Magnus & Sandri (No 4)

Case [2024] FedCFamC1F 499

FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA

(DIVISION 1)

Magnus & Sandri (No 4) [2024] FedCFamC1F 499

File number: SYC 3830 of 2019
Judgment of: HARPER J
Date of judgment: 24 July 2024
Catchwords: FAMILY LAW – PROPERTY – Where parties previously agreed that the matrimonial assets should be divided 53.5 per cent in the wife’s favour – Where the wife sought add backs in the amount of $17,765,446 – Where the husband rejected the inclusion of any add backs save for paid legal fees and the wife’s share of paid single expert fees – Where the primary dispute related to the decrease in value of a sizeable share portfolio – Where the share portfolio decreased significantly in value from the date of separation to the final hearing – Wife sought to have the decrease in the value included in the balance sheet as an add back – Where there were allegations of non-disclosure and frustration of the single expert’s ability to explain the decrease in value of the share portfolio – Court found that the expert was able to adequately explain the decrease in value and arguments as to wastage or premature dissipation of assets with respect to the share portfolio were not supported – Other largesse on the part of the husband, including wedding expenses, payments directed to his new wife and interest incurred on unpaid taxation liabilities added back – Where Court not bound by the percentage split as agreed by the parties – Court held it is necessary for there to be an additional 2.5 per cent adjustment in favour of the wife, pursuant to s 79(4)(e) of the Family Law Act 1975 (Cth) – Property division of 56 per cent in favour of the wife and 44 per cent to the husband.
Legislation: Family Law Act 1975 (Cth) Pt VIII, ss 79, 80, 81, 117
Cases cited:

Aitken & Aitken (2023) FLC 94-142; [2023] FedCFamC1A 69

AJO & GRO (2005) FLC 93-218; [2005] FamCA 195

Bevan & Bevan (2013) FLC 93-545; [2013] FamCAFC 116

Blatch v Archer (1774) 1 Cowp 63

C and C [1998] FamCA 143

Campbell v Kuskey (1998) FLC 92-795

Candle & Falkner (2021) FLC 94-069; [2021] FedCFamC1A 102

Dovgan & Dovgan [2021] FamCA 306

Gilmour & Hofte (No 2) [2024] FedCFamC1A 9

JEL and DDF (2001) FLC 93-075; [2000] FamCA 1353

M and M [1998] FamCA 42

Magnus & Sandri (No 3) [2024] FedCFamC1F 449

NHC and RCH (2004) FLC 93-204; [2004] FamCA 633

Norbis v Norbis (1986) 161 CLR 513; [1986] HCA 17

Rodgers & Rodgers (No 2) (2016) FLC 93-712; [2016] FamCAFC 104

Russell and Russell (1999) FLC 92-877; [1999] FamCA 1875

Stanford & Stanford (2012) 247 CLR 108; [2012] HCA 52

Strong v Woolworths Ltd (2012) 246 CLR 182; [2012] HCA 5

Trevi & Trevi (2018) FLC 93-858; [2018] FamCAFC 173

Vass v Vass (2015) 53 Fam LR 373; [2015] FamCAFC 51

Watson & Ling [2013] FLC 93-527; [2013] FamCA 57

Wei v Xia (No…

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AGLC
Magnus & Sandri (No 4) [2024] FedCFamC1F 499
Case
[2024] FedCFamC1F 499
Decision Date

CaseChat Overview and Summary

In the Federal Circuit and Family Court of Australia, the case of Magnus & Sandri (No 4) involved property division proceedings between Ms Magnus and Mr Sandri following their separation and divorce. The primary dispute centred around the valuation and distribution of their assets, particularly a significant share portfolio that had decreased in value substantially between the date of separation and the final hearing. The wife sought to include this decrease as an add back in the balance sheet, while the husband argued against it, claiming non-disclosure and interference with the expert’s analysis. The court found that the expert adequately explained the decrease and dismissed arguments regarding wastage or premature dissipation of assets. Other add backs, such as wedding expenses, payments to the husband's new wife, and interest on unpaid tax liabilities, were included. The court decided to adjust the agreed percentage division, finding an additional 2.5 per cent adjustment in favour of the wife, resulting in a property division of 56 per cent to the wife and 44 per cent to the husband.

The legal issues before the court included the interpretation and application of sections 75(2) and 79(4) of the Family Law Act 1975 (Cth), which guide the court in making orders for the adjustment of property interests. The court had to determine the appropriate, just, and equitable adjustment of the parties' property interests, considering the agreed percentage division and the evidence presented. The court reasoned that while the agreed percentage division could be a starting point, it was not binding. The ultimate goal was to ensure the order was just and equitable, focusing on the real impact in monetary terms. The court found that the wife's percentage should be adjusted beyond the agreed percentages, taking into account the add backs and other factors.

The court's reasoning was grounded in established case law, which emphasizes that the application of percentages does not necessarily result in a just and equitable outcome. The court highlighted that the ultimate order must be just and equitable, not the underlying assessment of contributions. The court was not bound by the parties' agreement on the percentage division and had the discretion to make orders it considered appropriate. After considering all factors, the court ordered an adjustment in favour of the wife, resulting in a final property division of 56 per cent to the wife and 44 per cent to the husband. The court also made specific orders regarding the discharge of loans, sale of property, and distribution of assets, ensuring the orders were just and equitable and avoided further proceedings.

Orders

Orders of the court

SYC 3830 of 2019

FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)

BETWEEN:

MS MAGNUS

Applicant

AND:

MR SANDRI

Respondent

ORDER MADE BY:

HARPER J

DATE OF ORDER:

24 JULY 2024

THE COURT ORDERS THAT:

1. Within 60 days of the date of these orders, the Applicant Wife (“wife”):

(a) pay all monies, do all things and sign all documents necessary to discharge the following loans held in the name of the Respondent Husband (“husband”):

(i) E Bank Loan BSB … account number …00;

(ii) E Bank Loan BSB … account number …00; and

(iii) E Bank Loan BSB … account number …01;

(“the E Bank Loans”)

secured by mortgage to Westpac Banking Corporation being registered as dealing number … (“Westpac mortgage”) registered on the title of the former matrimonial home situated at and known as F Street, Suburb C being the whole of the property contained in Certificate of Title Folio Identifier … (“the Suburb C property”); and

(b) pay to the husband the amount of $1,433,560 less any amount owing and unpaid by the husband:

(i) pursuant to Order 3(a); and

(ii) pursuant to the orders of 8 October 20219, 4 September 2020 and 4 April 2024, as referred to in Notation E made on 4 April 2024.

2. Upon compliance with Order 1 the wife is to indemnify the husband against all or any liability in relation to the property from the date of discharge of the E Bank loans.

3. Pending compliance with Order 1, or alternatively, in the event of non-compliance with Order 1, upon the settlement of the sale of the Suburb C property in accordance with Orders 5, 6 and 7:

(a) the husband shall be liable for meeting all minimum repayments due and owing on the E Bank loans, as and when the obligation to make those repayments arise, and shall indemnify the wife in respect of all such obligations;

(b) each party is restrained from drawing down or against the E Bank loans or from in any way increasing the indebtedness of either of the parties arising in respect of the E Bank loans and these orders shall constitute sufficient authority to the E Bank to restrict each parties’ access to the said accounts in the manner as contemplated by this order.

4. Subject to compliance with Order 1 above, the wife be declared to be the sole owner, to the exclusion of the husband, of her right, title and interest in the Suburb C property.

5. In the event that the wife fails to comply with Order 1 above, the parties shall within 14 days of the non-compliance do all acts and things and sign all documents necessary to cause the Suburb C property to be listed for sale and upon settlement of the sale of the Suburb C property the parties do all acts and things and sign all documents necessary to cause the proceeds of sale to be distributed in the following manner and priority:

(a) payment to discharge the Westpac mortgage and the E Bank loans;

(b) payment of the real estate agent’s commission, advertising and other expenses payable upon the sale;

(c) payment of the conveyancer’s legal costs and outlays relating to the sale;

(d) payment of the usual adjustments of sale including but not limited to municipal and water rate adjustment;

(e) payment to the husband, or as he directs, so much of the amount calculated in accordance with Order 1(b) as remains unpaid to the husband;

(f) the balance to the wife.

6. For the purposes of Order 5 above:

(a) the Suburb C property shall at first instance be sold by public auction;

(b) in the event the Suburb C property fails to sell at auction or within 14 days after the date of the auction pursuant to Order 6(a) by further negotiation, the property shall be listed for sale by private treaty; and

(c) in the event that the Suburb C property is not sold by private treaty pursuant to Order 6(b) above within a further three months of being listed for sale by private treaty, the parties shall do all acts and sign all documents necessary to sell the property by auction within a further three months and if the Suburb C property remains unsold following the second auction then the property shall be re‑submitted for sale by private treaty in accordance with Order 6(b) above and then auction pursuant to this order until it is sold.

7. For the purposes of Order 6, the following sale conditions shall apply:

(a) the wife shall notify the husband of the conveyancer appointed to act on the sale, and in the event that a conveyancer is yet to be appointed, then the conveyancer to act on the sale shall be as agreed between the parties in writing;

(b) the method of sale shall be as agreed between the parties in writing with regard to the recommendation of the real estate agent;

(c) the listing price (or reserve price if sold at auction) shall be agreed between the parties in writing;

(d) the contract of sale shall provide for completion within 42 days after the date of the contract, unless otherwise agreed between the parties in writing;

(e) the wife shall co-operate in every way in relation to the marketing and sale of the Suburb C property, including, but not limited to:

(i) allowing inspection at all times reasonably requested by the agent;

(ii) making the key readily available to the agent;

(iii) ensuring that the Suburb C property is clean, neat and in good order at the time of any inspection or is being photographed for marketing purposes.

8. The parties may, by agreement in writing signed by both of them, adopt a different method sale to that specified in Orders 6 and 7.

9. Contemporaneously with compliance with Order 1, or alternatively, upon the settlement of the sale of Suburb C in accordance with Orders 5, 6 and 7, the parties are to co‑operate and take all necessary steps to cause the discharge of any guarantee provided by the wife as security for the E Bank loans.

10. The parties forthwith do all things and sign all documents necessary to close the joint Westpac account number …61 and pay the balance of those accounts on closure to the wife.

11. Within 14 days from the date of these orders the wife make available for collection by the husband the following artwork:

(a) Artwork 1;

(b) Artwork 2; and

(c) Artwork 3.

12. The husband be declared to be the sole owner, to the exclusion of the wife, of all of the right, title and interest in the property situated at L Street, Suburb D in the state of New South Wales being all of the land contained in certificate folio identifier ….

13. The wife be declared to be the sole owner, to the exclusion of the husband, of all of her right title an interest in:

(a) G2 Investment Company; and

(b) G Investment Company.

14. The husband be declared to be the sole owner, to the exclusion of the wife, of all of his right title an interest in:

(a) M Company;

(b) Sandri Family Trust - Trustee: H Pty Ltd;

(c) H Pty Ltd (corporate trustee); and

(d) G Investment Company.

15. Other than as provided for in these orders, the parties be declared to have the sole right, title and interest in:

(a) Any chattels, goods, furnishings, bank accounts, artworks and other property which are at the date hereof in their possession respectively; and

(b) Any monies, shares, debentures or superannuation entitlements which stand in their sole name respectively at the date hereof.

16. The parties do all acts and things and give consents and execute all documents and writings necessary to give effect to the orders made herein.

17. In the event either party refuses or neglects to execute any deed, document or instrument necessary to give effect to all or any of these orders, then the Registrar of the Court shall be appointed pursuant to s 106A of the Family Law Act 1975 (Cth) to execute such deed, document or instrument in the name of the said party and do all acts and things necessary to give validity and operation to the deed, document or instrument upon the Registrar being provided with verification of such refusal or failure by way of affidavit.

18. If any party seeks costs, an application in the appropriate form supported by affidavit evidence is to be filed and served within 28 days of the date of these orders.

19. If no application for costs is filed within the time specified, there shall be no order as to costs.

20. All interim orders be discharged and any extant applications be otherwise dismissed.

Note: The form of the order is subject to the entry in the Court’s records.

Note: This copy of the Court’s Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 10.14(b) Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 10.13 Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).

Part XIVB of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish an account of proceedings that identify persons, associated persons, or witnesses involved in family law proceedings.

Background

Background to the litigation

These are property proceedings between the applicant wife, Ms Magnus (“wife”) and the respondent husband, Mr Sandri (“husband”) pursuant to Pt VIII of the Family Law Act 1975 (Cth) (“the Act”).BRIEF BACKGROUND The wife was born in Australia in 1969 and is 54 years of age. The husband was born in 1967 and is 57 years of age. The husband works as a health professional and the wife works as a health professional three days a week. The parties commenced cohabitation in 1995 or 1996 and were married in late 1997. The husband contended that they separated on a final basis on 5 September 2018. The wife contended that the date of separation was on 16 December 2018. Nothing turns on this difference. It was an agreed position that the husband moved out of the former matrimonial home in January 2019. The parties divorced in 2020. There were three children of the relationship being Mr N, Ms O, currently 22 years old and Mr P, currently 18 years old. The parties’ eldest child, Mr N, passed away in 2022. Both parties gave evidence of the severe grief and emotional distress this has caused them. The husband re-partnered and married Ms Q in 2023. The husband and Ms Q have one child of the relationship, born in 2024. Ms Q has two children of a previous relationship aged nine and ten years of age. At the commencement of their relationship the wife worked full time as a health professional and the husband had graduated from R University. The parties moved to the United States in 1998 while the husband completed a two-year work placement. Between 1998 and mid-2000 the wife worked full time as a health professional. The parties’ eldest child was born in 2000 and the parties returned to Australia in late 2000, after which the husband set up a business as a professional. The husband has engaged in share trading since 1990. As will be explained later in more detail, he has concentrated on securities in “micro-cap” companies, which carry greater potential risk but also greater potential reward. The husband has used a share trading account with Westpac since 1990 and since about 2010 a portfolio managed by S Pty Ltd. In 2003, the parties incorporated G Investment Company with the wife as the sole director between late 2003 and late 2022. The issued shares in G Investment Company were owned by H Pty Ltd (“H Pty Ltd”) as trustee for the Sandri Family Trust. The purpose of the Sandri Family Trust is to contain all running costs of the husband’s business in one entity. The only income for the trust has been service and management fees paid to it by the husband as part of the business structure of his business. In 2011, F Street, Suburb C (“Suburb C”) was purchased in the wife’s sole name for $7,200,000. At the time, the purchase was funded in part by two loans, secured by mortgage over Suburb C, with Westpac Banking Corporation, but in the husband’s name. The parties lived in Suburb C until early 2019 when the husband moved out. The wife and the youngest child continue to reside at Suburb C.

Evidence

Evidence Before The Court

The material tendered and relied upon by the parties is set out at Schedule 1 at the conclusion of these reasons.Expert Evidence A number of expert reports were read and relied upon by the parties including; (1)The report of Mr BB dated 26 March 2024;(2)The affidavit of Mr DD of CC Valuers filed 28 March 2024 annexing his updating report of Suburb C; (3)The affidavit of Mr EE filed 28 March 2024;(4)The affidavit of Mr FF of CC Valuers filed 28 March 2024 annexing his updated report of Suburb D; and (5)The report of Mr Z dated 3 April 2024. Mr DD was cross-examined.COMPETING PROPOSALS As already noted, the parties agreed in 2021 that a division of their property of 53.5 per cent to the wife and 46.5 per cent to the husband was just and equitable. To achieve this outcome, in summary the wife sought to retain Suburb C unencumbered, retain her interest in G Investment Company, and receive a cash payment from the husband. However, this broad position shifted or was affected, among other things, by the many proposed add backs sought by the wife, in particular the large claimed add back of $15,051,789. In final submissions, the husband took the position that, apart from legal fees, there should be no property added back, but rather it was open to the Court to adjust the percentage in favour of the wife pursuant to s 79(4)(e) and s 75(2)(o) of the Act. In other words, since, as mentioned above, the percentage division of 53.5 per cent to the wife was a “floor”, her percentage could be increased depending on the Court’s conclusion about added back property and other findings. After the sale of B Street, which completed in early 2024, the husband in summary proposed that the wife retain her interest in G Investment Company, her superannuation, Suburb C, but have the opportunity to discharge his loans secured against it, and make a cash payment to him to reach the agreed percentages. The wife continued to press for orders giving her Suburb C unencumbered, together with a cash payment from the husband. The wife’s final proposed Minute of Orders is detailed in Annexure “A”, set out at the conclusion of this judgment. The husband sought orders as set out in Annexure “B”.PART VIII Section 79 of Pt VIII of the Act gives the Court power to make such orders for alteration of property interests as it considers appropriate. Section 79(2) of the Act provides that:The court must 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. Having regard to the language of both s 79(1) and s 79(2) of the Act, the Court is required to make orders which are not only “just and equitable” but also “appropriate” (Zao & Lee [2019] FamCAFC 169 at [48]; Aitken & Aitken (2023) FLC 94-142 at [59]). Section 79(4) of the Act set outs the factors to be taken into account in considering what order, if any, should be made. These will be discussed in detail below. Section 80 grants specific powers to make a range of different orders to adjust property interests. Section 81 imposes an obligation to seek to make orders which finally determine the financial relationship between the parties and avoid further proceedings, as far as practicable.

Decision

Reasons for decision

The wife argued that interest charges on tax debts and directors penalties charged against the husband should be added back. The husband resisted this add back. The wife argued that the husband had clearly preferred using his income to fund extravagant lifestyle choices rather than to attend to his taxation liabilities in a timely manner. She argued that there was no just and equitable basis why she should share in these liabilities. I agree. Even though I consider it just and equitable to include the husband’s outstanding tax liabilities (Item 56) on the balance sheet, the interest and penalties are substantially a result of choices about lifestyle and the allocation of money made by the husband after separation. These amounts will be added to the balance sheet as notional property.Conclusions and Assets Pool According to my findings and conclusions the assets and liabilities of the parties are as follows: Accordingly, the wife currently holds about 68 per cent of the parties assets, while the husband holds 32 per cent.CONTRIBUTIONS The parties made no submissions about contributions. I understood this was on the basis that they had agreed to the percentage division of assets. Nonetheless, I have considered the evidence about contributions by each party as presented in their affidavits.SECTION 75(2) AND PERCENTAGE DIVISION As I understood the initial position of the parties, the percentage division of 53.5 to the wife and 46.5 to the husband took account of the factors incorporated for consideration by the Court under s 79(4)(e). But, as mentioned, the husband accepted that the wife’s percentage could be adjusted up, to take account of the husband’s expenditure which was not added back. However, I have added back significant amounts as notional property, just not as much as the wife claimed. Nonetheless, I propose to make an adjustment in the wife’s favour beyond the agreed percentages. The Court’s ultimate conclusions about the appropriate, just and equitable adjustment of property interests is usually informed by percentages. Nonetheless, as long ago as Norbis v Norbis (1986) 161 CLR 513 at 533–534, Wilson and Dawson JJ observed that the Act confers a discretion which, provided the required matters are taken into account, does not dictate a particular method of formulating an appropriate order. It has long been recognised that the application of percentages does not necessarily result in a just and equitable outcome; the real impact in money terms is the critical issue (JEL and DDF (2001) FLC 93-075 at [139]–[140]). It is the ultimate order which must be just and equitable not the underlying assessment of contributions (Russell and Russell (1999) FLC 92-877 at [80]; Keehan & Keehan [2015] FamCAFC 122 (Ainslie-Wallace, Murphy & and Tree JJ) at [78]). The purpose of referring to these authorities is to make clear that the parties’ agreement about a percentage division, reached two and a half years before trial, could not fetter the ultimate exercise of the statutory discretion of the Court. The Court is not bound by a percentage assessment at all, and clearly not by an agreement between the parties, although I accept such an agreement should be taken into account, and it has considerable weight. The Court is bound to consider the matters in s 79(4), including s 75(2) as incorporated by s 79(4)(e).

Ratio Decidendi

Legal Principle Established

Full text does not contain this section.