Macvean & Manton (No 2)
[2022] FedCFamC1F 689
Federal Circuit and Family Court of Australia
(DIVISION 1)
Macvean & Manton (No 2) [2022] FedCFamC1F 689
File number(s): MLC 13788 of 2019 Judgment of: BERMAN J Date of judgment: 14 September 2022 Catchwords: FAMILY LAW – PROPERTY SETTLEMENT – Where the wife seeks that the property proceedings be adjourned pursuant to s79(5) of the Family Law Act, to a date fixed no earlier than 1 September 2024 – Where the wife asserts that the husband’s business will increase in value – Where the wife seeks to rely on a shadow expert valuation report – Where no leave was given to the wife to rely upon the shadow expert valuation report – Consideration of whether it is likely that there will be a significant change in the financial circumstances of the husband’s business – Consideration of whether an adjournment would likely do justice between the parties – Where there is insufficient evidence to support a finding of a likely significant change in circumstances –Where there is no evidence or relevance to support the adjourned date proposed by the wife – Where the evidence presented would not enable the Court to exercise its discretion – Where the parties have spent in $3,000,000 in legal fees and disbursements – Whether the potential costs incurred if the proceedings were adjourned, would overwhelm the proceedings and diminish the asset pool – Application dismissed
FAMILY LAW – PROPERTY SETTLEMENT – Just and equitable – Contributions – Future needs – Addbacks – Where in the alternative to s 79(5) of the Family Law Act, the wife seeks orders for the division of property – Where the husband has made greater financial contributions – Where final orders were made by consent in relation to children’s matters – Where the wife is the primary carer – Where the husband earns significantly more income than the wife – Where the husband’s company is his alter ego –Where the husband asserts that he owes his mother a loan of $439,697 – Where the husband seeks to include his unpaid income tax accrued post separation –Where there is insufficient evidence presented and the loans are not brought to account – Where a significant part of each parties’ legal fees are added back – Consideration of s 75(2) factors – Orders.
FAMILY LAW – CHILD SUPPORT – Application for departure – Consideration of s 116(1)(b) and s 117 of the Child Support Assessment Act 1989 (Cth) – Where the Court is satisfied that leave should be given pursuant to s 116(1)(b) – Where the parties agree that there should be a departure – Where the parties do not agree as to the extent and the nature of the departure – Where the wife seeks that the husband pay periodic child support in addition to non‑periodic child support, being 100% of the children’s school fees and other expenses – Where the husband seeks that he pay non‑periodic child support, being 50% of the children’s school fees and other expenses – Consideration of the parties financial circumstances – Where there is merit in the departure order being reflected as a periodic payment rather than comprising non-periodic payment components – Orders.
Legislation: Child Support (Assessment) Act 1989 (Cth) ss 116(1)(b), 117
Family Law Act1975 (Cth) ss75(2), 79(4)(a)-(c), 79(5), 79(6), 90XT(4)
Federal Circuit and Family Court of Australia (Family Law) Rules 2021 r 7.26
Cases cited: Bevan & Bevan (2013) FLC 93-545
Biltoft & Biltoft (1995) FLC 92-614
Chorn & Hopkins (2004) FLC 93-204
Clifford & Lodge [2000] FamCA 1666
Cunningham & Cunningham (2005) FLC 93-212
Ferraro & Ferraro (1993) FLC 92-335
Finlayson v Finlayson and Gillam (2002) FLC 93-121
Foda & Foda (1997) FLC 92-753
Gartner [2000] FamCA 793
Grace v Grace (1998) FLC 92-792
Gyselman & Gyselman (1992) FLC 92-279
Kowaliw & Kowaliw (1981) FLC 91-092
Macvean & Manton [2022] FedCFamC1F 376
Mallet v Mallet (1984) FLC 91-507
Pearce & Pearce (1999) FLC 92-844
Pratt & Pratt [2012] 47 Fam LR 234
Stanford & Stanford (2012) 247 CLR 108
Vass & Vass (2015) 53 Fam LR 373
Waters & Jurek (1995) FLC 92-635
Division: Division 1 First Instance Date of hearing: 26-29 April 2022 and 6-8 June 2022 Place: Heard in Melbourne, delivered in Sydney Counsel for the Applicant: Mr Werner Solicitor for the Applicant: Johnston Family Lawyers Counsel for the Respondent: Mr Mellas Solicitor for the Respondent: Nicholes Family Lawyers ORDERS
MLC 13788 of 2019 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN: MR MACVEAN
Applicant
AND: MS MANTON
Respondent
order made by:
BERMAN J
DATE OF ORDER:
14 September 2022
THE COURT ORDERS:
1.That in full and final settlement of any claim that either party may have against the other for settlement of property or alteration of interest in property pursuant to Part VIII of the Family Law Act 1975 (Cth):
(a)That the husband pay to the trust account of Nicholes Family Lawyers for and on behalf of the wife the sum of ONE MILLION TWO HUNDRED AND SIXTY FOUR THOUSAND SIX HUNDRED AND SIXTY SIX DOLLARS ($1,264,666) (“the settlement sum”) as follows:
(i)$421,556 within 60 days of the date of this order;
(ii)A further $421,555 within 90 days of the date of this order;
(iii)A further $421,555 within 120 days of the date of this order.
2.That in the event the husband fails to pay the whole of the settlement sum by the date payable then interest will accrue on the payment at the rate as specified by the Federal Circuit and Family Court of Australia (Family Law) Rules 2001; and
(i)In the event that the husband fails to pay the settlement sum in whole or in part by the date payable then the husband shall do all things necessary to obtain the sale on the open market of the P Pty Ltd Group or such assets of the group or the husband including but not limited to registered trademarks as is necessary to make the payment to the wife with default interest.
3.In relation to the husband’s superannuation and interest in Superannuation Fund 1 member number … (“the Fund”):
(a)The Court allocate, pursuant to 90XT(4) of the Family Law Act 1975 (“the Act”), a base amount of $152,280 to the wife out the husband’s interest in the fund;
(b)That in accordance with s 90XT(1)(a) of the Act, whenever the Trustee of the Fund makes a splittable payment from the interest held by the husband in the fund, the Trustee shall pay to the wife the amount which is calculated in accordance with Part 6 of the Family Law (Superannuation) Regulations 2001 (“the Regulations”) and there shall be a corresponding reduction in the entitlement that the husband would have but for these orders.
4.That Order 3 have effect from the operative time, being seven (7) business days after the day on which a copy of the sealed orders is served on the Trustee.
5.Having been afforded procedural fairness the Trustee of the Fund will be bound to observe the provisions of Order 3 hereof, and the requirements pursuant to the Act and the Regulations.
6.That the husband is to pay one half of the costs of the review by Mr M of the transcript with the wife to pay the balance of his fees.
7.That within 14 days of the date of these orders the husband shall provide to the wife for her nomination two lists each containing 50% of the wine/alcohol in his possession and the wife elect one of the two lists and within a further fourteen (14) days of the wife’s election, the husband shall make available for collection by the wife of all of the wine/alcohol as selected by her PROVIDED that if the parties are not able to agree the division of wine then the wine shall be divided on a pick by pick basis with the husband to have first pick.
8.That within fourteen (14) days of these orders the husband make available for collection by the wife the following:
(a)50% of the champagne and wine glasses (Louis Roederer and Riedel);
(b)Two large wine fridges;
(c)Wild Roosters Dance painting; and
(d)Ikebana vases.
9.The husband shall retain to the exclusion of the wife:
(a)All shares and interest in:
(i)P Pty Ltd;
(ii)P2 Pty Ltd;
(iii)P3 Pty Ltd;
(iv)P4 Pty Ltd;
(v)P5 Pty Ltd (referred to collectively as “the P Pty Ltd Group”);
(b)All interest in the T Trust and U Trust (“the trusts”);
(c)Liability for all personal debts in his name (including credit card debt and litigation funding loans);
(d)All bank accounts held in his name;
(e)The Motor Vehicle 2 motor vehicle;
(f)Superannuation interests held by him; and
(g)All items of personal property currently in his possession.
10.The husband shall indemnify the wife and hold her full indemnified in relation to all liabilities (inclusive of taxation liabilities) relating to the companies, the trusts or the husband personally.
11.The wife shall retain to the exclusion of the husband:
(a)The apartment at B Street, Suburb C in the state of Victoria being the property described as Volume … Folio … subject to all encumbrances of mortgage number … to National Australia Bank Ltd;
(b)All bank accounts held in her name;
(c)All shares held in her name and the proceeds of sale of shares;
(d)Superannuation entitlements held by her; and
(e)All items of personal property currently in her possession.
12.Except as specifically provided by any order to the contrary, each of the husband and the wife release the other from all debts owing from one to the other.
13.That pursuant to s 116(1)(b) and s 117 of the Child Support Assessment Act 1989 (“the CSA Act”) there will be a departure order in respect to the Child Support Assessment relating to the children X born in 2014 and Y born in 2016 (hereinafter referred to as “the children”) as follows:
(a)The husband shall pay by way of periodic child support the sum of $1,665 per week;
(b)The periodic child support paid in accordance with order 13(a) hereof shall be increased annually on the first day of July 2023 and each year thereafter in accordance with the last published increase in the Consumer Price Index (CPI) for Melbourne as advised by the Australian Bureau of Statistics; and
(c)The child support payable by the husband for the children pursuant to these orders shall account for 100 per cent of the annual rate of child support payable by him for the children for the period from the date these orders are made until 31 December of the year the children each turn eighteen (18) years of age or complete their secondary education whichever is later.
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 the pseudonym Macvean & Manton has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
BERMAN J
INTRODUCTION
Mr Macvean (“the husband”) and Ms Manton (“the wife”) are unable to resolve their differences in respect of settlement of property and the extent of the departure from the administrative assessment of child support pertaining to X born in 2014 and Y born in 2016 (collectively “the children”). It is acknowledged that the husband is the liable parent.
The relationship between the parties is acrimonious and exemplified by high conflict. Following a two-day final hearing in December 2021, the parties were ultimately able to resolve ongoing parenting arrangements for the children. Orders were made by consent on 16 December 2021, summarised as follows:-
(1)That the wife has sole parental responsibility for the children.
(2)That the wife inform the husband in writing by email, text, or other electronic means in a timely manner of any decision she has made in respect to the children’s educational health or other long term considerations.
(3)That the children live with the wife.
(4)That subject to the time that the children spend with each of the parties from 23 December to 25 December, the children communicate and spend time with the husband as follows:-
(a)On Wednesdays from the conclusion of school or at 3.30 pm on non-school days to 6.00 pm;
(b)On Thursdays in the week following the weekend when the children are with the husband and alternate weeks thereafter, from the conclusion of school or 3.30 pm on non-school days until 6.00 pm; and
(c)On alternate weekends from 10.00 am Saturday to 5.00 pm Sunday with the husband to collect the children from school on Wednesdays and Thursdays (should it be a school day) and, unless otherwise agreed, with changeovers to be supervised by the Family Contact Service at the husband’s expense.
The orders also provided for the children to spend time with the husband on special occasions including Christmas Eve, Christmas Day, Father’s Day and the birthdays of each of the children and their half-brother.
Comprehensive orders were made for the exchange of information relevant to the children’s health, education and extracurricular activities.
The parties were each subject to injunctions, restraining them from denigrating or criticising the other, with the husband restrained from coming within fifty metres of any place where the wife lives or works or to remain within five metres of the wife.
Orders sought by the husband
By Amended Initiating Application filed 24 November 2021 and the husband’s proposed orders (“Exhibit 25”), he seeks orders by way of property settlement, summarised as follows:-
(1)The wife shall retain to the exclusion of the husband:
(a)The apartment at B Street, Suburb C in the state of Victoria being the property described as Volume … Folio … (“the apartment”) subject to all encumbrances inclusive of mortgage number … to the National Australia Bank Limited;
(b)All bank accounts held in her name;
(c)All shares held in her name and the proceeds of sale of shares;
(d)Superannuation entitlements held by her;
(e)All items of personal property currently in her possession.
(2)The husband shall retain to the exclusion of the wife:
(a)All shares and interests in:
(i)P2 Pty Ltd.
(ii)P4 Pty Ltd.
(iii)P5 Pty Ltd (referred to collectively as “the Companies”).
(b)All interests in the T Trust and the U Trust (“the Trusts”).
(c)Liability for all personal debt in his name (including credit card debt and litigation funding and business loans).
(d)All items of personal property currently in his possession.
(3)The husband shall indemnify the wife and hold her harmless in relation to all liabilities (inclusive of taxation liability) relating to the Companies or the Trusts.
(4)That a base amount be allocated to the wife out of the husband’s interest in Superannuation Fund 1 (“the fund”) in the amount of $87,500 (“the base amount”).
(5)That the husband and wife shall be equally liable for half of any repayments of O Insurance payments relating to payments made with respect to the injuries sustained by the husband together with the costs of defending any claim by O Insurance (“the insurance liability”) with the wife to indemnify the husband for half of any payments made by him with respect to the insurance liability.
(6)That the husband provide an irrevocable authority to the solicitors acting on his behalf in relation to the insurance liability to provide copies of all documents evidencing the quantum of the insurance liability to the wife inclusive of any orders, deed of settlement and all trust and accounting ledgers.
(7)Unless otherwise specified and save for the purpose of enforcing any money due under these or any subsequent orders, the husband and the wife shall otherwise retain the assets in their respective possession and remain liable for any personal liabilities or liabilities attaching to those assets retained by them respectively.
In anticipation of the wife’s application seeking a departure from the child support assessment, the husband also provided proposed child support orders (“Exhibit 26”), seeking orders summarised as follows:-
(1)Pursuant to Section 116(1)(b) and Section 117 of the Child Support (Assessment) Act 1989 (Cth) (“the CSA Act”) there be a departure order in respect to the Child Support Assessment relating to the children X born in 2014 and Y born in 2016 (hereafter referred to as “the children”).
(2)The husband pay to the wife periodic child support as assessed from time to time by the Child Support Agency (“assessed child support”).
(3)For so long as the children attend V school (“the school”), the husband pay to the wife, by way of direct payment to the school, half of all tuition and compulsory levies inclusive of the costs of all compulsory activities in which the children are engaged.
(4)In addition to assessed child support, the husband pay to the wife in lieu of all non‑periodic support, a further sum of $500 per month (non-assessed child support) increased on 1 July 2023 and thereafter annually in accordance with the last published increase in the consumer price index for Melbourne as advised by the Australian Bureau of Statistics.
(5)Payment of both assessed child support and non-assessed child support be paid monthly into Commonwealth Bank BSB … account number … or such other bank account as may be nominated by the wife in writing from time to time.
(6)The husband pay by way of direct payment the cost of all appointments for the children with Mr D or any healthcare professional who is subject of a recommendation in writing by Mr D to the husband and the wife jointly having consulted with them.
Orders sought by the wife
By Further Amended Response to Initiating Application filed 7 December 2021, and by reference to an Amended Minute of Orders (“Exhibit 27”), the wife seeks orders summarised as follows:-
(1)Pursuant to s 79(5) of the Family Law Act1975 (Cth) (“the Act”) the proceedings in relation to a final property settlement between the parties, be adjourned to a date to be fixed no earlier than 1 September 2024.
(2)At the end of each fiscal quarter from the date of these orders, the husband cause to be provided to the wife, the following documents for each trading entity within the P Pty Ltd Group by way of ongoing financial disclosure;
(a)Updated management accounts for all trading entities within the P Pty Ltd Group, including profit and loss statements, balance sheets and general ledgers;
(b)Business activity statements;
(c)Cash flow statements;
(d)Accounts receivable and accounts payable (reconciled to the amount shown in the balance sheet as at the end of each quarter);
(e)Any significant customer or reseller contracts or agreements entered into in the quarter; and
(f)Any other documents or information reasonably requested by the wife, including end of year tax returns and financial statements.
(3)That the parties do all acts and things and sign all documents necessary to jointly instruct Mr M of W Accounting Company (“the single expert”) to prepare an updated sworn valuation of the P Pty Ltd Group as at 30 June 2024 at the parties’ equal shared expense.
(4)For the purpose of the preceding order:-
(a)The husband shall, as soon as practicable do all acts and things necessary to instruct the accountants for the P Pty Ltd Group to prepare the tax returns and financial accounts (including but not limited to all profits and loss statements, balance sheets and depreciation schedules) for the P Pty Ltd Group; and
(b)The husband and wife shall do all acts and things necessary to provide all instructions including providing any documentation requested by the valuer within 7 days of a request.
(5)No less than 60 days prior to the final hearing of this matter (on a date to be fixed) the parties do all acts and things and sign all documents necessary to jointly instruct AA Real Estate to undertake an updated joint sworn valuations of all real properties in which the parties have an interest, including the properties situate at:
(a)B Street, Suburb C being the whole of the property contained in Certificate of Title Volume … Folio …;
(b)2 B Street, Suburb C being the whole of the property contained in Certificate of Title Volume … Folio …; and
(c)3 B Street, Suburb C being the whole of the property contained in Certificate of Title Volume … Folio …;
with the cost of the valuations to be borne equally by the parties.
(6)That until further order or agreement in writing between the parties the husband in his personal capacity and in his capacity as director and office holder of any company or trustee or appointor of any trust is restrained from:
(a)Signing any document or instrument or taking any steps to transfer or divest shares in any corporate entity of which is an office holder, shareholder or otherwise is authorised to do so, whether condition precedent or not;
(b)Procuring the removal, resignation or appointment of any director or officeholder of any corporate entity of which he is an officeholder, shareholder or otherwise is authorised to do so;
(c)Winding up any trust and/or amending any trust deed of a trust of which the husband is a beneficiary, appointor, trustee or director of a corporate trustee entity;
(d)Altering the records of the Australian Securities and Investment Commission (“ASIC”) with respect to any entity of which the husband is an officer or is otherwise authorised or instructing any third party or agent to do so.
(7)Until further order or agreement in writing between the parties, the husband in his personal capacity and in his capacity as director and officeholder of any company or trustee or appointer of any trust, as well as his servants and agents, are hereby restrained from:-
(a)Transferring, disposing of, alienating or encumbering any of the assets of any corporate entity of which he is a director or shareholder or in respect of which he is otherwise authorised to do so;
(b)Distributing, selling, transferring, assigning or encumbering any assets of any trust of which he is a beneficiary or trustee;
(c)Otherwise than in the ordinary course of business.
In the alternative to an order pursuant to s 79(5) of the Act, and by way of final settlement of property, the wife seeks orders summarised as follows:-
(1)That the husband pay or cause to be paid to the wife’s solicitors trust account, the following sums (totalling $1,908,160) to effect a property settlement whereby the wife retains non-superannuation assets equal to 60 per cent of the net value of the parties’ property interests (excluding superannuation) (“the payment”) in full satisfaction of her claim pursuant to s 79 of the Act:
(a)$477,040 within 60 days of the date of the orders;
(b)A further $477,040 within 120 days of the date of the orders;
(c)A further $477,040 within 180 days of the date of the orders; and
(d)A further $477,040 within 240 days of the date of the orders.
(2)That in the event the husband fails to pay the whole of the payments by the dates payable pursuant to this order, then interest will accrue on the portion of the payments which remain outstanding at the rate specified by the Family Law Rules 2021.
(3)That should the husband fail to make the payments as required in order to satisfy the settlement sum, then the husband shall do all acts and things and sign all documents as are required to appoint a representative of BB Professional Services (or other person/company as may be agreed between the parties in writing, as commercial agent (“the agent”) to market for sale the business operated by the P Pty Ltd Group (known as “P Pty Ltd”) as a going concern and inclusive of all assets including intellectual property.
(4)At settlement of the sale of P Pty Ltd, the proceeds be distributed in the following manner and order of priority:
(a)First to meet all costs, commission and expenses of the sales;
(b)Second, a sum equal to the estimated taxation liability associated with the sale as determined to be quarantined and held on trust for the parties by Nicholes Family Lawyers in an interest bearing bank account (such sum to be accounted for as a liability when determining the funds to be paid to the wife pursuant to the following subparagraphs);
(c)Third, to pay to the wife a sum commensurate with her retaining 60 per cent of the net matrimonial asset pool (excluding superannuation) and that this will be in full satisfaction of the husband’s obligation to make payments to the wife; and
(d)The balance be paid to the husband.
(5)In relation to the husband’s superannuation interest in Superannuation Fund 1 (“the fund”):
(a)The Court allocate pursuant to s 90XT(4) of the Act, a base amount of $152,280 to the wife out of the husband’s interest in the fund;
(b)That in accordance with s 90XT(1)(a) of the Act, whenever the trustee of the fund makes a splittable payment from the interest held by the husband in the fund, the trustee shall pay to the wife the amount which is calculated in accordance with Part 6 of the Family Law (Superannuation) Regulations 2001 (“the Regulations”), and there shall be a corresponding reduction in the entitlement that the husband would have but for these orders.
(6)That the operative time to give effect to these orders shall be four business days after the day on which a copy of the sealed orders are served on the trustee.
(7)Except as specifically provided to the contrary, the husband is the sole owner of and the wife has no interest in the:
(a)Domain name;
(b)Husband’s bank accounts;
(c)Husband’s bitcoin/ cryptocurrency portfolio;
(d)Husband’s frequent flyer points;
(e)Husband’s interim part property settlement;
(f)Husband’s motor vehicle;
(g)Husband’s liabilities;
(h)The P Pty Ltd Group subject to the default provisions;
(i)The balance of the husband’s wine collection;
(j)Any related party loan payable owing to the husband by the P Pty Ltd Group;
(k)Husband's B Street property;
(l)Household contents currently in possession of the husband, subject to these orders;
(m)Husband’s superannuation;
(n)All other chattels, choses in action and other items in his possession at the date of this order;
(8)Except as specifically provided to the contrary, the wife is the sole owner and the husband has no interest the:
(a)Suburb C property subject to the Suburb C loan account;
(b)Wife’s bank accounts;
(c)Wife’s shares and investments;
(d)Wife’s engagement ring;
(e)Household contents currently in possession of the wife;
(f)Wife’s interim part property settlement;
(g)Wife’s liabilities;
(h)Wife’s superannuation funds; and
(i)All other chattels, choses in action and other items in her possession at the date of this order.
(9)Within 30 days of the date of these orders the husband make available for collection by the wife the following items:
(a)Ikebana vases (including the vase and art piece (branch) purchased from CC Company);
(b)Painting (“Wild Rooster Dance” painting);
(c)50% of the champagne and wine glasses (Louis Roederer and Riedel); and
(d)2 large wine fridges.
(10)The husband shall make available for collection by the wife 50% of the wine/alcohol listed in Annexure “A” and in relation thereto, within 14 days of the date of these orders the husband shall provide to the wife for her nomination two lists each containing 50% of the alcohol listed in Annexure “A”, the wife shall elect one of the two lists, and within a further 14 days of the wife’s election the husband make available for collection by the wife all of the alcohol identified in the list chosen by the wife.
The parties agree that there should be a departure from the administrative assessment of child support. However, the parties do not agree as to the nature and extent of the departure.
By reference to the wife’s Amended Minute of Orders (“Exhibit 27”), the wife seeks departure orders, summarised as follows:-
(1)That pursuant to section 116 and 117 of the Child Support Assessment Act 1989 (“the CSA Act”) there will be a departure order in respect to the Child Support Assessment relating to the children.
(2)The husband shall pay the following expenses for the period by way of non-periodic child support, which will not be credited against any periodic child support payable by the husband;
(a)100% of the children’s education expenses, including but not limited to school tuition and enrolment fees, levies, any additional tutoring fees for tutoring recommended by the children’s teachers, school books and necessary educational equipment, school based extra-curricular activities, school excursions, school camps and residential learning programmes, which are associated with the children’s education at V School or at such other school in which the children are enrolled.
(3)For the purposes of implementing payments of a non-periodic expense, the husband shall make the required payments directly to the children’s school and he shall be solely liable for such expenses. In the event the wife is required to make a payment for one of the expenses identified in the preceding paragraph, the wife shall provide the husband with any receipts for expenses she has paid, and the husband shall reimburse the wife for the payment by payment into her nominated bank account within 7 days of being presented with a receipt.
(4)The annual rate of periodic child support payable by the husband to the wife shall be set at $52,000 per child, to be paid annually by the husband to the wife (unless otherwise agreed) with the first payment for each child to be made within 28 days of the date of these orders, subsequent payments be made every 12 months thereafter and the last payment for each child to be made during the year each respective child turns 18 or completes their secondary education (whichever is the later).
(5)The periodic child support paid in accordance with the preceding order shall be increased annually on the 1st day of July 2023 and each year thereafter, in accordance with the last published increase in the consumer price index (“CPI”) for Melbourne, as advised by the Australian Bureau of Statistics (“ABS”).
(6)The child support payable by the husband shall account for 100% of the annual rate of child support payable by him, for the children, for the period from the date of these orders are made until 31 December of the year that the children turn 18, or complete their secondary education.
By joint letter dated 12 July 2022, the solicitors for the parties forwarded a joint table of assets setting out the agreed and disputed items.
The joint table of assets is set out as follows:-
JOINT TABLE OF ASSETS[1]
[1] Taking into account the interim property distributions and updated account balances
Asset (Liability) Owner Husband’s value Wife’s value Husband’s business interests Husband $2,930,764 $4,545,865 Real property, B Street, Suburb C Wife $1,075,000 $1,075,000 Liquid funds – NAB …88 (Mortgage offset) Wife $578,891 $578,891 Liquid funds – all accounts (inclusive of CBA credit card …94) Wife $13,391 $8,076 Share portfolio – (WW Company) Wife $137,850 $115,181 Share portfolio (other) Wife $7,954 $5,031 DD Fund real estate fund Wife $29,357 $25,256 EE Credit Wife (disputed) $6,264 $0 Engagement ring Wife $18,000 $18,000 Liquid funds – CBA …32 Husband $466 $466 Liquid funds – CBA …59 Husband $30 $30 Liquid funds – CBA …08 Husband $30,548 $116,035 Liquid funds – CBA …14 Husband $0 $0 Motor Vehicle 2 Husband $0 $12,000 Cryptocurrency Husband $0 $2,656 Husband’s interest in B Street (deposit) Husband $10,000 $10,000 Related party loan payable by P Pty Ltd to Husband (as set out in paragraphs 21 – 24 of Mr M’s report dated 23 December 2021) Husband $0 $31,457
Add back: Husband’s withdrawal of $10,000 from Superannuation Fund 1 – September 2020 Husband $0 $10,000 Credit card debt AC Bank – (…94) Husband ($22,198) ($22,198) Credit card debt – CBA …90 (formerly…43) – Husband ($12,805) ($12,805) CBA Better business loan …13 Husband ($141,770) ($0) FY2021 unpaid income tax (on payment plan) Husband ($63,128) ($0) Personal loan from Ms FF Husband ($439,697) ($0) Mortgage, B Street, Suburb C (NAB…56) Wife ($799,326) ($799,326) CGT payable on shares sold by Wife Wife ($16,469) ($16,469) CGT payable for sale of Suburb JJ Wife ($37,853) ($37,853) SUB TOTAL $3,305,269 $5,665,293 SUPERANNUATION Superannuation Fund 2 Wife $66,893 $66,893 Superannuation Fund 3 Wife $224,691 $224,691 Superannuation Fund 1 Husband $596,145 $596,145 TOTAL SUPERANNUATION $887,729 $887,729 TOTAL Inclusive of SUPER $4,192,998 $6,553,022
Asserted add backs Owner Husband’s value Wife’s value Legal fees Wife $1,617,518 $0 Legal fees Husband $400,000 $0 SUB TOTAL $2,017,518 $0
Whilst not attempting to be comprehensive of all of the issues in dispute, the significant areas of disagreement are as follows:-
(1)The value of the husband’s business interest.
(2)The date upon which the wife’s share portfolios should be valued.
(3)The extent of the funds available to the husband in his CBA account …08.
(4)The treatment of a related party loan payable by P Pty Ltd to the husband.
(5)Whether the husband’s withdrawal of $10,000 from his Superannuation Fund 1 should be added back.
(6)Whether the following loans should be treated as liabilities of the parties;
(a)CBA better business loan …13 in the sum of ($141,770);
(b)FY2021 unpaid income tax for husband in the sum of ($63,128); and
(c)Personal loan from Ms FF (the husband’s mother) in the sum of ($439,697).
The parties are agreed as to their separate superannuation entitlements, but not the extent of any splitting order. They are not agreed as to the treatment of legal fees incurred by each of the parties and whether, and to what extent, they should be notionally added back into the asset pool.
documents relied upon by the husband
The husband relies upon the following documents:
(1)Amended Initiating Application filed 24 November 2021.
(2)Trial Affidavit of the husband filed 22 April 2022.
(3)Trial Affidavit of the husband filed 22 November 2021.
(4)Financial Statement of husband filed 24 April 2022.
(5)Financial Statement of husband filed 23 November 2021.
(6)The husband’s proposed orders (“EX25”).
(7)The husband’s proposed child support orders (“EX26”)
documents relied upon by the wife
The wife relies upon the following documents:
(1)Further Amended Response filed 7 December 2021.
(2)Trial Affidavit of the wife filed 7 December 2021.
(3)Trial Affidavit of the wife filed 22 April 2022.
(4)Amended Financial Statement of wife filed 22 April 2022.
(5)Affidavit of Mr N filed 21 April 2022.
(6)Amended Minute of Orders (“EX 27”).
Both parties rely upon the evidence of the single expert as set out in his affidavits filed 14 April 2022 and 7 June 2022 (the latter affidavit sets out the response of the single expert to questions asked in a letter of instruction dated 13 May 2022).
IS IT JUST AND EQUITABLE TO PROCEED
In Stanford & Stanford (2012) 247 CLR 108 ("Stanford") the majority held:
35.It will be recalled that s 79(2) provides that “[t]he court shall not make an order under this section unless it is satisfied that, in all the circumstances, it is just and equitable to make the order”. Section 79(4) prescribes matters that must be taken into account in considering what order (if any) should be made under the section. The requirements of the two sub-sections are not to be conflated. In every case in which a property settlement order under s 79 is sought, it is necessary to satisfy the court that, in all the circumstances, it is just and equitable to make the order.
36. The expression “just and equitable” is a qualitative description of a conclusion reached after examination of a range of potentially competing considerations. It does not admit of exhaustive definition. It is not possible to chart its metes and bounds. …
(Footnotes omitted).
In Bevan & Bevan (2013) FLC 93-545 at [73], the Full Court considered that the decision of Stanford (supra) could be reduced to “three fundamental propositions”: -
1.Determination of a just and equitable outcome of an application for property settlement begins with the identification of existing property interests (as determined by common law and equity);
2.The discretion conferred by the statute must be exercised in accordance with legal principles and must not proceed on an assumption that the parties’ interests in the property are or should be different from those determined by common law and equity;
3.A determination that a party has a right to a division of property fixed by reference only to the matters in s 79(4), and without separate consideration of s 79(2), would erroneously conflate what are distinct statutory requirements.
The parties both consider that it is just and equitable for there to be an order of property settlement made pursuant to s 79 of the Act and that the legal and equitable interests in the property will need to be adjusted.
background
The husband was born in 1969 and is now aged 53 years.
The wife was born in 1979 and is now aged 43 years.
The husband is self-employed and owns a business, which is comprised of the following entities:-
(a)P Pty Ltd;
(b)P2 Pty Ltd;
(c)P3 Pty Ltd;
(d)P5 Pty Ltd;
(e)P4 Pty Ltd;
collectively as “the P Pty Ltd Group”; and
(f)The T Trust and U Trust (“the trusts”).
The wife is a medical professional and currently works two days per week (for up to 20 hours).
The parties commenced cohabitation in 2007, were married in 2012 and separated in August 2019. A divorce order was effected in early 2021.
X and Y are the children of the parties and as discussed, final parenting orders were made by consent on 16 December 2021.
Following separation, the husband commenced a relationship with Ms GG (“Ms GG”). The husband and Ms GG commenced cohabitation in early 2020. A child of their relationship was born in 2021.
At the commencement of cohabitation, the wife was the sole registered proprietor of a unit situate at TT Street (“the Suburb JJ property”). The Suburb JJ property was sold in early 2021, for $400,000. The wife received net proceeds in the sum of $157,085 from the sale however, there was an estimated capital gains tax payable by the wife consequent on the sale, in the sum of $37,853.
The wife contends that at the commencement of cohabitation, she held approximately $160,000 of assets comprising of the following:-
(1)Equity in the Suburb JJ property of $37,000;
(2)A share portfolio valued at $16,479;
(3)Cash savings of approximately $87,000;
(4)Superannuation of $12,000;
(5)A motor vehicle of approximately $2,000; and
(6)Various household items and personal effects valued between $5,000 and $10,000.
At the commencement of cohabitation, the husband held a one-third interest in P Pty Ltd (“P Pty Ltd”). Whilst there is some uncertainty as to the value of the husband’s interest, it is uncontroversial that in late 2008, the husband purchased his business partner’s one‑third interest in P Pty Ltd either for $430,000, as claimed by the wife, or for $146,000 to fund the purchase of shares and $293,647 for cash flow, as claimed by the husband.
The husband also held an interest in the property at B Street, Suburb C (“the B Street property”) which he had purchased in early 2007 for $572,500 with a home loan secured by mortgage of $458,000.
Whilst there is some contention between the parties as to both the status and the treatment, it appears that the husband had borrowed money from his mother in the sum of $185,000, to finance the balance of the purchase price of the B Street property.
During the course of the relationship, each of the parties worked and were able to contribute to the best of their separate abilities, to the family expenses and the acquisition and maintenance of the property of the parties.
Between 2008 and 2016, the B Street property was used as security to finance the expansion and business operation of P Pty Ltd, culminating with the purchase by the husband of the remaining partner’s one-third interest. The transaction was finalised in 2016, making the husband the sole owner of P Pty Ltd.
In 2017, the husband received a significant compensation payout arising from an incident in late 2014, when the husband suffered an injury.
As a result of the injury received and the deleterious effect on the husband’s overall health and wellbeing, he was also able to claim on his income protection insurance with O Insurance, which until relatively recently, entitled the husband to receive $10,000 per month. Those compensation payments are currently suspended whilst consideration is given as to whether the husband satisfies the criteria for compensation payments to resume.
In 2017, P Pty Ltd entered into a loan agreement with KK Pty Ltd (“KK Pty Ltd”) to borrow one million dollars by way of a convertible note. A portion of that loan was repaid.
In late 2019, P Pty Ltd refinanced with LL Financial Services (“LL Financial Services”) for two million dollars of which $1,416,667 remains outstanding and appears in the P Pty Ltd balance sheet for the year ending 30 June 2021.
In mid-2018, the husband transferred his interest in the B Street property to the wife as an asset protection measure in circumstances where, the husband was seeking to borrow substantial capital to support P Pty Ltd.
As matters have transpired, the wife continues to reside in the B Street property and the husband, Ms FF and their son, reside in rental property also situate in B Street. It is the husband’s evidence that he seeks to purchase the property in which he currently resides together with an adjoining apartment.
The wife made application to Services Australia for a Child Support Assessment in late 2021.
Following separation, the husband has paid the children’s school fees and the cost of other curricular and extra-curricular activities.
The children currently attend V School with total tuition fees for the 2022 academic year being $49,040.
Both parties agree that the children should continue to attend V School however, they are not agreed as to the extent of the husband’s future contribution in respect of the children’s curricular and extra-curricular activities.
THE HUSBAND’S INTEREST IN THE P PTY LTD GROUP
The husband operates as a private business service provider.
The P Pty Ltd Group is comprised of a number of entities but principally, the focus is the value of P Pty Ltd (“P Pty Ltd”) and a product developed by P Pty Ltd known as P1 Service. It is intended that P Pty Ltd will enter into reseller agreements for the marketing and sale of P1 Service with a number of interested “partners” to enable the product to be distributed both nationally and internationally.
The husband adopts the value of $2,930,764, being the value determined by the single expert, as representative of his interest in P Pty Ltd as at 30 June 2021. The wife adopts a figure of $4,545,865, being the value determined by Mr N (“the wife’s shadow expert”).
By Application in a Proceeding filed 21 April 2022, the wife sought leave to rely upon the affidavit of Mr N, which annexed a valuation report, obtained by the wife shortly prior to the commencement of the trial. The wife’s shadow expert considered that the valuation of P Pty Ltd, as determined by the single expert, should increase by $1.615 million. The wife’s shadow expert opined that value should be attributed to the additional tax benefit of 18.5 per cent over the general tax deductable expenditure at the company tax rate of 25 per cent arising from a tax incentive for research and development.
For the reasons as set out in Macvean & Manton [2022] FedCFamC1F 376 delivered on 26 May 2022, the wife’s Application in a Proceeding was dismissed.
The reasons for judgment considered that the wife’s shadow expert presented his opinion based upon a substantial body of opinion contrary to that of the single expert and in any event, the wife had not sought to pose questions to the single expert, but instead chose to obtain separate expert evidence. It also considered case management implications and the cost of litigation, should the Application in a Proceeding have been successful.
On 29 April 2022, leave was given to the parties pursuant to r 7.26 of the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (the “Family Law Rules”) to pose questions to the single expert that were not limited to whether P Pty Ltd was entitled to claim the 18.5 per cent tax incentive arising from the development of P1 Service and if so, the impact if any, to the P Pty Ltd valuation.
By order made 10 May 2022, leave was given to the solicitors for the parties to forward a copy of the transcript of the proceedings, for the period 27 April 2022 to 29 April 2022 comprising 361 pages of transcript, to the single expert.
The purpose of forwarding the transcript, was to enable the single expert to consider any issues that might arise from the husband’s evidence, given that the final single expert report was dated 23 December 2021. A separate aspect for the consideration of the single expert, was to assist the Court in determining whether the proceedings should be adjourned pursuant to s 79(5) of the Act, in order to assess the potential future sales of P1 Service and the impact upon the P Pty Ltd valuation.
The wife has paid the single expert fees arising from a consideration of the questions asked and a review of the transcript, of $15,400. The wife seeks reimbursement from the husband for one-half of the fees charged by the single expert in the sum of $7,700.
The husband opposes the wife’s application seeking that he contribute to the costs of the single expert.
I am not assisted in the breakdown of the costs charged by the single expert in terms of the time taken to answer the wife’s questions and the subsequent review of the transcript.
The questions put by the wife to the single expert were not promoted by the husband. The questions could have been requested of the single expert soon after he published his valuation report. The questions arose because the wife was unsuccessful in her application for leave to rely upon the evidence of the wife’s shadow expert. I do not consider that the husband should bear any responsibility for the costs incurred by the wife, save as to the time spent by the single expert in reviewing the transcript.
I consider that the evidence of the single expert was enhanced by his consideration of the husband’s evidence in the transcript, given the time that had elapsed since the publication of the valuation report.
In the absence of a breakdown of the cost of the single expert, I propose to order that the parties each pay one half of the costs as claimed by the single expert for his review of the transcript as he may advise, with the wife to pay the balance.
The Mr M Reports
The husband values his business interests at $2,930,764. That figure derives from the value of the P Pty Ltd Group as assessed by the single expert as at 30 June 2021.
By reference to the executive summary in the final Mr M Report dated 23 December 2021 (“the final report”), the single expert acknowledges that his report was as a result of a joint letter of instruction dated 13 September 2021. The single expert had prepared an earlier report dated 18 February 2021 (“the initial report”).
The single expert acknowledges his awareness of the obligations required of a single expert to the Rules.
Under the heading of “Summary of Changes from Initial Report” the following information is provided:-
10. Based on information provided during the course of this updated engagement, the following material changes have occurred since 30 June 2020:
a [MM Pty Ltd] has been deregistered [in mid-2020];
b Deed of Surrender for the rental agreement was made [in early 2021] for [OO Street, Suburb NN] with the surrender date being [early 2021];
cAn updated estimate of the husband’s working hours to be approximately 50 hours a week. This has increased due to previous redundancies and time spent on additional non-core activities such as administration and loan applications; and
d The research and development costs associated with [P1 Service] indicate that it is no longer in the core development phase of the product life cycle. However, the financial information relating to [P1 Service] would indicate that there has been no significant market acceptance of the product.
(Emphasis added)
Further information was received by the single expert and it is relevant that a conference was convened between the single expert and the wife’s shadow expert, together with the external accountant for P Pty Ltd. As a result of the further additional information received, the following material changes were considered by the single expert and reflected in the final Report at [13]:-
eI have recalculated the research & development expenditure adjustment based on the submission from [Z Company] on behalf of the Husband, which indicated that the Draft Report did not make an adequate allowance for the capitalised development costs incurred by [P Pty Ltd];
aAn adjustment has been made to the adjustments for unsustainable improved Gross Margin and Other Cost Savings on the basis that my initial estimate overstated the normalised levels of gross margin and costs incurred by the [P Pty Ltd Business].
In doing so. I have also reconsidered the appropriateness of the unsustainable costs savings and determined that the majority of the costs savings will be maintained having regard to the current revenue levels of the Business, and thus the revenue levels adopted when ascertaining the future maintainable earnings of the Business;
bAn adjustment has been made to the assumed long-term rental obligation of the Business having regard to the short-term rental expense required and the uncertainty regarding the long-term rental structure of the Business; and
c An adjustment has been made to the capitalisation multiple to reflect the significant reduction in the debt structure of the Business since 30 June 2020.
As set out in paragraph 20 of the final report, the single expert set out the assessed value of the Macvean & Manton Group as at 30 June 2021, as follows:-
Equity Value Parties interests Value of Parties Interest P4 Pty Ltd atf the T Trust $1,486,932 100% $1,486,932 P2 Pty Ltd $2,930,764 49.26% $1,443,832 Value of Parties’ interest in the Macvean & Manton Group $2,930,764
At [21] and [23] of the final Report, the single expert also considered that there were net related party loans of $31,457 which if added back, would increase the net interest of the parties in P Pty Ltd to $2,962,221.
The wife seeks to bring to account the net related party loans. The proposed treatment by the wife is opposed by the husband. Whilst there are other considerations that need to be determined before a valuation of the parties’ interest in P Pty Ltd is quantified, I do not consider that adding back the sum of $31,457, as claimed by the wife, is the correct approach. If the higher value as determined by the single expert is preferred, then this would have the consequence of creating a liability of $31,457 rather than it being treated as an asset.
In Foda & Foda (1997) FLC 92-753 the Court considered that if a company or business is the alter ego of a party, then a loan account pertaining to a party or parties may not need to be taken into account. I do not propose to do so in this case and I will exclude the related party loan from the joint table of assets.
The Shadow Report
The wife values P Pty Ltd at $4,545,865. This figure is determined by the wife relying upon advice from the wife’s shadow expert, wherein he assessed the value of P Pty Ltd at $1.615 million above that of the single expert. As previously discussed, the significant component of the purported increase arises from an increase in the value attributed to the research and development spend in respect of P1 Service and the Q Pty Ltd business runoff.[2]
[2] Report of Mr N attached to his Affidavit 21 April 2022, page 4
Leave was not given for the wife to rely upon the evidence of the wife’s shadow expert, but the wife was given leave to put questions to the single expert pursuant to r 7.26 of the Rules.
Following leave being given, on 13 May 2022, the single expert received a letter of instruction from the wife’s lawyers seeking answers to questions in respect of the final report. The most germane question is as follows:-[3]
7. At paragraph 10 of your report you state that “the financial information relating to [P1 Service] would indicate there has been no significant market acceptance of the product”, and at paragraphs 46-62 of your report you refer to a letter received from Johnston Family Law dated 28 October 2021 in relation to the business environment and market uptake of [P1 Service].
How would the documents enclosed at items 4-12 above, disclosed since your report was finalised, impact upon your valuation of the business as at 30 June 2021 and how would they affect the current value of the business, noting that several of these documents were generated post 30 June 2021? In responding to this question, we ask that you address the following matters, in addition to any other matters that may be relevant:
a. How does the additional information impact upon the EBITDA/revenue multiple that should be applied to the business?
b. In your report you assessed [P1 Service] as a revenue-generating component of the broader operating business, and no value was separately attributed to [P1 Service] research and development costs, given the indication that there had been no market acceptance of the product.
In light of the communications between [P Pty Ltd] and [PP Corporation] and draft reseller agreements which reference year 1 sales of US$1 million in [Country QQ] and US$1 million in [YY Region], together with communications between the Husband/[P Pty Ltd] and [RR Consultancy], is it reasonable to consider [P1 Service] as still in the start-up/pre-revenue phase, and to accordingly capitalise the value of R&D costs? What impact would doing so have on the overall value of the business?
c. Assuming [P1 Service] R&D is treated in the above manner, what tax benefits would the business receive as a result (including under the Government R&D Tax Incentive as an ongoing benefit), and what is the impact on the overall value of the business?
[3] Mr M’s affidavit filed 7 June 2022, page 13-14.
The single expert notes a raft of provided documents numbered 4 to 12.
The wife’s contention is that whilst P1 Service may well be in its infancy, the husband has sufficient confidence in the integrity of the product that it is able to be the subject of various reseller agreements. A reseller agreement with a company known as SS Company has not been renewed and with PP Corporation, which at the time of trial an agreement had not been concluded, but it is a reasonable finding on the evidence that agreement would be reached.
Following receipt of the letter of instruction from the wife’s lawyers dated 13 May 2022, the single expert provided his responses to the letter of instruction on 2 June 2022 (“response to questions”). A copy of the letter of instruction and the response to questions are annexed to the single expert’s affidavit filed 7 June 2022.
The single expert adopted the evidence of the husband that there would need to be significant additional investment, totalling some millions of dollars, in order to promote and develop P1 Service.
At [81] of the response to questions, the financial performance of P1 Service since 1 July 2021, was assessed by the single expert as generating greater sales than in the financial year ending 30 June 2021, but still at very modest levels.
An important consideration is the impact on the valuation of P Pty Ltd as at 30 June 2021, if the P1 Service product was included as a separate asset. At [84] of the response to questions, the single expert considered that if the P1 Service product was included as a separate asset, the value of P Pty Ltd would increase by approximately $564,000.
However, at [85a] of the response to questions, the single expert also considered that by excluding P1 Service as a separate asset, there would be a corresponding reduction in the underlying value of the P Pty Ltd business by $32,477. The single expert considers at [88] of the response to questions, that approach would result in a reduction in the Enterprise Value of $135,000 by reference to the adopted Future Maintainable Earning multiple of 4.5 times.
At [95] of the response to questions, the single expert then considered the impact of research and development costs and allowance for obsolescence and he ultimately arrived at the conclusion that there should be an increase in the value of P Pty Ltd of $225,670.
should the proceedings be adjourned?
The wife seeks an order pursuant to s 79(5) of the Act that the proceedings be adjourned to a date to be fixed but no earlier than 1 September 2024. The application is predicated upon a view by the wife, that if the P1 Service product gains significant market penetration, as is hoped by the husband, then the value of P1 Service and the consequential increase in the value of the P Pty Ltd business, would exponentially increase.
It is not controversial that the husband has invested a significant sum (at least in part utilising property of the parties) in the research and development of the P1 Service product. It is unsurprising that the husband has a strong belief in the utility and efficacy of the product and his evidence portrays him as focussed and determined to do all that he can to promote the distribution and sale of the product.
Simply put, if there is a significant increase in revenue as a result of the successful marketing distribution and sale of P1 Service, the single expert concedes this would have a positive impact upon the value of the P Pty Ltd business.
The application to adjourn proceedings pursuant to s 79(5) of the Act may at first consideration be attractive. It is difficult to foretell the future, particularly in the volatile climate of software development marketing and sale. Whilst to date there has been a loose partnership arrangement between P Pty Ltd and R Company for the marketing and distribution of P1 Service, the husband’s evidence is that R Company are constantly reviewing and developing their own email and web security software products.
At trial, the evidence was that a reseller agreement with SS Company had been terminated and whilst negotiations were underway with PP Corporation, a reseller agreement has not yet been concluded.
The value is not to be considered by reference to the “signing off” on a reseller’s agreement but rather the subsequent performance in terms of marketing and sale of the product.
It must also be considered that if an adjournment of the proceedings was granted, then there would need to be a reconsideration of all of the assets and liabilities of the parties at that time. A further important consideration is that at present, the parties have incurred a total of about $3,000,000 in legal costs and disbursements. Whilst I do not ignore the significant component of legal costs and disbursements that can be attributed to the contested parenting proceedings, the potential for future costs incurred could well overwhelm the proceedings and diminish the assets available for distribution between the parties.
Section 79(5) of the Act is in the following terms:-
Without limiting the power of any court to grant an adjournment in proceedings under this Act, where, in property settlement proceedings, a court is of the opinion:
(a) that there is likely to be a significant change in the financial circumstances of the parties to the marriage or either of them and that, having regard to the time when that change is likely to take place, it is reasonable to adjourn the proceedings; and
(b) that an order that the court could make with respect to:
(i) the property of the parties to the marriage or either of them; or
(ii) the vested bankruptcy property in relation to a bankrupt party to the marriage;
if that significant change in financial circumstances occurs is more likely to do justice as between the parties to the marriage than an order that the court could make immediately with respect to:
(iii) the property of the parties to the marriage or either of them; or
(iv)the vested bankruptcy property in relation to a bankrupt party to the marriage;
the court may, if so requested by either party to the marriage or the relevant bankruptcy trustee (if any), adjourn the proceedings until such time, before the expiration of a period specified by the court, as that party to the marriage or the relevant bankruptcy trustee, as the case may be, applies for the proceedings to be determined, but nothing in this subsection requires the court to adjourn any proceedings in any particular circumstances.
Section 79(6) of the Act reinforces the position that the provisions of s 79(5)of the Act does not limit the general powers of the Court to grant an adjournment and provides that the Court can make such interim order, or orders as it considers appropriate, with respect to the property of the parties or either of them.
Section 79 of the Act does not limit the circumstances that a court may consider likely to represent a significant change.
In Grace v Grace (1998) FLC 92-792 the Full Court considered the history and purpose of s 79(5) of the Act, as a power that may be required to overcome a problem arising from superannuation entitlements and also future vested interests pursuant to family trusts.
At 84,888 the Full Court considered that whilst the circumstance which may justify the exercise of discretion to adjourn proceedings is not limited or curtailed, nonetheless:-
Seen in this context, it is apparent that the exercise of the discretion to adjourn pursuant to s 79(5) has very serious consequences for the actual subject matter of the dispute and does not just relate to the conduct of the hearing. It is therefore a different type of “adjournment” to that which is often the subject of discussion in those authorities that suggest that appellate courts should be reluctant to interfere with the exercise of discretion by a trial judge as to whether to grant an adjournment or otherwise.
Their Honours considered that certain preconditions would assist in determining when to exercise the discretion at 84,888-9 as follows:-
•that there is likely to be a change in financial circumstances;
•that the likely change is a significant one;
that having regard to the likely and significant change, it is reasonable to adjourn the proceedings; and
•that an order made if that significant change occurs is more likely to do justice as between the parties than an immediate order.
In Pratt & Pratt [2012] 47 Fam LR 234, the Court considered that a hope of a significant change in value of a rural property was not sufficient for the discretion to adjourn to be exercised.
Section 79(5) of the Act requires a consideration that the change in the financial circumstances of the parties be both significant and likely. If so, then a further consideration is necessary as to whether it is reasonable to adjourn the proceedings and that an adjournment is likely to do justice between the parties.
The husband concedes that he hopes the P1 Service product will gain significant market penetration. The single expert concedes that given the valuation methodology adopted by him to value the P Pty Ltd business is underpinned by a consideration of Future Maintainable Earnings, which is an approach informed by the history of financial performance of the entity to be valued, if P1 Service produces a higher level of revenue for P Pty Ltd, then it is likely to be reflected in a higher value.
The wife seeks that the proceedings be adjourned to a date not before 1 September 2024. There is no evidence to support the selection of that date, nor is there any evidence as to what event will occur by that time which would give the adjourned date a focus.
It is not certain that the P1 Service product will launch in the way that would be necessary to add value to the P Pty Ltd business. P Pty Ltd is engaged in hopeful negotiations with PP Corporation leading to a concluded reseller’s agreement but that is only a first step and does not guarantee that the marketing and sale of the product will be successful.
It is also problematic that there is likely to be significant further investment required if there is any chance of P1 Service reaching its full potential.
There is no evidence as to the market place, in particular, in circumstances where it is understood that whilst R Company is kindly disposed to P1 Service, they are nonetheless developing their technology.
The difficulty is the lack of evidence that would support a finding of a likely significant change in financial circumstances in support of an adjournment of the proceedings pursuant to s 79(5) of the Act. That is not to say that it is impossible, or will not occur, but the evidence falls short of being able to find that a beneficial outcome is likely to eventuate if the proceedings are adjourned.
There is no evidence as to the potential value to be added to P Pty Ltd depending upon possible future sales. Further, the costs likely to be incurred by the parties if these proceedings were adjourned, is a relevant consideration taking into account the history of the matter and the concession of the parties, that the costs to date are outrageous.
Accordingly, I do not consider that the evidence presented would enable the discretion to be exercised and the proceedings adjourned as sought by the wife.
With respect to the value of the P Pty Ltd business, I propose to adopt the value of the single expert of $2,930,764 but with the further amount of $225,677 to be added consequent upon the evidence of the single expert arising from his answers to questions asked. The value of the P Pty Ltd business is to be included in the joint table of assets in the total sum of $3,156,441.
costs of the parties
The wife’s costs
The notices as to the parties’ costs comprise “Exhibit 19”.
As at 5 June 2022, the wife’s total costs paid to date including fees, disbursements and costs to her previous solicitors, are estimated at $1,676,061.06, which comprises of the following costs:
Description Cost (inclusive of GST) Solicitors fees $891,808.29 Billed disbursements $532,462.26 Third party expert costs paid directly by you $70,188.75 Costs paid to L Lawyers $181,601.76 Total costs paid to date $1,676,061.06 Unbilled Work in Progress $9,953.35 Future anticipated costs $42,328 Total estimate of costs (including costs paid and estimated future costs) $1,728,342.41
In addition, the wife’s total estimated future costs are an additional $52,281.35, as outlined above.
The source of funds for the payment of the wife’s current solicitors legal costs, are as follows:-
(1)From the proceeds of the sale of the property at TT Street, Melbourne in the sum of $157,085.
(2)From the proceeds of sale of the wife’s share portfolio with WW Company in the sum of $110,269.
The balance of $1,156,916.55 has been paid from funds held by the wife, comprising of the following:-
(a)The wife’s income in the sum of approximately $276,480;
(b)The wife’s NAB Offset account in the sum of $221,336.88; and
(c)Various other accounts of the wife in the sum of approximately $659,099.67.
In relation to the legal costs paid to the wife’s former solicitors, the source of funds is from the wife’s income and personal savings.
As at 5 June 2022, there remained $55,787.05 in the wife’s solicitor’s trust account.
The husband’s costs
As at 6 June 2022, the total actual legal costs incurred to date (paid and unpaid) are estimated at $1,218,815, which comprises of the following costs:-
(1)Amount paid to AB Lawyers for costs and disbursements up to October 2021 in the sum of $759,699.
(2)Costs paid to the husband’s current solicitors in the sum of $22,698.50.
(3)Disbursements paid since the husband’s current solicitors acquired the file, inclusive of counsel fees and valuation expert fees in the sum of approximately $278,258.80.
(4)Outstanding costs billed by the husband’s current solicitors and outstanding in the sum of $158,159.50.
In addition, the husband’s anticipated legal costs and disbursements are an additional $32,000, totalling the actual and anticipated cost of proceedings to a total sum of $1,250,815.
The husband has paid a total cost of $1,060,655.50. The source of the funds for the payment of the husband’s legal fees is comprised as follows:-
(1)A partial property settlement in the sum of $150,000.
(2)Borrowings for the purpose of litigation (CBA & UU Finance) in the sum of $496,392.
(3)The balance of $414,263 was sourced from the husband’s post-separation earnings including O Insurance injury payment.
As at 6 June 2022, there remained $30,151.50 in the husband’s solicitors’ trust account or with counsel.
The treatment of legal fees paid by the parties is a significant issue for determination.
The total estimate of costs for both parties is approximately $3,000,000. It is an odious observation that the proceeding have been overwhelmed by the extraordinary quantum of legal fees incurred.
It is not immediately apparent as to the extent to which the parties have been advantaged by the extent of costs incurred by each of them, other than to further fuel the mistrust and the potential for ongoing conflict and dispute.
Wife’s bank accounts
The parties are not in agreement as to the value to be attributed to the wife’s savings. There is scant evidence to assist in determining the extent of the wife’s savings however, in the circumstances, I propose to accept the wife’s evidence that she has savings of $8,076.
WW COMPANY share portfolio
As at the date of trial, the wife conceded that her WW Company Share Portfolio held a value of $137,850. Following the reservation of judgment, the parties discovered that the joint table of assets as presented to me on 9 June 2022, did not include the wife’s share portfolio. By letter dated 12 July 2022, a revised joint table of assets was provided upon the joint application of the parties. The disputed items were identified and it appears that value of the wife’s WW Company shares decreased from the figure as set out in the wife’s Amended Financial Statement filed 22 April 2022 (“Amended Financial Statement”), to the reduced figure of $115,181. I consider that the proper course is to use evidence available to the Court as at the date of hearing to determine the value in the absence of any application to reopen the proceedings.
I propose to bring to account the wife’s share portfolio to $137,850.
wife’s share portfolio
Similarly, the balance of the wife’s share portfolio, as set out in her Amended Financial Statement, totals $7,954. I propose to adopt that figure, notwithstanding that the wife now asserts a lesser figure as set out in the joint table of assets of $5,031. I do not have any evidence, which would enable me to determine that in the absence of agreement, the wife’s share portfolio should be other than as presented at trial.
DD Fund
The husband adopts the value of the wife’s interest in the DD Fund as set out in her Amended Financial Statement. There is no evidence to support the wife’s current position that the value of her interest has reduced to $25,256. Accordingly, I propose to bring to account the wife’s interest in DD Fund at $29,357.
EE CREDIT
The husband contends that prior to separation, the wife purchased a business class air ticket to attend a conference in City VV at a cost of $6,264.64. The purchase price was paid via the husband’s credit card. Covid-19 border restrictions caused the flight to be cancelled and the husband did not receive a refund against the credit card liability but rather believes that the wife elected to receive a credit available for future travel with EE Airline.
The issue was not subject of evidence and the only assistance is from the wife’s explanation at paragraph 400(c) in her Trial Affidavit.
The wife’s evidence is that she does not have access to the husband’s credit card and has not been contacted by EE Airline to confirm that there is a ticket or flight credit available to her.
In any event, the purpose of the travel was to enhance the wife’s medical education.
In the absence of evidence that assists in determining whether a flight credit is still available to the wife, given that the flight was cancelled in early 2020, it does not enable me to find on the balance of probabilities that a flight credit remains available and if so, in what amount and subject to what terms and conditions. I do not propose to bring to account the EE Airline credit.
CBA account …08
The various iterations of the joint table of assets, brings to account a balance in the husband’s CBA account ending …08 (“the husband’s CBA Account”) of $30,548 as per the husband but $116,035 as per the wife.
It is conceded that there is little or no evidence that would assist in determining the issue, although the wife’s counsel conceded in final submissions that there had been belated discovery, which confirmed that at the date of the commencement of trial the sum of $30,548 was a true reflection of the state of the husband’s CBA account.
It appears that shortly prior to the commencement of the trial, the husband’s CBA account did have $116,035 however, he withdrew $85,000.
It is therefore conceded that at the commencement of trial, the amount standing to the credit of the husband’s CBA account was $30,548. For the Court to adopt the wife’s position, it would require an addback to be considered. It may be that the withdrawal by the husband was for good and proper purpose or for reckless and wanton behaviour. There is no evidence that would enable me to decide the matter and as such, I do not consider that it falls into the category of notional property that should be treated as an addback. See the decision of Kowaliw & Kowaliw (1981) FLC 91-092. Accordingly, I propose to bring to account the husband’s interest in the husband’s CBA Account …08 at $30,548.
MOTOR VEHICLE 2
The husband is the owner of a Motor Vehicle 2 with an agreed value of $12,000. The contention between the parties is that the motor vehicle is currently in the possession of the husband’s mother. The husband’s evidence in support of his contention that he has appropriately divested himself of the vehicle in favour of his mother was unimpressive.
The husband was forewarned that the wife considered Motor Vehicle 2 property of the parties irrespective of where it might currently be located.
There was an opportunity for the husband to call his mother and obtain evidence that may have assisted the Court in better understanding the husband’s relationship with her, the status of the motor vehicle in question, the basis upon which she provided $439,697 to the husband and the advance to purchase an engagement ring at a cost of $29,000 for Ms GG.
I do not draw an adverse inference against the husband in respect of a decision being made that his mother would not give evidence however, I am entitled to find that if called, the mother’s evidence may not have assisted the husband’s case.
I propose to bring to account Motor Vehicle 2 at $12,000.
crypto currency
The husband disclosed that he had invested in crypto-currency. The figure attributed to the husband’s account was $2,656. The husband’s evidence is that he no longer holds any crypto currency.
It is reasonable to find that an investment in crypto-currency is likely to be the subject of significant fluctuations in value.
There is no assertion that the decision to invest in crypto currency was wanton or reckless and therefore, it would have been foreseeable that such investment may well have a high level of risk. There is no assertion that the husband’s crypto-currency investment should be considered at a particular time. I do not bring the crypto-currency investment to account.
husband’s withdrawal from super fund
The husband withdrew $10,000 from his Superannuation Fund 1 in late 2020. It is not controversial that the husband was able to do so by making application pursuant to the relaxed withdrawal provisions that were put in place during the Covid-19 lockdown.
The wife may well be suspicious that the husband’s circumstances would not readily satisfy a test of hardship however, it is not suggested that the money withdrawn by the husband remains in his possession. The money has been spent and I do not consider that I have sufficient evidence to determine whether the withdrawn funds should be treated as an addback.
I do not propose to bring back the $10,000 withdrawn from the husband’s Superannuation Fund 1.
CBA BETTER business loan Account …13
The husband seeks to bring to account a liability of $141,770, which pertains to his CBA Better Business loan account …13 (“CBA business loan”). The wife’s opposition is based upon a consideration that the money was used for P Pty Ltd. At item 29 of the husband’s Financial Statement filed 24 April 2022, the husband lists a weekly payment of $2,083 relating to the CBA business loan. At paragraph 316 of the husband’s Trial Affidavit dated 22 November 2021, he attributes $50,000 of the CBA business loan, to the payment of his legal fees. By implication, the balance of the CBA business loan being the sum of $91,770 was used for miscellaneous P Pty Ltd expenses.
The husband’s evidence was unconvincing as to the basis that he considered the CBA business loan either in whole, or in part, should be brought to account as a liability of the parties.
The following exchange between the wife’s counsel and the husband is of assistance: [4]
[4] Transcript 28 April 2022, p.231 line 10.
[Counsel]:Yes. So you’ve sworn that you’ve got a liability to CBA Better Business Loan of $141,770?
[Husband]: Yes.
[Counsel]: Okay. That’s a business loan; is it not?
[Husband]: A business loan?
[Counsel]: Yes. It’s a loan for [P Pty Ltd]; - is it not?
[Husband]: Sorry. Say that again.
[Counsel]: It’s a loan for [P Pty Ltd] – is it not – for the business?
[Husband]: I’m – I’m not sure.
[Counsel]: Right. Because you say – there’s notes to that paragraph. It says:
The husband is a director and, as such, is indirectly liable for loans advanced to companies controlled by him which are currently 2,009,979 and which are 1,467,653 not included in the list of personal liabilities as calculated in paragraph 55.
[Counsel]: What does that mean?
[Husband]: Well I’m liable for all debt.
[Counsel]: But it’s predominantly a business debt?
[Husband]: I’m still liable for it.
[Counsel]: Well, yes, but [P Pty Ltd] will be paying for it; will they not?
[Husband]: [P Pty Ltd] pays for business loans, yes.
[Counsel]: Yes. Okay?
[Husband]: Yes.
[Counsel]: So you might – have you guaranteed these loans?
[Husband]: I would need to check the loans.
[Counsel]:Righto. Because, I mean, if you’ve guaranteed, you would agree with me that, ultimately, you might be liable if [P Pty Ltd] doesn’t pay the loan, but, right now, it’s [P Pty Ltd]’s business loan; they’re paying for it?
[Husband]: Yes.
The husband was unclear as to the components that comprise monies borrowed via the CBA business loan and CBA Better Business Loan. He considered that of the $141,770 outstanding on the CBA business loan $50,000 of that money was for litigation funding.
The evidence supports a finding that whilst there may be some transitional payment by the husband via his clearing account in respect of these loans to the CBA, they are business loans and not the personal obligation of the husband.
The repayments form expenditure in the books of account of P Pty Ltd and are treated as a deductable expense.
As such, I do not consider that the wife should bear any responsibility for the CBA business loans.
It is also a reasonable finding that the sum of $50,000, utilised by the husband to pay his legal fees from borrowed funds pursuant to the CBA business loan, has also been claimed as an item of business expense.
I do not propose to bring back the CBA business loan.
husband’s fy 2021 unpaid income tax
The husband has incurred a personal tax liability of $63,128 for the 2021 financial year. The husband has entered into a repayment plan with the Australian Taxation Office (“ATO”) such that he is required to repay the sum of $19,582 per month, or $4,538 per week, over the May to July 2022 period. The husband considers that he will complete his payment schedule with the ATO at the end of July 2021 and thereafter, his weekly taxation component will revert to $4,888 per week.
A point of contention between the parties is as to the status of money provided by the husband’s mother.
The lack of evidence presented as to the status of monies provided by the husband’s mother, does not enable me to find that there was a loan, or loans outstanding by the husband. However, given the concession that monies were provided, it is likely that they ought to be considered as a contribution made by, and on behalf of, the husband’s mother for his benefit.
For her part, the wife contends that she held property to the value of about $160,000.
It is a relevant consideration that the Suburb JJ property held by the wife at the commencement of cohabitation, was sold in early 2021 for $400,000. The net-proceeds, and the CGT payable from the sale of the property, has been affectively brought to account.
In Pearce & Pearce (1999) FLC 92-844 the Full Court emphasised that an original contribution should not be subject of a mathematical approach in attempting to carry forward the potential financial impact of a contribution, but rather, as was said at [28]:
In our opinion it is not so much a matter of erosion of contribution but a question of what weight is to be attached, in all the circumstances, to the initial contribution. It is necessary to weigh the initial contributions by a party with all other relevant contributions of both the husband and the wife. In considering the weight to be attached to the initial contribution, in this case of the husband, regard must be had to the use made by the parties of that contribution. In the present case that use was a substantial contribution to the purchase price of the former matrimonial home…
In 2014, the husband suffered an injury It is not contested that he received an initial settlement of $282,765, a subsequent total of lump sum payments in the sum of $503,942 and an ongoing disability payment of about $10,525 as and from September 2019. There was some evidence given by the husband as to the current status of the payments. As at the trial, the insurer did not consider that the husband qualified for further payments. The husband’s evidence was unsatisfactory on the topic in that he did not make it clear whether he intended to challenge the insurer’s decision to suspend or terminate the disability payments or whether he accepted that he no longer qualified for payments.
The evidence is unclear as to how the lump sum payments received in 2017 were utilised.
There is little doubt that the parties enjoyed a generous lifestyle and it is likely that at least some of the compensation money received was used to assist in the development of the P Pty Ltd business.
The parties contributed to the best of their ability to the advancement of the family, primarily by the wife’s contribution as a homemaker but also by each of the parties in terms of the acquisition and maintenance of property.
It is not controversial that during the course of the marriage, the parties kept separate bank accounts however when required, their separate savings were intermingled.
In 2014, the wife had saved $415,000, which was transferred from the mortgage offset account over the Suburb C property and thereafter used in part by the husband, to purchase the final remaining share in P Pty Ltd.
Various loans were secured by the husband over the property of the parties to explore and pursue various business opportunities but in particular, P Pty Ltd.
Following separation, the children remained in the primary care of the wife although the husband paid child support including periodic and non-periodic payments for the children. Whilst a party cannot bring to account an obligation to pay child support, or to make proper provision for a child or children as a contribution factor, I consider that the payments made by the husband were substantial and therefore they could be considered as a relevant factor in terms of the wife’s financial circumstance.
The evidence as to how money that came into the hands of the parties during the course of their relationship was utilised, is scant.
I bring to account the husband’s contributions by way of compensation payments and treat them not as a windfall, but rather as a contribution made for, and on behalf of, the husband.
There is a myriad of contributions made by each of the parties. I consider that the separate contributions of the parties should be reflected by an apportionment of 53.5 per cent to the husband and 46.5 per cent to the wife. Based on an asset pool of $6,141,103 the differential value of 7 per cent is reflected in $429,877. I find the adjustment for contribution to be just and equitable.
CHILD SUPPORT
The wife seeks, by way of Departure from the Administrative Assessment of Child Support, that the husband pay child support set at $52,000 per child, to be paid annually by the husband, with the first payment to be made within 28 days of these orders and the last payment for each child to be made during the year that each respective child turns 18 years of age or completes their secondary education (whichever is the later).
The periodic child support as sought by the wife, is subject to annual increase on the first day of 1 July 2023, and each year thereafter, in accordance with the published increase in the Consumer Price Index (“CPI”) for Melbourne.
In addition, the wife seeks that the husband pay non-periodic child support for all private school fees and other expenses and charges including school based extra-curricular activities.
The wife seeks that the husband make direct payment of non-periodic expenses to the children’s school and if the wife is required to make a payment, then upon the presentation of a receipt for expenses, the husband shall reimburse her for the sum which is to be paid into her nominated bank account.
The children currently attend V School. Both parties agree that the children should continue to be enrolled and attend at their school.
The issue of contention is the extent to which the husband should contribute towards the children’s school fees and extra-curricular school activities.
The husband proposes that he pay to the wife, periodic child support as assessed from time to time by the Child Support Agency. In addition, he proposes to pay to the wife, by way of direct payment to the school, half of all tuition and compulsory levies inclusive of the costs of all compulsory activities in which the children are engaged in a further sum of $500 per month by way of additional non-periodic child support. The additional payment is subject to CPI increase on the 1 July 2023 and thereafter annually.
Whilst not sought by the wife, the husband is also prepared to pay the costs of all appointments for the children to attend upon Mr D or any health care professional as may be recommended by him.
Both parties contend that it is appropriate for the Court to consider an application for departure pursuant to s 117 of the CSA Act, consequent upon the application of s 116 of the CSA Act which sets out as follows:-
(1) A liable parent or a carer entitled to child support may, in respect of an administrative assessment of child support for a child, apply to a court having jurisdiction under this Act for an order under this Division in relation to the child in the special circumstances of the case if:
(b) both of the following apply:
(i) the liable parent or carer entitled to child support is a party to an application pending in a court having jurisdiction under this Act;
(ii) the Court is satisfied that it would be in the interest of the liable parent and the carer entitled to child support for the court to consider whether an order should be made under this Division in relation to the child in the special circumstances of the case; or
…
I am satisfied that leave should be given pursuant to s 116(1)(b) of the CSA Act. The parties are engaged in complex proceedings for settlement of property, which require the Court to undertake a detailed exploration and consideration of their financial circumstances including, their assets and liabilities. It would be to the disadvantage of the parties, but in particular the children, if the Court was not able to deal comprehensively with the issues in dispute. It is a relevant consideration that both parties seek that the Court hear and determine child support issues.
Whilst the parties agree that there should be a departure from the administrative assessment, before an order should be made, the three step process as set out in Gyselman & Gyselman (1992) FLC 92-279 at 79,064, must be applied:-
1.Whether one or more grounds of departure in s 117(2) is established.
If so:
2.Whether it is “just and equitable” within the meaning of s 117(4) to make a particular order.
3.Whether it is “otherwise proper” within the meaning of s 117(5) to make a particular order.
Before an application for departure can be heard, there must be an administrative assessment in place.
Exhibit “3” comprises correspondence from the Child Support Agency dated 9 March 2022, advising of the husband’s income change from $699,415 to $781,688 for the 2020-2021 financial year.
Taking into account the husband’s income and that attributed to the wife for the same period is $164,631, the Child Support Assessment for the period 20 December 2021 to 2 March 2023 is set at the annual rate of $31,538 for both children.
In considering a departure from the Administrative Assessment, the first option is to determine the new Child Support Assessment by reference to the periodic and non-periodic payments. The second option is to reduce the non-periodic component to a periodic amount.
Neither party provided significant assistance in attempting to establish an annual cost of the total of the non-periodic payments as sought by each of them. For his part, the husband seeks that he contribute one-half of expenses associated with the children’s education and school related extra-curricular activities. The wife identifies a much expanded list of non-periodic expenses which are not easily quantified.
Some assistance is provided in the wife’s Trial Affidavit of 7 December 2021, at paragraph 339. For the purpose of the exercise, I accept that the V School fees schedule for 2022, for both children, total $49,040.
In addition to the tuition, infrastructure and consolidated charges for the children, there is a further cost of school uniforms, educational equipment and extra-curricular activities.
Exhibit “20” is the 2022 uniform and accessory price list. By considering the mid-range price for uniforms (both regular and sport) and accessories, the total sum is just under $1,000 per child. There is no evidence as to the value that should be attributed to the other categories as sought by the wife namely, school excursions, school camps and residential learning programs and any additional tutoring fees as may be recommended by the children’s teachers.
If not already indicated by the extraordinary level of fees and disbursements incurred by each of the parties, the distrust and open dislike by each of them towards the other, was palpable. It is in the interest of the parties, but also importantly the children, that the areas of dispute are minimised. Accordingly, there is merit in the order of departure from the administrative assessment to be reflected as a periodic payment rather than comprising non-periodic payment components.
Wife’s income and expenses
The wife’s average weekly income, as set out in Part D of the Amended Financial Statement filed 22 April 2022 (“Amended Financial Statement”), is $4,007 before tax. Her weekly income is principally comprised of her salary arising from her employment as a medical professional, in the sum of approximately $3,927 with a further $80 by way of dividends arising from her WW Company Share Portfolio. For the purposes of determining the appropriate level of child support, I bring to account the wife’s salary but not her modest share dividends. I do so on the basis that the further costs payable by the wife may well extinguish her share portfolio.
By reference to the average weekly expenses, as set out in Part N of the Amended Financial Statement, the wife considers that her total expenses are in the sum of $5,975 of which $4,023 represents the costs for the children.
The areas requiring some further consideration are the costs for the children as to the following:-
Children’s activities $164 Child minding $446 Medical, Dental and Optical (not including health insurance premiums) $702 Holiday’s $494 Gifts $68 Professional memberships $40 Clothing & shoes $174 Car parking and fares $32
I exercise my discretion and reduce the clothing and shoe allowance to $100 per week.
I exclude the children’s activities on the basis that there remains an item of expenditure being entertainment/hobbies at $150. The wife sets out the child minding requirements of the children, which comprise a carer for two hours on Wednesday and Thursday mornings and two hours on Wednesday and Thursday afternoons, being a total of eight hours at the rate of $35 per hour, being $280 per week. In addition, the wife seeks to bring to account school holiday programs totalling $8,640 or $166 per week. I propose to allow the cost of the children’s carer on Wednesdays and Thursdays, which enables the wife to attend her employment. I bring to account $280 per week as opposed to $446.
The average weekly expenses relating to medical, dental and optical expenses, is set in the sum of $702. This comprises dental expenses on average for the children of $17 per week, a psychologist for X at $230 per week and for Y at $230 per week, although he is not currently attending. There is also an expense of X attending a psychiatrist for fortnightly visits at $250. The wife also seeks an amount of $100 per session for art therapy for X. He does not currently attend art therapy sessions.
There was scant evidence presented in respect of the expenses however, I propose to allow the dental expenses for the children and the psychologist expenses for X only. I bring to account $247 instead of $702.
I also consider that there should be no component for car parking and fares, gifts and memberships nor am I satisfied as to the basis upon which the wife claims $494 per week, or $25,688 per annum, for the children’s holiday expenses.
The total expenses for the children is $2,530 per week or $130,560 per annum. That figure includes a significant component in respect of the educational expenses namely, $1,161 per week or $60,372 per annum of which $49,040 or $943 per week relates to the children’s tuition and compulsory charge school fees.
Husband’s income
By reference to the husband’s Financial Statement filed 24 April 2022, the husband sets out at Part D his total average weekly income at $12,738, or $662,376 per annum, which broadly equates to the Child Support income amount but is offset by personal expenditure of $24,304.
A significant personal expenditure is the husband’s income tax brought to account at $9,426 however, it is accepted that from August 2022, the income tax amount will reduce to $4,888. The husband’s total personal expenditure is therefore brought to account in the sum of $19,766. The husband’s expenditure exceeds his income by about $5,000 per week.
A significant component of the husband’s personal expenditure relate to loan repayments as set out in item 29 of his Financial Statement. The husband lists six loans that require repayment of which only one to four inclusive, totalling $7,299, are being repaid. The husband records director’s loan repayments in the sum of $2,571. This relates to the method by which the husband repays P Pty Ltd for the accumulated debt incurred by the husband’s use of his credit card comprising both personal and company expenses. The husband refers to credit card payments as the “[Mr Macvean] clearing account”.
It is more easily described as a debit loan account requiring the husband to repay the debit amount to P Pty Ltd to avoid a “deemed income” and a division 7A taxation liability being created.
The debit amount outstanding is offset against the credit account in favour of the husband, with a net related party loan of $195,036.
An important consideration is that the single expert brought to account the net related party loans of $31,457.
As discussed, there is some uncertainty as to the nature of the obligation to repay money provided by the husband’s mother. She was not called in circumstances where there was contention as to the status of money provided by the husband’s mother to her son.
I have determined that the CBA business loan and the CBA Business Loan (Litigation) have been brought to account as purported expenditure of P Pty Ltd.
Finally, the husband is yet to repay UU Finance Services by way of litigation funding and his solicitors.
The husband brings to account the anticipated child support assessment and acknowledges his anticipated payment of $1,500 per week for the children’s school fees and related expenses.
The husband has re-partnered with Ms GG and there is now a child of that relationship. Ms GG is employed with P Pty Ltd and receives about $2,000 per week. The financial arrangements between the husband and Ms GG was not adequately explained as to the extent to which Ms GG contributes to the household expenses.
The total of Part N expenses for the husband is $4,923 of which $2,335 relates to the children which includes the education expenses, fees and levies at $1,500 per week. The husband does not bring to account any educational costs of his child with Ms GG but contends that at some point school fees and educational expenses consistent to that which is being provided for the subject children, should also be extended to all three of the children.
When questioned, the husband acknowledged that he enjoys a reasonable standard of living that “costs him more than he … can afford, but he continues to adopt that lifestyle, with the assumption that somewhere he receives support to be able to make up the difference”.[5] It was apparent that the husband considered that he and Ms GG should enjoy a certain standard of living. That is exemplified by his concession that he and Ms GG spend a total of $800 on food each week. It is likely that a significant component of the expenditure on food relates to restaurant attendance.
[5] Transcript p 280, line 26
The husband conceded that he spends a significant amount on the purchase of alcohol, which is reflected in the credit card liability.
On 13 April 2022, the husband signed a conditional contract for the purchase of the two-bedroom apartment being 2 B Street, Suburb C, in which the husband, Ms GG and their son live.
The husband and Ms GG also seek to possibly purchase an adjoining unit, being 3 B Street. The purchase price of 2 B Street is $2,167,135. The husband intends to borrow 105 per cent of the purchase price in order to effect sale. The estimated repayments on the mortgage will be in excess of $9,100 per month or $4,000 per month if interest only. It is anticipated that in respect of 3 B Street there will be rental income of $1,000 per week.
The asking price for 3 B Street is $1.9 million. Presumably, the likely mortgage repayments will be not dissimilar to that which applies to apartment 2 B Street.
The husband agreed that if his plans pan out, then the anticipated repayments in respect of both 2 B Street and 3 B Street will be between $8,000 and $13,000 or $14,000 a month.
I am satisfied that the husband is genuine in his intent to purchase both properties and to turn them into a home for his family.
Even on the most cursory consideration of the husband’s financial statement, he could not afford a further $8,000 to $14,000 per month by way of expenditure against his income.
It is the case that in evidence, the husband conceded that his income for the 2021 financial year was $780,000 and that combined with Ms GG’s income of $100,000, it produced a total income for their household of $880,000.
The husband considers that he remains liable to his mother, the litigation financier, outstanding legal fees and a range of other liabilities for the payment by P Pty Ltd of the husband’s personal expenses.
The husband was challenged as to why he considered the purchase of the two properties was viable in circumstances where his current expenses significantly exceed his outcome. The husband’s response was unimpressive and either he is reckless with his financial arrangements, or he has a level of confidence that there are resources available to him to enable his expenses to be met and his liabilities covered.
It is difficult to place much reliance upon the husband’s Financial Statement. I place weight on his inclusion of the child support obligation and the payment of school fees and other expenses for the children.
I consider that the husband should pay a periodic payment that comprises the current child support assessment of $31,538, the childrens’ compulsory school fees of $49,040 and the further sum as proposed by the husband of $500 per month or $6,000 per annum. This equates to a total sum of $86,578 per annum, or $1665 per week or $7250 per month.
The annual amount will increase on 1 July 2023, and thereafter annually in accordance with the Melbourne CPI.
The husband proposes that the child support be paid monthly into the wife’s nominated bank account.
section 75(2) factors
The Court is obliged to consider the factors as set out in s 75(2) of the Act. It is to be remembered that the exercise is not one of social engineering. The purpose is not to equalise the circumstance of the parties going forward but rather to determine an appropriate adjustment taking into account the s 75(2) factors in order to reach an outcome that is just and equitable.
The husband owns and operates P Pty Ltd which should be considered as his alter ego. The wife is currently employed as a medical professional on a part-time basis comprising 20 hours per week. There is no evidence that suggests at some future time she would be unable to work longer hours. At present, the wife considers that the current level of work undertaken by her is consistent with her obligations to parent and supervise the children aged 8 and 6.
Both parties are in reasonable health and but for each of them experiencing adverse psychological consequences arising from the ongoing litigation, there are no relevant health issues which would impact upon the parties. The husband did not present current evidence of any ongoing impact of his ammonia poisoning. He would not indicate his intention to pursue a resumption of compensation payments.
The husband’s income has been the subject of considerable focus. It is difficult to determine with accuracy the husband’s income given that it is derived from P Pty Ltd and brings to account a range of work related benefits. It is a reasonable contention that the husband’s income is substantial and is at least $662,000 per annum and possibly as high as $781,000 per annum.
The income of a party is always a significant s 75(2) factor. In Waters & Jurek (1995) FLC 92-635, the Full Court considered the weight to be attached to a disparity in the separate income earning capacity of the parties. The Full Court said at 82,388:-
There are many case, in which there has been a disparity in the property and financial resources of one of the parties which has been reflected in an adjustment being made under s 75(2) for that reason. Indeed, one of the arguments raised in Collins and Collins (supra) was that for there to be any adjustment under s 75(2) a financial need for such on the part of the other party must be shown. The Court rejected such a notion in the passage to which I have referred and came to the conclusion that the trial Judge was entitled to take account of any imbalance in property and resources.
An imbalance in the income of the earning capacity of the parties is a factor that should be considered.
I am cautious to ensure that the husband’s income derived from his interest in P Pty Ltd is not double counted given that a value has been attributed to the business entity.
In Cunningham & Cunningham (2005) FLC 93-212 the Full Court had to consider whether it was proper to bring to account a significant difference in the parties’ income position as a result of the manner of which assets were distributed. In short summary, the husband derived his income from the profit of the business that he retained. The wife received a significant settlement sum.
The approach of the Full Court was summarised in the following paragraph:-
25. While the trial Judge focused upon the income differential of the parties in determining an appropriate adjustment, his Honour seemingly overlooked the fact that for the husband to maintain the income differential represented by the business's profits he has to keep invested $160,000 from his half share of the assets invested in the business whilst the wife has available to her an equivalent sum to invest as she sees fit. It can be assumed that those monies will securely return her a sum which will diminish the gap between the parties' income and earning capacity either by way of income or capital growth. To the extent that the trial Judge has overlooked that factor in this case we feel it appropriate that we interfere in the outcome.
Their Honours did not conclude that a Judge would be prohibited from taking into account the relative income positions but rather the financial circumstances of the parties cannot be ignored.
In valuing the husband’s interest in P Pty Ltd, the single expert attributed an income benchmark for the husband at $500,000. As is obvious, the husband’s income is significantly more than that and there also remains the substantial uncertainty as to the true extent of the husband’s financial resources, given that he exudes a high level of confidence that what appears to be a precarious financial circumstance where expenditure greatly exceeds income, it is not as dire as it appears.
I am also cognisant of the significant income drawn by the husband over and above that brought to account by the single expert for the purposes of determining Future Maintainable Earnings.
The parties have reached agreement in respect of the future parenting arrangements for the children. I do not ignore that there remains considerable hostility and there is the spectre of the parenting orders being the subject of re-litigation. At present however, there is a final order, which provides for the wife to have primary care of the children. It is likely that the children will spend more time in the care of the father as time passes.
I have considered the extent to which the wife is currently employed as being a reasonable compromise between her capacity for employment and the extent to which the children would benefit from her greater presence.
It is a feature of the proceedings that both parties consider the children may well require ongoing therapeutic assistance and the orders proposed by the husband contemplate a continued involvement by Mr D in terms of the children’s ongoing emotional and psychological development and welfare.
I do not ignore that the husband has re-partnered with Ms GG and that there is a child of that relationship. Ms GG however retains substantial employment with P Pty Ltd and I bring to account that she is not necessarily entirely reliant upon the financial support of the husband.
The parties acknowledge, by their conduct, that they consider they should maintain as best as they are able to do so, a significant standard of living that is commiserate with that enjoyed by them whilst they were together. The wife’s circumstances and level of expenditure is more moderate than that of the husband who enjoys fine food, wine and entertainment.
At the commencement of the proceedings, the wife abandoned her application for spousal maintenance and the focus is upon the extent of child support payable under the CSA Act.
Whilst I have not found favour in the somewhat heroic departure order sought by the wife, the orders that I propose to make nonetheless represent a substantial proportion of the husband’s before tax income.
The husband will pay the equivalent of the current Child Support Assessment together with the children’s school fees and other related expenses as a periodic amount subject to CPI indexation. The matters considered and acknowledging that a percentage adjustment must be considered on the basis of its dollar worth rather than the application of a percentage based principle, there should be an adjustment in favour of the wife of 10 per cent.
conclusion
The net pool (inclusive of liabilities and addbacks) is $6,141,103. At 56.5 per cent the wife is entitled to receive $3,469,723. The wife is to retain the following:-
ASSETS AMOUNT B Street, Suburb C $1,075,000 NAB Offset account …88 $578,891 Liquid Funds – all accounts (inclusive of CBA credit card …94) $8,076 WW Company Shares $137,850 Share Portfolio $7,954 DD Fund $29,357 Engagement ring $18,000 Legal Fees $1,147,790 Trust Account fund $55,787 TOTAL ASSETS $3,058,705 LIABILITIES AMOUNT Mortgage on B Street $799,326 CGT payable on shares $16,469 CGT payable on sale of Suburb JJ $37,853 TOTAL LIABILITIES $853,648 TOTAL NET ASSETS $2,205,057
The wife is entitled to the sum of $3,469,723 and accordingly she is to receive a settlement sum of $1,264,666.
In the amended draft minute of order, the wife sought a settlement of $1,908,160. Presumably, the wife accepted, albeit with some reluctance, that the husband may struggle to find the proposed settlement sum readily and therefore, was prepared to accept a payment of the settlement sum by instalments.
I propose to enable the settlement sum that is payable to the wife to be repaid by three separate instalments.
superannuation
Taking into account the ages of the parties, it is unlikely that they will satisfy a condition of release for a significant period.
I have not been provided with a copy of the superannuation trust deed but I am satisfied that each of the parties hold an interest in an accumulation type fund and that the agreed superannuation entitlements of each of the parties is sufficient for me to be satisfied that the parties separate superannuation interests have been properly considered and identified.
The total superannuation of the parties is $887,729. The wife holds $291,584. She seeks there be a base amount of $152,280 allocated to her pursuant to s 90XT(4) of the Act from the husband’s interest in Superannuation Fund 1 (“the fund”). Such an outcome would represent 50 per cent of the total superannuation of the parties.
The husband concedes that there should be a base amount allocated to the wife, but limited to $87,500. This would represent 42.7 per cent of the superannuation interest of the parties.
There is scant evidence as to the method and manner by which the separate superannuation interests of the parties accumulated.
I note that at the commencement of cohabitation the husband held a superannuation entitlement of $78,955.
I assume that but for the $10,000 sum that was withdrawn by the husband, his initial contribution is significantly reflected in the current superannuation balance.
The wife held a modest superannuation entitlement at the commencement of cohabitation of about $12,000.
I bring to account the contributions of the parties to their separate superannuation funds. Predominantly, the wife’s superannuation has accrued as a result of a superannuation contribution arising from her employment as a medical practitioner. Her ability to generate income and undertake employment was subservient to her commitment to the care of the children. The husband’s interest in P Pty Ltd enabled him to generate a significantly higher income stream and also the greater contribution to his superannuation. The husband’s interest in P Pty Ltd is property of the parties to which each of the parties have made a financial and non-financial contribution.
In circumstances where the wife seeks an adjustment of superannuation that would result in her receiving 50 per cent of the superannuation entitlements of the parties, I consider that such an outcome would be just and equitable and I propose to make the order as sought by the wife.
I make orders as appear at the commencement of these reasons.
I certify that the preceding three hundred and sixteen (316) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Berman. Associate:
Dated: 14 September 2022
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