution, more is required than the mere fact that upon final hearing the applicant would receive the property being sought, or an amount in excess of what is sought[8].
[8] Strahan at [132] and [139]
Whilst a detailed enquiry is not required, there must be some assessment of s.79 factors and “either the remaining property needs to be sufficient to meet the legitimate expectations of both parties at the final hearing, or the order that is contemplated needs to be capable of being reversed or adjusted if it is subsequently considered necessary to do so”[9].
[9] Osferatu & Osferatu [2012] FamCA 408 at [41]
Furthermore, in Strahan[10] the Court has said:
The need for a party to proceedings under the Act to seek an order for the provision of funds to enable the payment of his or her legal costs of participating in the proceedings has been recognised for many years. It is a reflection of an important matter that distinguishes litigation under the Act from civil litigation between parties who are not parties to a marriage, namely that “very often the wealth of the parties is controlled by one rather than both of them”
…
… If the source of jurisdiction is 117(2) of the Act then the court may make such order as it considers just provided there are justifying circumstances. If the order is sought under s 79 of the Act then the court may make such an order as it considers appropriate provided it is satisfied that it is just and equitable to make the order. If the order is sought under s 74 of the Act then the court may make such order as is proper.
(citations omitted)
Determination
[10] Strahan at [79] and [86]
Partial Property Distribution
It appears that the asset pool at the time of the interim hearing consists of the following:
(a)B Street, Suburb C (joint) E$ 900,000 - $1,000,000
(b)Logan Family Trust/G Pty Ltd (husband) $ 301,000
(c)Caravan (husband) $ 45,000
(d)Superannuation (husband) $ 266,000
(e)Superannuation (wife) $ 15,000
Total (estimated maximum): $ 1,627,000
The parties are in dispute about most issues in this matter, and given the lack of evidence in the husband’s case as to contributions (notwithstanding his application for partial property distribution), there is only the wife’s limited evidence as to contributions prior to and during the parties’ relationship. In the case of a marriage as long as this one, where both parties contributed in their respective ways, it is difficult to see why their contributions ought not be preliminarily assessed as comparatively equal.
Taking a cautious approach and assuming a net asset pool of around $1,627,000, equal contributions during the relationship and post-separation contributions slightly favouring the wife, the application for property adjustment orders might see the parties receive an adjustment favouring the wife. This is of course said in the context of a very preliminary broad-brush assessment[11], based on very limited and untested evidence. Furthermore, there is significant disagreement by the parties about the asset pool and the valuation of the business. There may be issues of non-disclosure, which if proven, might have certain consequences in terms of how the Court approaches any property adjustment orders.
[11] As required by the authorities
The wife asks the Court for partial property distribution of $30,000 to rehouse herself and X and for associated costs, $70,000 for her legal costs (including future costs) and that $90,000 be repaid to her parents. The wife opposes the orders sought by the husband.
The husband asks the Court for partial property distribution of $30,000 to each of the parties, that the wife receive $70,000 for her legal costs and that he receive $28,732 for legal costs (being a dollar for dollar amount matching of the wife’s future legal costs).
The parties should, as far as possible, have a level playing field in terms of their financial capacity to conduct family law litigation. This is particularly so after a relatively long marriage, and where on a party’s case one party has a much higher earning capacity and financial resources.
The wife has carefully outlined in her evidence what her legal costs have been to date, how she has funded those costs, and what her likely future legal costs will be and the likelihood that she would not be able to afford ongoing legal representation if funds were not released to her for this purpose. The Court is therefore satisfied that the amounts sought by the wife, for the payment of past and future legal costs, is also an appropriate amount that she ought to receive by way of partial property distribution.
The husband’s evidence is very brief in respect of his legal costs and his application for a partial property distribution to fund his future legal costs. He does not set out the basis of the amount he seeks, except that he is “only seeking the same amount that is being released” to the wife. He says “I am struggling to ascertain how I will fund litigation moving forward.” On the evidence, the Court is not satisfied that it is appropriate, nor that it is just and equitable, for the husband to receive any monies by way of partial property distribution in respect of his anticipated future legal costs.
Both parties are currently working and receiving an income from that work. The husband is earning approximately double what the wife earns.
The wife has been living in the property post separation. Given the orders for the property to be sold, she will now need to rehouse herself and the parties’ children, noting that X lives with her and that both Y and Ms F regularly spend time with her. The amount sought by the wife of $30,000 to rehouse herself and for her use pending the final hearing, is not excessive or in any way inappropriate. Indeed, it is a modest amount.
The husband also seeks $30,000 “to help” with his living costs. The husband deposes that his weekly expenditure consistently exceeds his weekly income. He is presently supporting his new partner and her 4 children. He says that “taking a higher income for myself from the business is not a viable option” to meet his living costs. According to his financial statement, there is a shortfall of approximately $2,000 each week between his income and expenditure. The husband does not explain how he has to date met this shortfall. In any event, it appears from the evidence that $30,000 as sought by the husband is an appropriate amount for the husband to help him meet his living costs.
The husband has agreed that $30,000 be repaid to the wife’s parents as these funds were used by the wife to pay outstanding mortgage payments in respect of the property. Such an order will therefore be made. The balance of the monies the wife says should be paid to her parents is an alleged loan, which does not on the evidence currently before the Court, appear to be presently repayable. As such, the determination of this matter will be left to the final hearing and only the agreed amount of $30,000 shall be paid back to the wife’s parents at this interlocutory juncture.
The wife’s application on a final basis is, it appears, for a property adjustment of 80% in her favour and the husband’s application on a final basis is for a 40% adjustment in his favour.
Therefore, on a brief consideration of the relevant s.79 matters, it seems that each of the parties will be likely to receive by way of property settlement a sum sufficient to cover the amounts respectively sought by each of them[12], noting that the proposed distribution by the husband (to the husband) is less than 4% of the asset pool, and that the proposed distribution by the wife (to the wife) is less than 12% of the asset pool.
[12] Strahan at [87] citing Zschokke and Zschokke [1996] FamCA 79
In all of the circumstances, it is just and equitable that a partial property distribution be made as set out at the forefront of these reasons for judgment.
Motor Vehicle 1
While the Motor Vehicle 1 is a vehicle that is owned by the trust, it is a vehicle that appears on the evidence to have at all relevant times been driven by the wife, and the expenses for which were paid for by the business.
The wife seeks to retain the vehicle for her use pending the final hearing, while the husband wants to sell the vehicle to pay the tax liability of the business. As noted earlier, there is no adequate explanation in the husband’s evidence about the continued accrual of the tax liability and why funds which were held by the company as at March 2021, were not used to pay off the tax liability.
The trust owns three other vehicles. The business has other assets.
The tax liability appears to be one that is related to an integrated client account, and it is not clear on the evidence why the business has not taken steps to make appropriate arrangements with the ATO for the payment of that debt, including by way of an instalment plan.
Even if the Motor Vehicle 1 was sold, it would only meet part of the tax liability.
The Court is not satisfied on the evidence, that the vehicle should presently be sold for the purposes of meeting the tax liabilities of the business over which the husband appears to have entire control of.
It is appropriate that pending the final determination of the matter, the wife have use of the Motor Vehicle 1 as she has to date.
Costs Applications
Both parties seek the costs of their respective applications. The determination of costs is reserved to after the conclusion of the final hearing.
Conclusion
For all of those reasons, orders as set out at the forefront of these Reasons for Judgment will be made.
74 I certify that the preceding seventy-three (73) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Obradovic.
Associate:
Dated: 6 October 2022
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