Magnus & Sandri (No 4)
[2024] FedCFamC1F 499
•24 July 2024
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 5) (2023) 67 Fam LR 421; [2023] FedCFamC1F 679
Zao & Lee [2019] FamCAFC 169
Division: Division 1 First Instance Number of paragraphs: 166 Date of hearing: 2–4 April 2024 Place: Sydney Counsel for the Applicant: Mr Muddle SC with Mr Bennett Solicitor for the Applicant: Coleman Greig Lawyers Counsel for the Respondent: Mr Sirtes SC with Mr Auld Solicitor for the Respondent: Abbott Delaney Lawyers ORDERS
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.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Magnus & Sandri has been approved pursuant to subsection 114Q(2) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
HARPER J:
INTRODUCTION
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.
In 2013, G Investment Company was established in the United States of America, with the wife as the “Member” and the husband as the “Manager”, as a vehicle to purchase and manage the T Apartments being Apartments 1, 2 and 3, at U Street, T Apartments, United States (“T Apartments”), purchased in 2013. The parties purchased the apartments for just over USD1,250,000.
In 2015, the Westpac mortgage over Suburb C was refinanced with the E Bank by way of three loan accounts, …00, …00 and …01, in the husband’s sole name but secured by mortgage given by the wife. After discharge of the Westpac mortgage, the refinance resulted in a surplus of approximately $4 million which was invested through the husband’s share portfolio and, according to the husband, other investments such as artwork and taxation liabilities.
In late 2016, that is, during the marriage, the husband had entered into a contract to purchase B Street Sydney (“B Street”) “off the plan” for $16,000,000. He paid a deposit of $1,600,000 and $1,060,490 in stamp duty.
Following separation, the husband resided in a three-bedroom apartment in Suburb V with Ms Q and her two children at a cost of $18,467 a month until approximately January 2021.
In late 2019 and early 2020, the parties sold Apartments 1 and 2 of the T Apartments. After separation the wife took control of G Investment Company, excluded the husband, and opened two bank accounts, …65 and …02, with W Bank in the name of G Investment Company. There was no dispute the wife controls those accounts. The net proceeds of sale of Apartments 1 and 2 were deposited into account …65. Injunctive orders were made in September 2020 restraining the wife from unilaterally dealing with the proceeds. The rental income from Apartment 3 continues to be paid into account …02. The remaining T Apartment, Apartment 3 continues to receive rental income which was deposited directly into the W Bank account.
In late 2020 the husband exchanged contracts on a property at L Street, Suburb D (“Suburb D”) with a purchase price of $6,200,000. He paid a deposit of three per cent, $186,000, in late 2020, and obtained a mortgage from X Financial Services in the amount of $3,640,000 secured against the property. In order to obtain this finance he was obliged to reduce his liabilities by about $1,300,000. The husband gave evidence that he sold shares to the value of $2,916,500 between late 2020 and early 2021 to cover the balance of the purchase price, the deposit and stamp duty. I will return to the source of these funds later in these reasons. The purchase of Suburb D settled in early 2021.
In December 2020, pursuant to consent orders made in September 2020, the parties sold a number of pieces of artwork and 65 per cent of the net sale proceeds, being $1,026,793, was deposited into E Bank Loan account ending …00. The remaining 35 per cent, being $552,888, was paid towards the husband’s taxation liabilities. A further piece of artwork was sold in early 2023 for just over $500,000 to be paid in monthly instalments. A portion of the proceeds were to be paid into the E Bank Account …00 and the remainder was to be used to reduce the husband’s taxation liabilities. The wife contended that this sale was done unilaterally by the husband and that he sold the painting for $80,000 less than the lower valuation estimate. However, ultimately nothing turned on this allegation.
In summary, during the course of their approximately 23-year long relationship, the parties amassed considerable wealth and purchased and sold numerous properties. The parties’ wealth was derived primarily from the husband’s work as a health professional and his share trading. The wife worked for periods throughout the relationship, assisted the husband on occasion with his business and undertook the vast majority of the homemaker and childcare responsibilities.
The purchase of B Street settled in late 2021 with a balance of $14,406,487 payable. It is convenient here to explain in more detail how the purchase of B Street was financed and settled. The husband’s evidence was that he reduced the X Financial Services mortgage loan secured against Suburb D by $3,667,842 by selling shares to the net value of $3,592,750 between May and September 2021. He then obtained two loans from National Australia Bank (“NAB”) in the amounts of $7 million (…28) and $4 million (…27), both of which appear to have been drawn down in late 2021, secured against B Street. The husband also obtained another NAB loan of $4,000,000 to refinance the X Financial Services mortgage, secured against Suburb D. The documentary evidence discloses that the NAB mortgage in the amount of $4 million (…76) was secured against Suburb D and when drawn down in late 2021, $3,641,254 was deposited into the associated NAB offset account …47 in late 2021.
It was agreed that $3,422,447.80 was withdrawn from …47 in late 2021 and applied to complete the purchase of B Street.
The wife contended that the X Financial Services mortgage debit balance had been reduced to nil as at late 2021 and that therefore when the husband had borrowed $4,000,000 on the refinance of X Financial Services with NAB, an additional amount of approximately $600,000 had not been applied to the purchase of B Street and has not been accounted for. However, while the evidence is unclear, the $600,000 appears to be comprised of the difference of approximately $358,037 between the draw down of $4 million from …76 and the $3,641,254 deposited into the offset account …47 and the approximately $220,000 difference between the $3,641,254 deposited into …47 and the $3,422,447 withdrawn on 14 December 2021.
This conclusion is supported by the evidence. It appears to be agreed that as between 1 May 2021 and 1 September 2021 the husband caused $3,451,068 to be applied to the X Financial Services mortgage reducing the loan balance to $155,666 (Exhibit S, p.291–304). There were an additional two withdrawals amounting to $160,000 during this time (Exhibit S, p.291–295) which appears, on the face of the transaction descriptions in the husband’s Westpac …51 account, to have been reinvested in shares, used in small part to pay the husband’s spousal maintenance obligations and transferred to the husband’s business account (Exhibit S, p.314–315). There was a further cash withdrawal of $200,000 on 2 September 2021 and the loan was discharged in full on 20 September 2021 following the payment of $358,037 and some minor dishonoured repayment fees on 21 September 2021 and 1 October 2021. I am satisfied this corroborates the husband’s explanation that the X Financial Services mortgage was refinanced with NAB and the surplus funds of $3,641,963, being $4,000,000 less the remaining loan amount of $358,037, were deposited into the NAB offset account …47 on 20 September 2021.
As for the other discrepancies, the wife annexed a bank statement for NAB …47 (Exhibit A, p.703–704) and which showed that between 23 September 2021 and November 2021 the husband withdrew $820,000 over 10 transactions. The husband claims he spent or invested the surplus $820,0000 (Husband’s affidavit filed 11 November 2023, paragraph 90). H Pty Ltd, trustee of the Sandri Family Trust, subsequently deposited $610,000 into …47 between November 2021 and the settlement of B Street in late 2021, and deposited a further $300,000 across three transactions between 15 December 2021 and 24 January 2022. As already noted above, the only source of income for the Sandri Family Trust has been the husband’s fees as a health professional. Despite this the husband’s case was that the source of the funds for the deposits between November 2021 and 24 January 2022 were share sales.
The wife also put in contention the source of the funds used to pay down the X Financial Services mortgage and the husband’s claim that due to limitations with his borrowing capacity he was required to sell shares in order to complete the purchase. I will return to these issues below.
B Street appears to have been rented between December 2022 and December 2023 for $26,071 per month. The rent was paid into …47. Contracts for the sale of B Street were exchanged in early 2024 for a purchase price of $16,000,000 and settlement occurred a short time later. I refer to this further below.
There was no dispute that between separation and trial the husband broadly speaking made payments to service the borrowings secured against Suburb C, Suburb D, and B Street, until its sale. According to the husband, the monthly impost, including Suburb C, until the sales of B Street was in the order of $65,000. He has also paid about $1.1 million in spousal maintenance since separation. The wife has lived in Suburb C without the burden of paying the mortgage or the obligation to pay rent. As at the date of the final hearing the husband had $55,047.75 in arrears in non-periodic child support payments.
However, the wife disputed the husband serviced the Suburb C mortgage in an orderly fashion save for a period of six months due to the impact of the pandemic. The husband agreed that while he “did not consistently pay the mortgage repayments for the [E Bank] loan account on a monthly basis, I reconciled the amounts and made lump sum repayments” (Husband’s affidavit filed 1 April 2024, paragraph 12). As at 26 February 2024 he contends he was behind in repayments in the amount of $34,639.84. The husband advanced the case that he shouldered the burden of considerable mortgage debt for which the wife has reaped the benefit in the case of Suburb C.
The wife’s solicitor, Mr Y, filed an affidavit which was accepted into evidence. This set out in detail the husband alleged breach of injunctive orders and failure to make the court ordered mortgage payments to the Suburb C property. Mr Y was not cross-examined and his evidence was ultimately not challenged.
On 8 October 2019 (“the October orders”), orders were made, by consent, which required the husband to make all instalment payments as and when they fell due with respect of the Suburb C mortgage. Furthermore, injunctive orders were made restraining the husband from increasing the balance outstanding in relation to any of the Suburb C mortgage loan accounts. On 24 September 2020 (“the September orders”) the previous injunctive order was discharged and it was ordered, by consent, that the parties be restrained from withdrawing funds from the Suburb C mortgage loan accounts without written agreement between the parties.
As at the date of separation the total balances for the Suburb C mortgage, made up of the three loans accounts was $7,503,307. As already mentioned, the debit balance of loan account …00 was decreased by the sale of the parties jointly owned artwork in the amount of about $1,338,424. The wife argued that the sale proceeds were to be used to reduce the balance outstanding on the Suburb C mortgage, not to be used by the husband to make future loan repayments. I note that at no point have the October orders been discharged. It appears from the tenor of the husband’s argument that he considered the payment of the proceeds of the sale of the artwork to be lump sum payments made in compliance with the October orders.
As at the date of the final hearing the Suburb C mortgage debit balance totalled $7,206,365.
It appears that between separation in December 2018 and April 2020 the husband made regular interest only payments on a monthly basis to the loan accounts making up the Suburb C mortgage. The husband claims to have applied and been approved by E Bank to waive repayments to the Suburb C mortgage for a six-month period between May 2020 and November 2020. It was conceded by the husband that he made no payments, or nominal payments only, towards the Suburb C mortgage in that period.
Following November 2020, the husband made irregular payments towards the loan account …00, with only three payments between March to December 2022 and no payments from 1 March 2023 to 1 May 2023 (Affidavit of Mr Y filed 28 March 2024, paragraphs 74–80). The account was in arrears on several occasions (Affidavit of Mr Y filed 28 March 2024, paragraph 81).
The wife conceded that with respect to the account …01 the husband made payments of various amounts including $150,000 from the sale of shares in May 2021 which reduced the balance to $431,363. However, she contended that he did not make payments in February, April, May, June or August to 7 November 2023 (Affidavit of Mr Y filed 28 March 2024, paragraph 86).
In late 2020 the proceeds of the sale of the artwork discussed above at [17] were deposited into the loan account #...00 in the amount of $1,026,793 pursuant to Court orders (Affidavit of Mr Y filed 28 May 2024, Annexure AJW-37 p.147). Between December 2020 and December 2023, the repayments in advance decreased from $1,027,646.92 to $54,184.21 (Affidavit of Mr Y filed 28 March 2024, paragraph 71).
The husband made an interest repayment of $17,248.42 on 26 December 2020.
No repayments were made between March 2022 and 16 May 2023. On 18 May 2023 $124,653.88 was paid into the loan account …00 with the description “Backdate”. However, this payment appears to be the first instalment of the proceeds of the sale of an artwork pursuant to Court orders as discussed above at [17]. No evidence is before the Court as to whether the remaining instalments of $213,347 from the sale of the artwork have been paid and accordingly if they have been applied to the mortgage.
Between 29 May 2023 and 21 July 2023 the husband made three repayments of $62,326 totalling $186,978 with interest accruing in the amount of $91,182. No source of these funds was identified by the husband for these payments, however as they were also described as “Backdate” it is possible they were the subsequent instalment payments from the sale of the artwork.
The wife’s evidence is that the husband provided instructions to E Bank to redraw on the loan account ending …00. Between 15 September 2023 and 9 October 2023 the wife contends that the husband unilaterally, and in contravention of Order 11 of the orders dated 24 September 2020, withdrew $860,500 from the loan account …00. The solicitor for wife undertook a tracing exercise of these funds and showed that the funds were initially traced into his E Bank accounts ending …21 or …18 (Affidavit of Mr Y filed 28 March 2024, paragraph 90).
It appears that $152,895.56 of the money withdrawn from the loan account …00 was ultimately transferred back to pay interest in the Suburb C mortgage loan accounts between 31 October 2023 and 1 December 2023. Accordingly, as at 26 December 2024 the loan account had increased from $5,209,643 on 26 June 2023 to $6,055,036 and the payments in advance had decreased from $899,577, as at 26 June 2023, to $54,184 (Mr Y affidavit filed 28 March 2024, Annexure MY-37 p. 158–161).
The husband subsequently made seven payments to the loan account …00 between 15 September 2023 and 1 February 2024 in the amount of $50,633. The original source of these funds was the withdrawal from loan account …00 (Affidavit of Mr Y filed 28 March 2024, paragraphs 79–80).
The wife contends that $273,290 appears to have been applied to the husband’s taxation liability and some of the funds drawn down appear to have been applied to the NAB mortgages secured against B Street and Suburb D.
The redraw facility was removed and the restraint reactivated following Westpac’s receipt of a letter from the wife’s solicitor on 13 March 2024.
Accordingly, approximately $476,818.56 of the $850,000 remains unaccounted for and $747,7373.44 was ultimately removed from the account and not returned. The husband provided no explanation for withdrawal of $850,000 simply stating that:
I, nor my lawyers have not had the opportunity to trace the forensic accounting exercise by [Mr Y] in respect to the [E Bank] loan accounts, […00], […01] and […00] … to determine the accuracy.
(Husband’s affidavit filed 1 April 2024, paragraph 11)
No submissions were made by either party as to the inclusion of Item 42A on the balance sheet as an asset of the husband, being $809,213 and described as “Partial Property Settlement – [E Bank] Funds”. Neither party contended this amount should be treated as property of the husband which should be added back. It is possible that this item accounts for the funds withdrawn from the Suburb C mortgage, noting that there do not appear to be any orders for a partial property settlement in that amount. It is curious that that this is listed as an asset of the husband and not as an add back.
It is important to note that the wife did not have viewing access for the Suburb C loans as she was only a guarantor for the loans. The husband contended that he had provided her regular disclosure of the accounts and she “was aware of my conduct in respect of the payment of [Suburb C] mortgage and did not file an Enforcement Application during these proceedings” (Husband’s affidavit filed 11 November 2023, paragraph 56).
Outside the dealings in the husband’s share portfolio, which I discuss in greater detail later, on balance I am not persuaded the wife’s claims of large sums unaccounted for are sustained on the evidence.
On 14 August 2023 the husband sold Vehicle 3 for $355,000. In his trial affidavit he contends that the sale proceeds “are being applied to my taxation liability” pursuant to Order 7 of the orders of 18 August 2023 (filed 11 November 2023, paragraph 140). I note here that Order 7 of the consent orders of 18 August 2023 required the husband to pay the first $279,061.68 to the taxation office to satisfy the statutory demand issued to H Pty Ltd, with the balance to be paid to the loan account …00. The wife claims no disclosure has been provided with respect to the use of the $355,000. In submissions, this was not pressed by the wife, or at least not clearly pressed, as property to be added back, but rather raised as a further example of the husband’s non-disclosure and potential contempt of Court orders.
The evidence with respect of the husband’s Vehicle 3 is confused somewhat by the fact that at some point the wife unilaterally sold a 50 per cent interest in Vehicle 4 which was bought and registered in the wife’s sole name for $200,000, by the husband. Despite both being referred to as the same kind of vehicle at various times they appear to be separate assets. The wife conceded in cross-examination that she sold the 50 per cent interest in the vehicle and had retained the profits of $200,000 (Transcript 2 April 2024, p.34 lines 31–37). This was listed as a potential add back of the wife’s (Item 46), though it appears that the husband did not wish to press this add back, not providing a value for the amount on Exhibit Q. Counsel for the husband rather urged the Court to consider it “to the extent [it] is going to make findings” with respect to add backs and that the Court should “holistically” at the “conduct of both the husband and wife” (Transcript 2 April 2024, p.33 lines 30–34).
RELEVANT PROCEDURAL HISTORY
The wife commenced parenting and property proceedings in the Family Court of Australia (as it then was) on 14 June 2019. The parties were able to reach agreement with respect of the parenting issues and the wife filed a Further Amended Initiating Application on 2 October 2019 seeking final orders with respect of property, child support and spousal maintenance only.
Consent orders were made in October 2019 requiring the husband to pay the wife $4500 a week in interim spousal maintenance. The Court made a child support departure order, by consent, requiring the husband to pay $650 per week per child for the youngest two children. The wife received $150,000 by way of partial property settlement.
Orders were made on 1 December 2021, including notations that the parties agreed that the property pool would be divided 53.5 per cent in favour of the wife and 46.5 per cent in favour of the husband, and that the wife would retain Suburb C and the shares in G Investment Company. At trial neither of the parties sought to resile from these agreed positions, except to the extent discussed later, namely, the husband accepted that 53.5 per cent was a “floor” in favour of the wife, and a greater percentage in her favour was open to the Court.
The matter was transferred to the Major Complex Proceedings List and first listed before me on 22 July 2022.
On 3 March 2023, the matter was set down for final hearing commencing on 6 November 2023 with an estimate of five days.
On 18 August 2023, Mr Z was appointed to prepare an expert report providing a narrative explanation for the decrease in the husband’s shareholdings between 30 July 2018 and 31 August 2023. A number of other experts were appointed to value various property interests. The wife was ordered to nominate the value of various property including artworks, household contents, various vehicles and the AA Club membership within seven days of the orders. In the event the nominated values were not agreed within 10 days then an expert was to be appointed to value the identified items. The husband did not contest the values submitted by the wife in the time frame specified by these orders. This has importance for settling the value of several items on the balance sheet as explained later.
The matter was not ready for hearing on 6 November 2023, and the hearing dates were vacated. A number of consent orders were made including the requirement that the husband respond to any requests from Mr Z as soon as possible but not later than 48 hours.
On 15 November 2023, the matter was then relisted for final hearing to commence on 2 April 2024 with an estimate of three days.
The final hearing commenced on 2 April 2024 and concluded on 4 April 2024. Judgment was originally reserved on 4 April 2024. On that date I made a number of interlocutory orders requiring the husband to continue making payments of mortgages and spouse maintenance pending delivery of judgment.
B Street was due to settle in early 2024. I made orders requiring the payment of the net sale proceeds to be paid into the E Bank Loan account ending …00, which is a loan account of the husband. Surplus funds of $4,753,416 were received into that account reducing the debit balance from $5,958,340 to $1,204,924, according to the figures provided on the joint balance sheet. Consequently, I note here, the sale of B Street reduced the value of the husband’s assets by $15,760,000, and his liabilities by $11,000,000 and $4,753,416. The debit balance of the husband’s loans secured by Suburb C were therefore also reduced by $4,753,416. Thereby increasing the wife’s equity by the same amount.
Final judgment was listed for delivery on 3 July 2024. On the eve of judgment delivery the husband filed an Application in a Proceeding seeking leave to reopen the evidence and seeking to discharge a number of the interlocutory orders made on 4 April 2024. Judgment delivery was adjourned and the Application in a Proceeding was listed for interim hearing on 23 July 2024, where it was dismissed (Magnus & Sandri (No 3) [2024] FedCFamC1F 449).
MATERIAL RELIED UPON
The wife read and relied upon the following material:
(1)The affidavit of the wife filed 24 October 2023;
(2)The wife’s Case Outline filed 3 November 2023;
(3)The affidavit of Mr Y filed 5 November 2023;
(4)The affidavit of Mr Y filed 28 March 2024; and
(5)The wife’s Amended Financial Statement filed 3 April 2024.
The wife was cross-examined.
According to the husband’s Case Outline filed 1 April 2024 he read and relied upon the following material:
(1)The husband’s affidavit filed 11 November 2023;
(2)The husband’s Amended Financial Statement filed 1 April 2024;
(3)The husband’s affidavit filed 1 April 2024; and
(4)The husband’s affidavit filed 17 August 2023, confined to paragraphs 20.9.1 to 20.11.
The husband was cross-examined.
Both parties sought to rely upon written submissions in addition to their oral closing submissions.
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.
In Stanford & Stanford (2012) 247 CLR 108 (“Stanford”) the High Court made clear at [37] it is necessary to begin consideration of whether it is just and equitable to make a property settlement order by identifying, according to ordinary common law and equitable principles, the existing legal and equitable interests of the parties in the property. Stanford has not overruled a four step approach which has been generally utilised for many years Bevan & Bevan (2013) FLC 93-545 (“Bevan”) at [72]–[73]:
1.Identify and value, the parties’ property, liabilities and financial resources at the date of the hearing;
2.Identify and assess the contributions of the parties as referred to in s 79 of the Act and determine the contribution based entitlements of the parties expressed as a percentage of the net value of the property of the parties, whether examined on a global approach or an asset by asset approach;
3.Identify and assess the other factors relevant including, the matters referred to in s 75 of the Act and determine the adjustment (if any) to be made to the contribution entitlements at step two; and
4. Consider the effect of the above and resolve what order is just and equitable in all the circumstances of the case.
Stanford made clear that the requirement pursuant to s 79(2) that it would be just and equitable to make orders altering property should not be conflated with the requirements of s 79(4). The very fact of separation may lead to the ready satisfaction of the just and equitable requirement (Stanford at [41]–[42]). Here, the parties accept it would be just and equitable to make some form of adjustment. The just and equitable requirement has been satisfied by the issues joined and the way the case was conducted. The Court must also be satisfied that its proposed final orders are themselves just and equitable. I will return to this question later in these reasons.
Identification of the parties’ existing assets and liabilities is the essential first step.
ASSETS, LIABILITIES AND FINANCIAL RESOURCES
A joint balance sheet was tendered by the parties, which became Exhibit Q. A number of items remained in dispute. In relation to these disputed items, I express my conclusions as follows, noting the reference to item numbers is a reference to the item number on Exhibit Q.
Item 1
There was no agreement about the value of Suburb C. An expert valuation prepared by Mr GG of CC Valuers in October 2023 gave a value at that date as $13,750,000. The wife pressed the Court to accept this value (Exhibit W, p.33). An updated valuation was prepared by Mr DD in April 2024. Mr DD is a colleague of Mr GG in CC Valuers. He valued Suburb C at $14,500,000.
The wife initially objected to the Court receiving Mr DD’s evidence, arguing it was unilaterally obtained by the husband. However, the objection was not maintained and Mr DD’s report was read as part of the evidence. He was cross-examined. In his oral evidence he pointed out Suburb C was in the “upper echelon” of property types, and supported his value by what he considered comparable sales. He eschewed the use of data which was insufficiently refined to distinguish between prestige and other segments of the market. The did not make any particular final submissions about Mr DD’s valuation to argue for its rejection. I accept the value of $14,500,000.
Item 4 – B Street
When the balance sheet was prepared the sale of B Street had not completed. However, as mentioned, the sale settled in early 2024. Consequently, I will exclude Item 4. The sale discharged NAB Loans …28 & …76 which had appeared on the balance sheet at Item 53. I will exclude this item. The net proceeds of sale received reduced E Bank loan account …00 debit balance to $1,204,924. I will include this amount as Item 51.
Items 30, 37, 42 and 46
The wife contends that she provided the husband with her estimated values for the property items identified in the 18 August 2023 orders on 30 August 2023, as required by the orders. She caused a letter to be sent to the husband’s legal representatives on 17 October 2023 advising that if she did not receive a response from the husband by 24 October 2023 that it would be assumed the husband did not object to the values nominated by the wife. No such response was received.
As at the trial the husband raised the prospect of different values with respect of the Items 30, 37, 42 and 46. He initially submitted that expert evidence with respect to Items 30, 42 and 46 was going to be adduced during the course of the trial. No such evidence was ultimately relied upon.
Item 37 is the AA Club Membership. The wife ascribed a value of $5,000 and the husband $25,000. The husband accepted this was a “small-ticket” item. The husband tendered an advertisement for AA Club Membership, which became Exhibit I, in support of his contention that Item 37 should be valued at $25,000 rather than the wife’s asserted value of $5,000. I do not consider this to be compelling evidence. I will accept the wife’s value, given the letter on 30 August 2023, which it appears the husband did not challenge until trial.
I also accept the wife’s values for Items 30, 42 and 46. I earlier discussed Item 46 (above at [48]–[49]).
As also discussed, I accept Item 42A as property of the husband (above at [45]).
I further note that while Items 27.1 to 27.7 are presently owned in the husband’s name, the parties have expressed agreement as to the division these items, being artwork and sculptures. Accordingly, I have included them as the assets of the husband for the purpose of identifying the parties’ property.
Item 23
Item 23 refers to the husband’s interest in the Sandri Family Trust and was presented as an agreed value as between the parties, pursuant to the expert report prepared by Mr EE. Despite having been included as an asset in the balance sheet, it appears that the Sandri Family Trust’s liabilities exceed the assets by $17,710 and Mr EE accordingly valued the husband’s share as -$17,710. No submissions were made as to this item. I will, however, include it as a liability rather than an asset of the husband.
Liabilities
The husband disputed the inclusion of Items 67 and 68 as liabilities of the wife. Item 67 was said to be a loan from Mr HH totalling $110,000 in three tranches, of which the wife has repaid $20,000. One tranche was $50,000, the purpose of which was to purchase a Motor Vehicle 1. The wife tendered documents showing Mr HH paid $50,000 directly to a dealership. A second amount of $50,000 was lent to pay legal fees. The wife tendered an email from Mr HH confirming this payment (Exhibit A, p.772). The wife also claims Mr HH lent her $10,000 for urgent airfares when the parties eldest child died. The wife’s evidence in this regard was not challenged in cross-examination. However, the husband argued that as her evidence was mere assertion, cross-examination was not warranted to explore her assertions, Mr HH was not called by her as a witness so it should be inferred his evidence would not have assisted her case, and the Court should infer Mr HH would not seek repayment. I do not accept these submissions. The contemporaneous emails lend credence to the existence of the loans. I am satisfied the probabilities support it. I will include $90,000 as a liability of the wife.
Item 68 was included by the wife as a loan from her parents in the amount of $175,000. However, apart from a line item in Exhibit Q, the wife gives no other evidence at all about this loan. I will not include it.
Items 54 and 56 – Husband’s tax liabilities
The wife argued that she should not share in the husband’s tax liabilities as reflected in Items 54, 55 and 56.
Item 54 is an estimate of 2023 income tax at $131,660. Item 55 was included by the parties in liabilities section of the balance sheet but is in fact a tax refund of $393,437 in the husband’s favour for the years ended June 2022. I will take account of this amount as a credit, not a liability.
The principal dispute here is Item 56 being the husband’s assessed taxation liabilities for the years 2019, 2020, and 2021 in the total amount of $2,673,902. The wife argued that the extant tax obligations at separation in about January 2019 were about $292,345 and they have “ballooned” to millions of dollars since, in circumstances where the husband has expanded large sums on such things as his wedding with Ms Q, rather than pay tax. She supported this argument by reference to the husband’s integrated client account issued on 14 August 2019 (Exhibit A, p.311).
However, a consideration of the evidence limited to the integrated client account would be misleading. The notice of assessment issued to the husband on 17 May 2022, but for the financial year ended 30 June 2019, shows the husband was assessed for tax of $2,886,393 for that financial year on taxable income of $6,473,992. After credits for offsets and PAYG instalments and withholding, the husband owed $1,917,258.60 in tax for the 2019 financial year as at May 2022. Accordingly, I infer that a significant proportion of the husband tax debts at trial are referrable to the period in the 2019 financial year before separation.
In most cases, according to the usual practice of the Court, if a tax liability exists, the Court should take it into account when calculating the nett amount available for distribution between the parties rather than use s 75(2) as a means of bringing to account a liability or potential liability (Campbell v Kuskey (1998) FLC 92-795; Rodgers & Rodgers (No 2) (2016) FLC 93‑712 at [28]–[32] (“Rodgers”); Dovgan & Dovgan [2021] FamCA 306 at [316]). But there is no rule of law that liabilities must be deducted from assets; the manner in which a particular liability should be treated is, ultimately, dependent upon the nature of the liability, the circumstances surrounding the liability, and the dictates of justice and equity shaped by each (Rodgers at [36] and [40]). Ultimately it is a question what is just and equitable (NHC and RCH (2004) FLC 93-204 at [71] (“NHC & RCH”)).
As stated, I am satisfied that a material proportion of the husband’s outstanding tax liability, to be included as Item 56, was incurred before separation. I also conclude that the taxation liability incurred after separation was assessed on income that the husband earned as a health professional and which in part was used to make payments either to the wife, such as spouse maintenance, or from which the wife benefitted, such as servicing mortgages or reducing loan balances which were on occasion redrawn to make payments to the wife. As explained shortly, I will also add back as notional property significant amounts which the husband could, as the wife argued, have been used to reduce outstanding tax. I will include Item 56 on the balance sheet.
I note here that Item 57 which was described as Capital Gains Tax liability for shares sales in the year ended June 2024 had no amount included. I will exclude this item from the balance sheet but take account of potential capital gains tax under to s 79(4)(e).
Notional Property – “Add backs”
There was a significant dispute between the parties about notional property being added back into the balance sheet. Before considering the individual disputes it is necessary to set out the principles applicable to notional property or “add backs”.
First, it is also well settled that adding back property is exceptional and may be appropriate where the parties have expended money on legal fees, where there has been a premature distribution of matrimonial assets, or “waste” or wanton, negligent, or reckless dissipation of assets designed to reduce the property pool (Candle & Falkner (2021) FLC 94-069 at [52]‑[58]).
Secondly, adding back non-existent property can have a distorting impact on the reality of property available for division (Bevan at [79]). This is clearly a relevant consideration where the proposed added back property is an enormous sum such as $15,051,789. Proper consideration must be given to existing interests in property (Vass v Vass (2015) 53 Fam LR 373 at [139] (“Vass”)).
Thirdly, adding back property reflects a decision that, exceptionally, in the particular circumstances of a case, justice and equity requires it, for example, to address the inherent unfairness where but for the impugned expenditure the property interests available for division would be significantly greater (Watson & Ling [2013] FLC 93-527 at [29]–[34]). In cases that are not “exceptional”, justice and equity can be achieved not by adding back, but by taking up the same as a relevant s 75(2) factor which is, perhaps, “technically more correct” (Bevan at [79]; Trevi & Trevi (2018) FLC 93-858 at [30] (“Trevi”); Vass at [138]–[139]).
Fourthly, parties do not go into a state of suspended economic animation at separation and are entitled to reasonably conduct their affairs and expenditure post-separation in a manner that is consistent with properly getting on with their lives (M and M [1998] FamCA 42; C and C [1998] FamCA 143; NHC & RCH at [24]; Trevi at [29]).
Fifthly, an add back does not necessarily occur whenever a party has expended money realised from the disposition of assets that existed as at the date of separation; there needs to be some assessment of the reasonableness of the expenditure (AJO & GRO (2005) FLC 93-218 at [39]). For example, reasonable living expenses are not usually added back (Gilmour & Hofte (No 2) [2024] FedCFamC1A 9 at [18]).
Sixthly, adding back emphasises the point that satisfying the respective requirements of s 79(2) and s 79(4) of the Act to do justice and equity can require an “accounting” or “balance sheet” exercise for the purposes of s 79(2) and s 79(4), “so as to include the value of the dissipated property or expended sums within the total value of the parties’ existing interests in property, and to credit the value of same against the assessed entitlement of the dissipating or spending party” (Trevi at [47] per Murphy J).
Items 43 and 44 – Paid legal fees
Paid legal fees are a recognised category of expenditure which it is often appropriate to add back to the balance sheet, in the exercise of discretion. In NHC & RCH at [57]–[58] the Full Court emphasised the source of the funds used, describing a guideline that distinguished funds used for legal fees existing at separation, which should be added back, from funds generated by a party post‑separation from his or her own endeavours or received in his or her own right (for example, by way of gift or inheritance), which should not.
As the husband submitted, in Trevi the Full Court urged a degree of caution in applying this guideline, with Murphy J pointing out that failing to add back legal costs is a pre-emptive decision about one party paying the other’s legal costs, which is inconsistent with the default position in s 117(1) of the Act that neither party pays all or some of the other party’s costs, before any finding of justifying circumstances to award costs in accordance with s 117(2).
Here the wife argued paid legal fees should not be added back for either party because this would unduly prejudice her. She argued that the quantum of her legal fees had been increased by the conduct of the husband, arising from his admittedly tardy response to Court orders and the vacation of the earlier final hearing dates. She also argued that the evidence did not permit a conclusion about the source of the funds to pay the husband’s legal fees, that is, whether from marital or post separation funds.
The wife’s paid legal fees are considerably more than those of the husband ($967,491 versus $566,892). Nonetheless, in light of Trevi, the reasons given by the wife do not persuade me. I shall include legal costs as added back property.
Item 48A – Reduction of the share portfolios
The husband had a considerable share portfolio at the date of separation. By the date of trial, it had been significantly diminished. The wife sought to add back an amount of $15,051,789. This is a reduction from the figure of $16,210,180 which appears in Item 48A on Exhibit Q and she claimed was the value at separation. She conceded this reduction in submissions. An add back of such size would plainly have a very substantial impact on the overall balance sheet. In short, without this add back, and on the basis of the agreed division of 53.5 per cent to the wife, if the wife retains Suburb C and her interest in G Investment Company, she would be compelled to make a substantial payment to the husband. As will become apparent, without adding back such a large amount, it is very difficult for the wife to justify retaining Suburb C unencumbered as part of a just and equitable outcome. However, if $15,051,789 is added back, the husband would be required to make a substantial payment to the wife, on the same basis.
In support of her claim to add back this amount, the wife argued that the husband had failed in his disclosure obligations to a deplorable extent, including a failure to provide essential information to the single expert, Mr Z, who was appointed specifically to produce a report “precisely because of the size, complexity and opacity of the husband’s dealings with approximately $18 million worth of shares held at the date of separation” (Wife’s closing submissions filed 4 April 2024, paragraph 14). She pointed out that the husband’s failures in disclosure were a major contributing factor in causing the original trial dates to be vacated, and the husband then failed to provide information in breach of Court orders, as detailed in the evidence of Mr Y. She further argued that the evidence of Mr Z was compromised because he had been unable to complete his task as an expert because of the husband’s conduct. The wife argued the husband had failed to explain the massive reduction in the value of the share portfolio and the appropriate course was for the Court to accept its value as at separation and add back property of the husband to that value.
It should be pointed out here that the balance sheet includes continuing shareholdings of the husband which have not been sold or have been purchased since separation. Item 16 gave an agreed value of the Westpac share portfolio at the date of trial, being $1,165,827. Item 17 gave the value of the S Pty Ltd portfolio in listed shares as $179,000. Item 18 gave a break down of a S Pty Ltd portfolio of unlisted shares totalling $1,168,012. Item 19 gave a value of $556,133 for additional miscellaneous unlisted shares. The total of Items 16, 17, 18 and 19 is $3,068,972.
The husband resisted the inclusion of any added back property of this nature. He claimed the approach of the wife sought to reverse the onus of proof by simply pointing to the reduction in the share portfolio value as sufficient to demonstrate wastage or a design to diminish the pool of assets.
The wife bears the onus of establishing that the reduction in the share portfolio is inadequately explained, and constitutes wastage, premature distribution of marital assets, or a deliberate course of conduct to diminish the pool. As a first step, this at least required her to call evidence either sufficient “to raise an issue as to the existence or non-existence of a fact in controversy” or “sufficiently weighty to entitle, but not compel, a reasonable trier of fact to find” in her favour and, on either view, thereby prima facie compel the husband to respond; in other words to place a “provisional” or “tactical” burden on the husband to call contradicting evidence or risk losing on the issue (Strong v Woolworths Ltd (2012) 246 CLR 182 at [52]–[53] per Heydon J).
In the context of a conceded history of the husband being disorganised and tardy in providing disclosure, I am satisfied that the evidence of the decline in the value of the share portfolio is sufficient to compel the husband to respond or risk losing on the issue. This does not reverse the onus as the husband argued. Rather the wife still carries the onus of proof. But the contradicting evidence of the husband, if sufficiently convincing, may cause her to fail in satisfying the onus.
In Wei v Xia (No 5) (2023) 67 Fam LR 421 (“Wei”) (appeal dismissed: Wei & Xia [2024] FedCFamC1A 65), at [148]–[165] I discussed the principles applicable to onus of proof and inferential reasoning and relevant authorities. In summary, determining whether an onus of proof has been discharged, the tribunal of fact must reach a state of actual persuasion; it is necessary for the Court to assess the combined and cumulative weight of all evidence, including circumstantial evidence, as a unified whole; making an informed, considered, qualitative appreciation of the evidence in its entirety, because the overall effect of the detail is not necessarily the same as the sum total of the individual details. The overall probabilities in the evidence have long been recognised as critical to the process of inferential reasoning and conclusions in fact finding.
In relation to the consequences of failures in disclosure, in Wei at [159]–[161] in particular, I pointed out that the evidentiary principle applied by courts and derived from Blatch v Archer (1774) 1 Cowp 63 (“Blatch v Archer”) has importance for the drawing of adverse inferences, and permits the Court to take into account the failure of a party to give or to call evidence for the purpose of evaluating the evidence which is before the Court. It permits an assessment of the weight of evidence, unfavourable to the party against whom the principle is applied. In Wei at [174]–[175] I also discussed at some length the overlap of the principle in Blatch v Archer and the consequences of non-disclosure as settled in the jurisprudence of this Court. Non‑disclosure warrants the Court being not unduly cautious about making findings in favour of the innocent party. The consequences can include a finding that hidden assets exist, or take account of the likely existence of other assets under s 79(4)(e) of the Act (s 75(2)(o) of the Act), or an order beyond the ascertained property; to achieve substantial justice relative to the subject non-disclosure or order that all known assets should be awarded to the innocent party.
Here it is the argument of the wife that the evidence of the husband concerning his dealings with shares should be entirely discounted or its overall weight assessed unfavourably, thereby failing to meet his tactical burden of proof.
The husband argued that his disclosure was adequate, and his explanations of the decreases in value of the portfolio are convincing. As mentioned earlier, there was no dispute that the husband focussed his share trading activities primarily on “micro-cap” companies. These constitute a riskier investment class, typically falling outside the ASX 300, but capable of yielding greater financial reward. He gave evidence, which I accept, that his ability to derive income from his business was severely restricted by the impact of the COVID-19 pandemic during 2020 and 2021, by reason of government imposed restrictions. He claimed that he was compelled to sell shares to meet his ongoing expenses, which, as detailed above, remained substantial in those years, including his business expenses, living expenses, spouse maintenance to the wife, taxation liabilities and servicing borrowings secured against Suburb D and Suburb C. He was not cross-examined about this evidence. I accept it accords with the overall probabilities.
Mr Z’s evidence is very important in helping determine this dispute. He was instructed to prepare a report setting out:
(a) A narrative explanation for the decrease in the Husband’s shareholdings (excluding [H Pty Ltd]) between 30 June 2018 and 31 August 2023, with yearly points in time;
(b) The debits and credits (sorted and categorised) on the Husband’s Westpac account ending in […51] between 30 July 2018 and 31 August 2023); and
(c) Confirming whether all of the monies spent or received on share transactions were paid from or into the Husband’s Westpac account ending in […51] (“account […51]”) and identify any share transactions amounts which were not paid from or into that account.
(Exhibit O, p.1–2)
It can be seen that in the instructions to the expert the start date was 30 June 2018 and a Westpac account, number …51 was of central importance. In addition to this online brokering account the husband dealt with shares through brokers called S Pty Ltd, JJ Financial Services and KK Financial Services.
Mr Z qualified the conclusions in his report in the following paragraph:
1.3In preparing this report, I have experienced difficulties and delays in obtaining responses to requests for information. I advised the Parties on 28 November 2023 that in circumstances where there are delays to responses to any requests, the matter may not be given priority and delays could be expected. Further, despite requesting details of any Court or other relevant dates to assist with planning and prioritising work on 26 January 2024, I was not advised by either Party of the hearing commencing on 2 April 2024 until 20 March 2024. Therefore, I am not in a position to provide a report setting out responses to all aspects of the instructions. This report sets out some of the matters that have been considered and a summary of some of the findings from the work undertaken.
(Exhibit O, p.2)
Mr Z further pointed out:
1.5 Therefore, there is not one central institution that maintains a record of all of the Husband’s investments. I have undertaken a detailed analysis of the Husband’s trading via his Westpac online broking account up to 30 June 2023 and I have summarised that analysis in this report. I have undertaken a partial analysis of the Husband’s share trading via [S Pty Ltd] and limited analysis of transactions with [JJ Financial Services] and [KK Financial Services]. I have not had sufficient time to complete that analysis and summarise it in this report, however, I have set out some of my findings from the analysis that has been undertaken. I have only undertaken limited analysis of shares purchased and sold via other means and I have set out some of my findings from that analysis in this report.
(Exhibit O, p.2)
The wife leant heavily in her submissions upon these limitations expressly identified by Mr Z, arguing they justified the Court simply adding back the value of the share portfolio at separation. I do not accept this broad argument. Despite gaps in the material supplied to him, as the following discussion shows, Mr Z was able to produce a detailed report which gave a persuasive insight into the husband’s share dealings, because he had sufficient information about Westpac account …51, and share broker accounts. Mr Z’s evidence has substantial weight.
At 1.7 of his report Mr Z set out the following table analysing “the movements in the [K Company] share portfolio on an annual basis for the years ended 30 June 2019, 2020, 2021, 2022 and 2023” (Exhibit O, p.3). The table sets out “a summary of the movements in the value of the share portfolio each year, including an estimate of the profit or loss from trading and movements in share prices”:
Year ended 30 June 2019 2020 2021 2022 2023 Total Value at start of year 13,917,029 16,019,417 12,536,932 14,812,762 4,459,845 13,917,029 Purchases 2,293,420 1,856,085 1,890,945 2,388,757 247,031 8,676,238 Sales (5,697,945) (4,070,819) (5,728,884) (6,300,762) (1,789,983) (23,588,393) Est. Profit / (Loss) 5,506,913 (1,267,751) 6,113,769 (6,440,912) (1,144,450) 2,767,569 Value at end of year 16,019,417 12,536,932 14,812,762 4,459,845 1,772,443 1,772,443
The following observations should be made about this table. In the year ended June 2019 the combined effect of purchases, sales, and profit increased the value of the portfolio from $13,917,029 to $16,019,417. The contentions of the wife focus primarily, if not exclusively, on the diminution in value of the portfolio held in the Westpac account from July 2019, that is, starting with the value of $16,019,417. In the year ended June 2020 the combined effect of purchases, sales and losses reduced the value to $12,536,932. Between May 2019 and December 2020 the husband sold shares to the value of $2,383,184 to help in the discharge of his 2017 and 2018 tax liabilities. The combined effect of purchases, sales and losses in the year ended June 2021 increased the value to $14,812,762. This evidence shows that for those three years, in the context of sizeable share trading, the portfolio underwent substantial fluctuations in value, rather than betraying a trend of dissipation. I do not accept the evidence raises an inference that the husband’s dealings with the share portfolio was wanton, reckless or unreasonable, or designed to reduce the pool in the financial years 2019, 2020 or 2021.
The substantial fall in value occurred in the year ended June 2022. Mr Z explained at 1.8 of his report that:
I note that the estimated loss of $6,440,912 in the year ended 30 June 2022 predominately relates to trading and price movements in two shares, being [LL Shares] and [MM Shares].
(Exhibit O, p.3)
Mr Z further explained this conclusion in Appendix G to his report. He makes clear that all sales and purchases of shares have been accounted for in account …51. He then explains at G.9:
… The reduction in the value of the share portfolio of $10,352,917 in the year ended 30 June 2022 is attributed to a combination of:
a) an estimated net loss of $6,440,912 from trading and movement in prices over the year;
b) net sales of on-market transactions via Westpac of $1,988,174 accounted for in account […51];
c) the sale of [PP Shares] via [QQ Financial Services] for $2,645,493; and
d) off-market purchases and option exercise of $721,662 accounted for in account …51.
(Exhibit O, p.35)
At G.10 Mr Z shows that there were 97,154,036 shares in LL Shares with a price of $0.026 per share held in the portfolio as at 30 June 2021. As at 30 June 2022 the number of shares, after sales and purchases, including a capital raising, had risen to 151,400,000 but the price per share had declined to $0.006. There were 85,936,030 MM Shares in the portfolio as at 30 June 2021, valued at $0.071 per share. This had fallen to 6,000,000 by 30 June 2022 with an increased value of $0.31 per share. There were sales in this financial year of 30,092,726 at $0.0521 per share, and purchases of 310,000 shares at $0.3588 per share. However, there was also a share consolidation of 58,928,885 shares.
The husband also gave evidence in his trial affidavit of numerous share transactions. These were presented in the form of tables (paragraphs 80, 82, 88). In cross-examination he conceded that the tables were actually prepared by his solicitors on the basis of primary documentation. The wife argued for this reason the tables had no persuasive weight. I do not accept the wife’s argument. I have already discussed some of the relevant dealings (above at [18]–[44]). While the method of preparing the tables in the husband’s affidavit was not ideal, I infer the husband knew about his own share transactions, he adopted the tables through his affidavit, and the overall probabilities favour the husband’s evidence in this regard. The evidence of Mr Z is also consistent with the husband’s evidence in this regard. For example, at G.8 of his report he shows that there were sales in the amount of $3,655,269 between June 2021 the June 2022 financial year and at G.7 he agreed that the deposit of $2,645,493 into the account …51 on 30 July 2021 corresponds with a sale of a bundle of shares that between May and September 2021. The husband claimed, and I accept, he sold shares to reduce the X Financial Services mortgage secured against Suburb D by the amount of $3,667,842.
In relation to the financial year ended 30 June 2023, Mr Z explained the reduction in value of the husband’s share portfolio at H.5 of his report:
For the year ended 30 June 2023, the movements in the number of shares held have been agreed to Westpac trading records and all sales and purchases of shares have been accounted for in account […51]. The reduction in the value of the share portfolio of $2,687,402 is attributed to a combination of:
a) an estimated net loss of $1,144,450 from trading and movement in prices over the year; and
b) net sales of on-market transactions via Westpac of $1,542,952 accounted for in account […51].
(Exhibit O, p.38)
In relation to LL Shares specifically, Mr Z pointed out that although the share price at 28 March 2023 had risen to $0.10 cents per share, there was a share consolidation on a 50 to 1 basis, i.e., every 50 shares held would be converted into 1 share with effect on 8 August 2023 (Exhibit O, p.36).
The point about this evidence is that it shows that the ordinary market forces, finance restructuring by companies, as well as sales and purchases were largely responsible for the diminution in the value of the portfolio between 1 July 2021 and 30 June 2022, and again to 30 June 2023. This evidence provides an explanation of the fall in value which is not affected by any non-disclosure by the husband. Again it also inconsistent with an inference that diminution was the result of wanton, reckless or unreasonable conduct of the husband, or conduct designed to reduce the pool.
The husband submitted that overall the contention that he had “frittered away millions of dollars” was not supported by any of his affidavit evidence or concessions in cross-examination nor by the evidence of Mr Z. I broadly accept this submission. The argument of the wife implicitly accepted that some of the “massive reduction” of the share portfolio was adequately explained, but the Court would then have to “pick and choose” particular sums from Mr Z’s report. This, it was argued, was a less satisfactory course because Mr Z was unable to complete his task adequately. In other words the wife argued that because of some alleged opacity, the reasons for the reduction in value of the portfolio and disbursal of share proceeds, the Court should act on the basis the entire $15,051,789 was inadequately explained and should be treated as exceptional, so as to falling within a category of add back.
I do not accept these contentions. Overall, I accept Mr Z was able to complete his task adequately. The evidence of the husband taken with that of Mr Z is sufficient in my view to support the conclusion that whatever deficiencies there may have been in disclosure and provision of information to Mr Z, the combined weight of all the evidence, including the detail in his report, and the overall probabilities do not justify the submission that the diminution of the share portfolio is unexplained. Nor do they support adverse inferences against the husband leading to the conclusion that the share sales were unexplained, wanton or designed to reduce the pool of assets or otherwise unreasonable.
On the contrary I am satisfied that the share portfolio was reduced in value over a five year period through a combination of market fluctuations, corporate refinancing arrangements such as share consolidations, and the need for share sales to meet various expenses, including payments to service mortgages and to the wife. The pressure to sell shares was exacerbated by COVID-19, the purchase of Suburb D and the purchase of B Street. I also point out the evidence of the use of the proceeds of share sales to assist the purchase of Suburb D was clear and unchallenged. The value of Suburb D, already included on the balance sheet, reflects the value of those sold shares. Consequently, to include the entire amount of $15,051,789 as an add back would plainly result in a level of double counting.
Overall, I am not persuaded that adding back the value of the share portfolio at separation is necessary to achieve substantial justice relative to any failures in disclosure by the husband. I am unable to accept it would be just and equitable.
As a matter of discretion, I decline to add $15,051,789 back as notional property of the husband.
Item 48A – Wedding expenses
The wife also sought to add back $856,224 which the husband spent on the wedding for his marriage to Ms Q. The wedding took place overseas. The wife argued this expense was extravagant and wasteful.
The husband argued the wedding expenses were not unreasonable. He and Ms Q wanted a “destination wedding” which was not intrinsically unreasonable, and it was not unreasonable to pay for their guests to attend. He also argued that it was reasonable for him to mark the start of a new chapter in his life with a “sliver” of happiness, after ending an acrimonious marriage and losing his eldest child. Finally, the husband makes the point that in the context of his overall earning capacity, and the financial support he was providing to the wife and their children, including servicing the mortgage secured against Suburb C, spousal support and child support, the wedding expense was relatively modest.
This much may well be true. But the assessment of whether the expenditure is reasonable, and falls within a category allowing the husband to “get on with his life”, is also informed by the question of whether it is just and equitable for the expense to diminish the available pool from the point of view of the wife. I find that it is not. I find this expenditure was unreasonably large and it would be just and equitable to add back this amount as notional property of the husband.
Item 48A Funds advanced to Ms Q
The wife also argued that $368,236 paid to Ms Q and the purchase of a luxury vehicle for $200,000 were unreasonable expenses and should be added back.
In his affidavit, the husband claimed that he is trying to diversify into new business areas, and Ms Q is providing services as a consultant for this purpose. In cross-examination the husband maintained the payments were for professional services to his business, pointing to Ms Q’s full-time position as manager for a company called NN Company. However, there was no evidence of any written agreement for Ms Q to provide any services, and the husband was unable to identify specific advice given which could justify the level of payment. I accept the wife’s submission that the payments to Ms Q were not legitimate business expenses. I also accept the submission that the husband’s own evidence in cross-examination demonstrated a pattern of making “income splitting” payments to family members. Again, I find it would not be just and equitable for the wife to share in this expense by diminishment of the pool. I will add back $368,236 as notional property of the husband.
I reach the same conclusion concerning the luxury vehicle. While Ms Q may use the vehicle, such an expensive car is not reasonable and therefore $200,000 should be added back.
Item 48A – Interest charges on tax liabilities
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:
Ownership Description Agreed value 1 Wife Suburb C $14,500,000 2 Wife Interest in G Investment Company $3,009,549 3 Husband Suburb D $8,800,000 5 Wife W Bank Account …02 $41,349 6 Wife Westpac Account …51 $232 7 Wife Westpac Account …77 $5,855 8 Wife Westpac Account …83 $39,623 9 Husband E Bank Account …18 $1,905 10 Husband E Bank Account …21 $5 11 Husband Westpac Account …51 $392 12 Husband Westpac Account …43 $125 13 Husband Westpac Account …89 $7 14 Husband NAB Account …47 $193 16 Husband K Share Portfolio …77 $1,165,827 17 Husband S Portfolio …97 $179,000 18 Husband Investments in unlisted shares through S Pty Ltd $1,168,012 19 Husband Additional parcels and unlisted shares $556,133 24 Husband Interest in H Pty Ltd (corporate trustee) $1 27.1 Husband Artwork 4 $300,000 27.2 Husband Artwork 5 $250,000 27.3 Husband Artwork 6 $10,000 27.4 Husband Artwork 1 $18,000 27.5 Husband Artwork 2 $40,000 27.6 Husband Artwork 7 $45,000 27.7 Husband Artwork 3 $38,000 28 Wife Motor Vehicle 1 $38,000 30 Husband Motor Vehicle 2 $105,000 31 Husband Luxury vehicle $1,000,000 36 Wife Partial property settlement $150,000 37 Wife AA Club Membership $5,000 38 Wife RR Venue Membership $4,000 39 Wife Household contents $32,970 40 Wife Personal effects including jewellery $50,000 41 Husband Household contents – Suburb D $54,890 42 Husband Personal effects including luxury watch $100,000 42A Husband Partial property settlement – E Bank Funds $809,213 55 Husband Estimate of 2022 tax liability refund $393,437 Total $32,911,718 ADD BACKS 43 Wife Paid legal fees $967,491 44 Husband Paid legal fees $566,892 45 Wife Single expert valuation fees & mediation fees owed by the wife $15,603 48A.2 Husband Wedding expenses $856,224 48A.3 Husband Funds advanced to Ms Q $368,236 48A.4 Husband Luxury vehicle for Ms Q $200,000 48A.5 Husband General interest – husband’s income tax account $588,411 48A.6 Husband General interest charges – Activity statement $302,223 48A.7 Husband PAYGW Director Penalty $31,757 48A.8 Husband GST Director Penalty $11,805 Total $3,908,642 LIABILITIES 23 Husband Interest in Sandri Family Trust $17,710 49 Husband Suburb C – E Bank Account …00 $816,344 50 Husband Suburb C – E Bank Account …01 $431,681 51 Husband Suburb C – E Bank Account …00 $1,204,924 52 Husband Suburb D – NAB Line of Credit …52 $3,999,300 54 Husband Estimate of 2023 Tax liability $131,660 56 Husband Outstanding tax liabilities 2019, 2020 and 2021 $2,673,902 58 Husband Integrated client account $982,915 59 Husband H Pty Ltd ATF G Investment Company ATF Family Trust $108,788 60 Husband Loan owed to Sandri Family Trust $490,491 61 Husband Westpac credit card …78 $26,356 62 Husband OO Financial Services – Luxury Vehicle $396,259 65 Wife Westpac credit card $6,046 67 Wife Personal Loan – Mr HH $90,000 Total $11,376,376 SUPERANNUATION Member Name of Fund Agreed value 69 Wife Super Fund 1 $159,369 70 Husband Super Fund 2 $1,988,265 71 Husband Super Fund 3 $339,606 Total $2,487,240 NET POOL (INCLUDING SUPERANNUATION): $27,931,224
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).
However, in light of the parties’ agreed approach, and after consideration of the evidence, I accept it is broadly appropriate in this case to use percentages as a means to achieve just and equitable orders for the division of the property interests, and the parties’ agreed percentages are an important starting point. In light of the husband’s characterisation of 53.5 per cent to the wife as a “floor”, if the method of percentage division is followed through, in light of what has transpired since 1 December 2021, described in detail above, I consider that the Court in the exercise of discretion should make a further percentage adjustment in favour of the wife under s 79(4)(e).
The husband is 57 and the wife is 54. She did not work for the twelve years prior to separation, and has had difficulty obtaining employment since separation. She retrained and obtained employment with a salary of $110,000 between December 2021 and July 2022 when she began working part time. She now has a permanent part time position but the evidence did not permit the conclusion that she was likely to be able obtain a highly paid full time position. I accept that she suffers from anxiety. I also accept it is likely that the youngest child will continue to live with her for a time after 2024.
The husband deposed to experiencing several health issues which have resulted in him requiring surgery which will leave him unable to perform part of his work for a period of three months. I accept that the husband has struggled with his mental health and in late 2023 was diagnosed with a medical condition. He gave evidence, which I accept, that he cannot work the long hours “as I once did”. He clearly has been and remains under considerable financial pressure, but that situation is primarily as a consequence of extravagant expenditures he has chosen to make. The husband contends these factors have and will continue to adversely impact his earning capacity. I accept this is likely, but I am satisfied he will retain a reasonably strong earning capacity, certainly beyond the wife’s capacity. He is married to Ms Q who has full time employment, although now has a baby to care for. I have considered the likelihood of capital gains tax liabilities accruing to his account, but none of the proposed orders will cause such a liability to accrue. I find that share trading is unlikely to generate the level of returns achieved by the husband in the past. At 57 the husband is closer than the wife to accessing superannuation, which in his case is agreed to have a substantial value of $2,327,871.
Taking all these matters in account, I consider that there should be an adjustment in the wife’s favour of 2.5 per cent above the agreed “floor”.
Accordingly, the property of the parties should be divided 56 per cent to the wife and 44 per cent to the husband.
CONCLUSION
To achieve this outcome, and attending to the real impact in money terms, I have concluded that the wife should be given the opportunity to retain Suburb C and to discharge the residual E Bank loans of the husband secured against it. After the net proceeds of B Street were paid into account …00, the total loans still owing to E Bank, and secured against Suburb C, are about $2,452,949. In order for the husband to receive his entitlement of 44 per cent, the wife will also have to pay the husband a further $1,433,560. I have taken account of the fact that the youngest child is doing the Higher School Certificate in 2024, so the wife should be allowed 60 days to obtain finance or take any other necessary steps for these purposes. This will leave the wife with 56 per cent (rounded) of the assets.
Although the wife wants to retain Suburb C unencumbered, the evidence, and my reasons set out above generally, show this is probably not realistic nor is it just and equitable, if the husband is to receive his entitlement, and the wife retains her interest in G Investment Company, including the T Apartment, valued at $3,009,549, which seemed to be common ground. The T Apartment can earn income or alternatively could be used as a source of funds if sold. If the wife is unable to discharge or refinance the husband’s loans secured against Suburb C and pay him $1,433,560, Suburb C can be sold. On current values this will result in net proceeds of approximately $10,500,000 being received by the wife which is sufficient to enable her to rehouse herself, and the youngest child. The husband’s overall financial position will improve by about $3,900,00.
The husband will retain Suburb D valued at $8,800,000, and a stronger earning capacity. His liabilities, of which almost half are his taxation obligations, will be reduced by the discharge of the E Bank loans and he will have the opportunity to reduce his liabilities further by receiving $1,433,560.
The evidence shows that there are outstanding unpaid amounts by the husband, in relation to the E Bank loans which he has been required to pay pursuant to Court orders made during the course of the proceedings, including those made on 4 April 2024. The capital sum of $1,433,560 to be paid to the husband should be adjusted to take account of any amounts owing pursuant to those orders. My orders will make provision for this.
Both parties will retain their superannuation. The parties will retain the artwork and sculptures as agreed between themselves.
I am satisfied the outcome is just and equitable when viewed in real money terms. The proposed orders are appropriate to finally determine the financial relationship between the parties and avoid further proceedings. In light of the description of the outcome in [159] and [163] above, I do not consider it necessary to set out a table of the assets and liabilities of the parties resulting from the orders.
COSTS
Neither party has been wholly successful. My inclination is not to make any orders as to costs. However, there have been hearing dates vacated and either party may wish to make an application for costs if offers to settle have been exchanged. I will make provision for any application for costs to be made within 28 days of this judgment.
CONCLUSION
For all the foregoing reasons I am satisfied the orders set out at the commencement of these reasons should be made.
I certify that the preceding one hundred and sixty-six (166) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Harper. Associate:
Dated: 24 July 2024
SCHEDULE 1
Exhibit Label Document Tendered by A Exhibits to the wife’s affidavit filed 24 October 2023 AW B Financial Statement of 26 October 2023 AW C Objection to the husband’s material as marked up by Harper J AW D Aide Memoire General Interest Charges – Income Tax Account AW E Aide Memoire General Interest Charges – PAYG Director Penalty Statement AW F Aide Memoire General Interest Charges – GST Director Penalty Statement AW G Aide Memoire General Interest Charges – Activity statements AW H Aide Memoire – Payments to Ms Q AW I Futurity Annual Member Statement AW J Material returned from subpoena to H Pty Ltd RH K Wife’s financial statements dated 16 February 2023 and 29 July 2019 RH L Members notice board for AA Club RH N Husband’s financial statements dated 27 March 2023 and 31 October 2019 RH O Mr Z report Joint P Index of tender bundle references sought to be relied upon by the applicant wife AW Q Draft joint balance sheet Joint R Proposed minute of order RH S Index for exhibits relied upon by the husband RH T Husband’s tender bundle RH U Wife proposed final orders AW V Wife’s proposed minute of interlocutory orders AW W Wife’s tender bundle AW ANNEXURE “A” – MINUTE OF ORDERS SOUGHT BY THE WIFE
UPON APPLICATION TO THE COURT IT IS ORDERED:
1.That within three months of the date of these Orders the Respondent Husband pay all monies, do all things and sign all documents necessary to discharge the mortgage to Westpac Banking Corporation being registered as dealing no. […] secured 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 property”) and remove the Applicant Wife as guarantor of the following loans pursuant to the Westpac Banking Corporation mortgage:
1.1 [E Bank Loan BSB …] account number […00];
1.2 [E Bank Loan BSB …] account number […]; and
1.3 [E Bank Loan BSB …] account number […];
(“the [E Bank] loans”)
and thereafter the Applicant Wife is to indemnify the Respondent Husband against all or any liability in relation to the property from the date of discharge of the Westpac Banking Corporation mortgage.
2.That within three months of the date of these Orders the Respondent Husband pay to the Applicant Wife by way of alteration of property interest by bank cheque the sum of $[INSERT].
3.That pending the Respondent Husband’s compliance with Order 1 and/or Order 2 or Order 4 (in the event of default by the Respondent Husband of Order 1 and/or Order 2):
3.1the Respondent 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 Applicant Wife in respect of all such obligations;
3.2the Respondent Husband shall be liable for meeting all minimum repayments due and owing on the National Australia Bank Flexi Plus Mortgage BSB […] account number […52] or such other mortgage/line of credit secured against the [Suburb D] property in substitution of the current Flexi Plus Mortgage ending […52] (“the NAB loan”);
3.3each party is restrained from drawing down or against the NAB loan, or from in any way increasing the indebtedness of either of the parties other than for the purposes of the payment to the Applicant Wife pursuant to Order 2 above, arising in respect of the NAB loan and these Orders shall constitute sufficient authority to National Australia Bank to restrict each parties’ access to the said NAB loan in the manner as contemplated by this Order;
3.4each 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.That in the event that the Respondent Husband fails to comply with Orders 1 and/or 2 above, the parties shall within fourteen days of the Respondent Husband’s non compliance do all acts and things and sign all documents necessary to cause the property at [L Street, Suburb D] being the whole of the property contained in Certificate of Title Folio Identifier […] (“the [Suburb D] property”) to be listed for sale and upon settlement of the sale of the [Suburb D] 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:
4.1Payment to discharge the mortgage held by NAB;
4.2Payment of the Real Estate Agent’s commission, advertising and other expenses payable upon the sale;
4.3Payment of the Conveyancer’s legal costs and outlays relating to the sale;
4.4Payment of the usual adjustments of sale including but not limited to municipal and water rate adjustment;
4.5If the Respondent is in default of Order 1, in payment of such payment the [E Bank] loans that remain outstanding;
4.6If the Respondent is in default of Order 2, in payment to the Applicant Wife of such payment that remains outstanding together with interest;
4.7The then balance to be provided to the Respondent Husband.
5. That for the purposes of Order 4 above:
5.1The [Suburb D] property shall at first instance be sold by Auction;
5.2In the event the [Suburb D] property fails to sell at auction or within fourteen (14) days after the date of the auction pursuant to Order 5.1 by further negotiation, the property shall be listed for sale by Private Treaty; and
5.3In the event that the [Suburb D] property is not sold by private treaty pursuant to Order 5.2 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 D] property remains unsold following the second auction then the property shall be re-submitted for sale by private treaty in accordance with Order 5.2 above and then auction pursuant to this Order until it is sold.
6. For the purposes of Order 4 and 5, the following sale conditions shall apply:
6.1The Respondent Husband shall notify the Applicant Wife 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;
6.2The method of sale shall be as agreed between the parties in writing with regard to the recommendation of the real estate agent;
6.3The listing price (or reserve price if sold at auction) shall be agreed between the parties in writing;
6.4The sale price shall be agreed between the parties in writing and the Respondent Husband shall be restrained from accepting any offers without the express written consent of the Applicant Wife;
6.5The contract of sale shall provide for completion within 42 days after the date of the contract, unless otherwise agreed between the parties in writing;
6.6The Respondent Husband shall ensure that the Applicant Wife is notified of the progress of the sale including but not limited to:
6.6.1Notifying the Applicant Wife of any offers made to purchase within four (4) hours of receiving such offer;
6.6.2Notifying the Applicant Wife of all inspections and open homes.
6.7The Respondent Husband shall co-operate in every way in relation to the marketing and sale of the [Suburb D] property, including, but not limited to:
6.7.1Allowing inspection at all times reasonably requested by the agent;
6.7.2Making the key readily available to the agent;
6.7.3Ensuring that the [B Street] is clean, neat and in good order at the time of any inspection or is being photographed for marketing purposes.
7.In addition to order 6.6, the Applicant Wife has liberty to serve a copy of these Orders upon the agent and conveyancer and this order acts as authority for the agent and conveyancer to provide to the Applicant Wife copies of all correspondence and documents in relation to the sale of the [Suburb D] property, including but not limited to:
7.1notice of any change in the auction reserve price;
7.2formal offers made by potential purchasers of the property, including any sale updates;
7.3the Contract for Sale in draft and a signed copy upon any exchange of contracts;
7.4the Settlement Adjustment Sheet in draft and a finalised copy in preparation for settlement; and
7.5all other documents in relation to the disbursement of sale proceeds and finalisation of sale.
8.That the parties forthwith do all things and sign all documents necessary to close the joint Westpac Classic Plus account no. […61] and pay the balance of those accounts on closure to the Applicant Wife.
9.That within fourteen days from the date of these Orders the Applicant Wife make available for collection by the Respondent Husband the following artwork:
9.1 [Artwork 1];
9.2 [Artwork 2]; and
9.3 [Artwork 3].
10.That other than as provided for in these Orders, the Respondent Husband and wife be declared to have the sole right, title and interest in:-
10.1Any chattels, goods, furnishings, bank accounts, artworks and other property which are at the date hereof in their possession respectively.
10.2Any monies, shares, debentures or superannuation entitlements which stand in their sole name respectively at the date hereof.
11.That the Respondent Husband and wife do all acts and things and give consents and execute all documents and writings necessary to give effect to the Orders made herein.
12.That 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 Section 106A of the Family Law Act to execute such deed, document or instrument in the name of the said party and do all acts and things necessary to give validity and operation to the deed, document or instrument upon the Registrar being provided with verification of such refusal or failure by way of affidavit.
ANNEXURE “B” – MINUTE OF ORDERS SOUGHT BY THE HUSBAND
Real Property
[Suburb C]
1. That it be noted, the Wife may seek to utilise the equity in [G2 Investment Company] (approximately $3,009,549.00), together with the payment of $1,219,759,63 pursuant to Order 9 below, towards the reduction of debt secured against the property at [F Street, Suburb C] being the whole of the land comprised in Folio Identifier […] (the “[Suburb C] property”) leaving a balance required to be refinanced of $2,977,056.37.
2. That within 90 days, the Wife do all things and sign all documents to discharge and/or refinance the mortgage secured against the [Suburb C] property being loan accounts:
a. [E Bank Account …01];
b. [E Bank Account …00];
c. [E Bank Account …00].
(“the [Suburb C] Mortgage”).
3. That the parties are restrained from withdrawing funds from the [E Bank] mortgage, in the absence of written agreement between the parties.
4. That subject to compliance with Order 2 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.
Default Sale of [Suburb C]
5. That in the event to Wife does not comply with Order 2 above, or elects not to retain the [Suburb C] property, the parties forthwith do all acts and things and sign all documents necessary to cause the [Suburb C] property to be sold by private treaty or auction as agreed and for the purpose of sale:
a. Retain an Agent by agreement, and failing agreement to be determined by the Proper Officer of the Real Estate Institute or his nominee;
b. Retain a solicitor to act on the sale by agreement, and failing agreement to be determined by the NSW Law Society.
6. That in the event the [Suburb C] property fails to be sold by private treaty or at auction within a period of three (3) months from the date the property is listed on the market, then each party should take all necessary steps and execute all necessary documents to cause the said property to be sold by auction at the earliest possible date, at a reserve to be agreed upon between the parties and, failing agreement, to be determined by the Proper Officer of the Real Estate Institute or his nominee.
7. That on settlement of the sale of the [Suburb C] property, the proceeds of sale be disbursed in the following priority:
a. Payment of the [Suburb C] mortgage;
b. Payment of agent's commission, advertising expenses and legal expenses of the sale;
c. The net balance up to a sale price of $14,500,000 be distributed to the Wife and any surplus proceeds over and above a sale price of $14,500,000 be split 53.5% to the Wife and 46.5% to the Husband.
[B Street]
8. That it be noted:
a. The husband exchanged contracts to sell the property at [B Street], […], Sydney certificate identifier […] & […] ([B Street]) for $16,000,000.00;
b. Settlement is scheduled [in] 2024;
c. The net proceeds of sale following the discharge of the NAB Loan facilities […28] and […76] (approximately $11,000,000.00), are estimated to be approximately $4,760,000 less legal fees, agents costs and the usual sale adjustments.
9. That on settlement of the sale of [B Street], the net proceeds of sale be distributed as follows:
a. $1,219,759.63 to the Wife;
b. The balance to the Husband.
[Suburb D]
10. That 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 situate at [L Street, Suburb D] in the state of New South Wales being all of the land in certificate folio identifier […].
Corporate Interests
11. That 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];
b. [G Investment Company].
12. That 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);
d. [G Investment Company].
Artworks and Statutes
13. That the Wife be declared to be the sole owner, to the exclusion of the Husband of the following artworks and statues:
a. [Artwork 4];
b. [Artwork 5];
c. [Artwork 6];
d. [Artwork 2];
e. [Artwork 7].
14. That the Husband be declared to be the sole owner, to the exclusion of the Wife of the following artworks and statues:
a. [Artwork 1];
b. [Artwork 3].
Other Assets
15. That save as otherwise provided for in these Orders, each party be declared to be the sole owner to the exclusion of the other to the whole of their right, title and interest in all items of property of whatsoever nature and wherever situated held by them including but not limited to superannuation, motor vehicles, boats, bank accounts, real property, money at bank, interest in any entity or Trust, shares, contents, personal items and the like.
Indemnities
16. That each of the parties shall indemnify the other and keep the other indemnified in respect of any liability in their respective name save as otherwise provided for in these Orders.
17. That the husband indemnify and keep the wife indemnified from all or any claims arising after separation and pursuant to liabilities incurred after separation, including claims of payments of taxes, liabilities, actions and/or debts of any nature whatsoever and howsoever existing or arising from the husband's interests in any company, business, partnership, self-managed superannuation fund or trust.
18. That the wife indemnify and keep the husband indemnified from all or any claims arising after separation and pursuant to liabilities incurred after separation, including claims of payments of taxes, liabilities, actions and/or debts of any nature whatsoever and howsoever existing or arising from the wife's interests in any company, business, partnership, self-managed superannuation fund or trust.
Implementation of Orders
19. That in the event either party refuses or neglects to execute any document to give effect to these Orders, the Registrar of the Family Court of Australia at Sydney be appointed, pursuant to Section 106A of the Family Law Act, to execute all such documents in the name of that party and to do all such acts and things necessary to give the validity and operation to the said documents.
20. Leave to apply as to the implementation of these Orders upon 7 days' notice to the other party and the Court.
Discharging Interim Orders
21. That all other Orders made during the proceedings be discharged.
Costs
22. Costs.
2
9
1