MARCONE & MARCONE
[2020] FamCA 850
•9 October 2020
FAMILY COURT OF AUSTRALIA
| MARCONE & MARCONE | [2020] FamCA 850 |
| FAMILY LAW – PROPERTY – Final Orders – where the parties separated approximately 10 years ago – where the parties agree that the division of the matrimonial assets should be equal – where the wife seeks an add-back in the sum of $19,000 – monies added back to the asset pool – where the wife’s principal residence will be subject to CGT if she sells the property – where the wife seeks that the husband indemnify her for 50% of any CGT liability she may incur from the sale of the property in the next 8 years – where the husband agrees to indemnify the wife for 2 years – where the parties seek a declaration of the existence of their Trust – declaration as to the existence of the Trust – order for a contingent liability that the husband be required to indemnify the wife in respect of one half of the CGT in the event of the sale of her principal residence for a period of 2 years – order for a 50/50 division of the net asset pool. |
| Evidence Act 1995 (Cth) s 140 Family Law Act 1975 (Cth) ss 75, 79 Family Law Rules 2004 (Cth) |
| Bevan & Bevan (2013) FLC 93-545; [2013] FamCAFC 116 Chapman & Chapman (2014) FLC 93-592; [2014] FamCAFC 91 Jarrott & Jarrott [2012] FamCAFC 29 |
| APPLICANT: | Mr Marcone |
| RESPONDENT: | Ms Marcone |
| FILE NUMBER: | MLC | 12470 | of | 2016 |
| DATE DELIVERED: | 9 October 2020 |
| PLACE DELIVERED: | Melbourne |
| PLACE HEARD: | Melbourne |
| JUDGMENT OF: | Johns J |
| HEARING DATE: | 21, 22 & 23 July 2020 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr Werner |
| SOLICITOR FOR THE APPLICANT: | Gigliotti Lawyers |
| COUNSEL FOR THE RESPONDENT: | Mr Kiernan |
| SOLICITOR FOR THE RESPONDENT: | Ian Robertson Legal |
Orders
DECLARATION
Pursuant to section 78(1) of the Family Law Act 1975 (Cth), the Court declares that F Pty Ltd holds on Trust for the Marcone Family Trust all real property interests presently registered in its name.
BY CONSENT IT IS ORDERED
The Husband shall retain the following assets:-
(a)The real property at AA Street, Suburb P in the State of Victoria (“AA Street”);
(b)His 50% interest in BB Street, Suburb CC in the State of Victoria (held jointly with B Pty Ltd, A.C.N. …).
The Husband shall retain the proceeds of sale of his interest in C Pty Ltd (A.C.N. …) and D Pty Ltd (A.C.N. …).
The Wife shall retain the following real properties:-
(a)Her 30% interest in DD Building, 2 Z Street, R Town in the State of New South Wales (held jointly with Ms FF);
(b)Her 50% interest in CC Building, 1 Z Street R Town in the State of New South Wales (held jointly with Ms T and F Pty Ltd);
Within 7 days, the proceeds of sale of the property at M Street, Suburb N presently held on trust by the Wife’s solicitors (approximately $224,266) shall be divided between the parties as follows:-
(a)First, $69,925 to the Husband; and thereafter
(b)The balance to the wife.
As soon as practicable, the parties shall do all things and sign all documents necessary to cause F Pty Ltd to pay the outstanding land tax payable in respect of the property at X Street, Suburb Y in the State of Victoria (“X Street”).
The Wife shall retain her shares in F Pty Ltd and her interest in the Marcone Family Trust.
Upon completion of proceeding …/2019 presently pending in the Victorian Civil and Administrative Tribunal (including any appeals) the husband and the wife do all such acts and things as may be required to effect a sale of the real properties at the Unit at G Street, Suburb P in the State of Victoria (Certificate of title Volume … Folio …) and the shop at G Street Suburb P (Certificate of title Volume … Folio …) (“G Street Properties”) and the proceeds of sale applied as follows:-
(a)First, to pay all costs and expenses of the sales;
(b)Second, to discharge any debt secured over either of the properties;
(c)Third, to pay any capital gains tax payable upon the sale of the properties; and thereafter
(d)The balance to F Pty Ltd, subject to these orders.
Prior to the sales of either of the G Street Properties, the parties may by agreement undertake any rectification works as they may be advised.
The parties have liberty to apply for further orders concerning the rectification and/or sale of the G Street Properties.
Upon settlement of the sale of the G Street Properties, and subject to order 10 above, all funds held by F Pty Ltd shall be divided between the parties in equal shares subject to the following:-
(a)The Husband may take his share over a period of up to two financial years, as he may be advised.
(b)The Wife may take her share at such intervals as she may be advised.
(c)Each party will be separately liable for any tax payable upon his or her share.
BY THE COURT
Until the settlement of the sale of the G Street Properties, any rental received in relation to the G Street properties or either of them be paid into the bank account maintained by F Pty Ltd, with any expenses relating to those properties to be paid from the said account.
BY CONSENT IT IS ORDERED
By no later than 30 June in the tax year in which the Husband receives his final payment referred to in paragraph 11 above, the Husband shall transfer to the Wife, all of his shares in F Pty Ltd and sign all documents necessary to relinquish his interest in the Marcone Family Trust.
Save as otherwise provided expressly in these orders, the parties shall each be responsible for half of all expenses relating to the G Street properties pending compliance by the Husband with paragraph 13 above.
Save as expressly provided in these orders, each party shall hereafter be personally responsible for payment of all expenses relating to any real properties which he or she is to retain pursuant to these orders, and for the purposes of this order any real properties to be retained by F Pty Ltd are deemed to be properties to be retained by the Wife or her nominee.
The Wife may, at her election, require F Pty Ltd to sell the property at X Street anytime up to two years from the date of these orders, subject to the following:-
(a)The election shall be made by notice in writing to the Husband.
(b)The Husband and the Wife shall have the joint conduct of the sale.
(c)The property shall be sold by an agent agreed between the parties and, in default of agreement, by an agent appointed by the President of the Real Estate Institute of Victoria.
(d)The terms of sale shall require a deposit of not less than 10% with the balance payable by the purchaser within not more than 120 days, unless otherwise agreed.
(e)Subject to the parties having liberty to apply, the reserve price, advertising and mode of sale shall be in the discretion of the agent.
(f)The proceeds of sale shall be applied as follows:
(i)First, all costs and expenses of the sale, including estate agents costs and disbursements;
(ii)Second, all capital gains tax payable;
(iii)Third, the balance to F Pty Ltd; and
(iv)The balance to be distributed by F Pty Ltd to the Wife in such manner as the Wife may elect.
(g)The parties have liberty to apply for further orders concerning any aspect of the sale.
BY THE COURT
In the event that X Street is sold strictly in accordance with paragraph 16 of these orders and the transfer is completed within two years of the date of these orders the Husband shall indemnify the Wife for 50% of the capital gains tax payable upon the sale up to a maximum amount of $142,000 (“the Indemnity”).
As soon as practicable, the Husband shall by deed in writing charge the AA Street property with payment of the Indemnity in accordance with these orders and the Wife may register a caveat over that property in support.
Upon the second anniversary of these orders, the Husband is released from the Indemnity and the Wife must withdraw any caveat she has lodged in respect of it.
BY CONSENT IT IS ORDERED
The Wife may, at her election, require F Pty Ltd to transfer to her its 25% interest in the property at CC Building, 1 Z Street R Town, with the Wife to be responsible for all associated costs and any taxes arising as a consequence.
In the event that any party fails to sign any document reasonably required to give effect to these orders then, pursuant to section 106A, the document may be signed by a Registrar on behalf of any party.
Unless otherwise agreed, the parties shall instruct the Practice of V Street, Suburb W, Victoria to prepare and lodge any income tax returns, company financial statements or other such documents as may be necessary to effect the orderly payment of any taxes for which the parties are presently liable, or become liable to pay as a consequence of these orders.
That unless otherwise specified in these orders and except for the purposes of enforcing the payment of any money due under these or any subsequent orders:-
(a)each party be solely entitled to the exclusion of the other to all property (including choses-in-action) in the possession of such party as at the date of these orders;
(b)all insurance policies to become the sole property of the owner named;
(c)each party to be solely liable for and indemnify the other against any liability encumbering any item of property to which that party is entitled pursuant to these orders (F Pty Ltd being taken, for the purposes of this order, to be an item of property retained by the Wife);
(d)any joint tenancy of the parties in any real or personal estate is hereby expressly severed.
That all extant applications be otherwise dismissed.
AND THE COURT NOTES:
A.The Wife holds her half share of the property at CC Building, R Town (Lot … in Strata Plan …) as tenant in common with F Pty Ltd and Ms T (each of whom hold a one quarter share).
B.The Wife holds her 30% share of the property at DD Building, 2 Z Street, R Town (Lot … in Strata Plan …) as tenant in common with Ms FF (who holds a 70% share).
C.Since the proceeding commenced the parties have sold the following real properties, the proceeds of which now form part of F Pty Ltd’s cash reserves:-
(a)M Street, Suburb N;
(b)K Street, Suburb P; and
(c)L Street, Suburb Q.
D.The effect of these orders is that the Wife shall become the sole shareholder in F Pty Ltd, which entity will remain the registered proprietor of the following real properties:-
(a)The X Street property (such property being the principal place of residence of the Wife) ; and
(b)CC Building, 1 Z Street R Town (F Pty Ltd’s 25% interest being held jointly with the Wife and Ms T).
E.Since the proceeding commenced the Applicant Husband sold his (25% share the C Pty Ltd), the proceeds in the sum of $95,000 now form part of the Applicant Husband’s Westpac Bank Account.
Note: The form of the order is subject to the entry of the order in the Court’s records.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Marcone & Marcone has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
Note: This copy of the Court’s Reasons for Judgment may be subject to review to remedy minor typographical or grammatical errors (r 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to r 17.02 Family Law Rules 2004 (Cth).
| FAMILY COURT OF AUSTRALIA AT MELBOURNE |
FILE NUMBER: MLC 12470 of 2016
| Mr Marcone |
Applicant
And
| Ms Marcone |
Respondent
REASONS FOR JUDGMENT
Introduction
The applicant husband, Mr Marcone, and the respondent wife, Ms Marcone, seek orders for the adjustment of their property interests pursuant to Part VIII of the Family Law Act1975 (Cth) (“the Act”). The husband commenced proceedings in 2016 seeking final property orders nearly six years after the parties’ separation.
The parties’ cohabited for a period of nearly 38 years and raised five children over the course of their marriage.
At the commencement of the final hearing, the parties had all but settled the matter; both parties agreed that their contributions throughout the relationship were equal. Further, the parties had agreed as to the assets each was to retain on a final basis. As a result, the issues remaining for determination were extremely narrow; that these parties were unable to come to a final agreement without the need for further Court intervention was unfortunate.
The main issues pressed during the final hearing related to:-
· Whether there should be an add-back of $19,000 to the pool of assets as a result of the husband’s alleged premature distribution of matrimonial assets;
· The duration of an indemnity offered to the wife by the husband in relation to a potential capital gains tax (CGT) liability she may incur if she elects to sell her principal place of residence, it being the husband’s position that that indemnity should last for two years, whilst the wife contends it should continue for eight years; and
· The disbursement of rental income received in respect of the parties’ investment properties pending their sale.
These are my Reasons for Judgment with respect to the parties’ competing property applications.
Background
The applicant husband is aged 71 and is self-employed, although he has currently ceased providing those services as a result of the imposition of restrictions during the COVID-19 pandemic.
The respondent wife is aged 68 and does not work. She was a homemaker during the parties’ marriage.
The parties married in 1972 and separated on a final basis approximately 10 years ago. They divorced in 2011. There are five adult children of the marriage.
It is common ground between the parties that when they commenced their relationship, neither had any assets of significance. Throughout the marriage, the husband owned and managed a furniture store and was the primary income earner whilst the wife was the primary homemaker and carer of the parties’ five children.
In or around 1991 F Pty Ltd was incorporated. The husband and the wife are the sole directors and shareholders of F Pty Ltd. During the marriage the parties acquired various investment properties which were registered in the name of F Pty Ltd.
As at the date of hearing F Pty Ltd was the registered proprietor of the following real properties:-
·the Unit at G Street, Suburb P; and
· Shop, G Street, Suburb P. (“G Street properties”)
· CC Building, 1 Z Street, R Town (25 per centum interest); and
· X Street, Suburb Y (“X Street property”).
Whilst it was common ground between the parties that F Pty Ltd holds its interest in those properties as the trustee of the Marcone Family Trust (“the Trust”), neither the husband nor the wife was able to locate a copy of the trust deed for the Trust. As a result, the wife sought a declaration from the Court that F Pty Ltd holds its interest in the properties upon trust for the Marcone Family Trust. The husband did not oppose that application.
On 20 December 2016, approximately six years after separation, the husband filed his Initiating Application in the Family Court of Australia seeking final property orders. The wife filed a Response to Initiating Application on 4 April 2017, also seeking that the Court make final property orders as and between the parties. Although the husband’s application was filed some five years after the parties’ divorce, the parties agreed that they should have leave to proceed out of time with their applications. In circumstances where the parties have jointly owned property, I am satisfied that such leave should be granted in circumstances where hardship would be suffered by both parties were such leave not granted.
The matter first came before the Court on 28 June 2017, where Registrar Jenkins added the matter to a list of cases awaiting allocation to a judicial docket. The Registrar noted that the parties intended to conduct a mediation in an attempt to resolve the matter.
The matter was allocated to my docket in August 2018 and the matter was listed for a first day hearing before me on 7 November 2018.
In October 2018 at the joint request of the parties the matter was adjourned until 4 February 2019. That adjournment was sought as the parties were in the process of selling some of their real properties and intended to engage in further mediation.
The matter came before me for a case management hearing on 4 February 2019. Orders were made by consent that day providing for further disclosure of documents between the parties. The parties sought a further adjournment of the matter as they were endeavouring to narrow the issues in dispute, with a view to resolving the matter.
On 29 March 2019 the matter returned to Court. I was informed that day that the parties were involved in a dispute at the Victorian Civil and Administrative Tribunal (“VCAT”). Those proceedings were commenced on behalf of F Pty Ltd; it sought compensation from the builder of the G Street properties as a result of building defects.
The matter was adjourned by consent as a result of the ongoing VCAT proceedings. Almost one year later, the matter returned before me on 13 March 2020. That day the parties informed me that they were ready to proceed with their applications in the Family Court, notwithstanding that the proceedings at VCAT were unresolved. The parties indicated to the Court that any final orders could be fashioned to deal with the implications of the VCAT proceedings. As a result, I made trial directions listing the matter before me to commence 20 July 2020 as a two day matter.
The trial commenced on 21 July 2020 and was conducted over the course of three days, concluding on 23 July 2020.
Material relied upon and orders sought
The husband’s case was opened by his counsel on the second day of the hearing. The husband relied upon the following material:-
·Case outline filed 17 July 2020;
·Second Amended Initiating Application filed 17 April 2020;
·Financial statement of the husband filed 17 April 2020;
·Affidavit of the husband filed 17 April 2020;
·Affidavit of the husband filed 3 June 2020;
·Affidavit of Mr H filed 15 July 2020; and
·Exhibit H-1, being a document tendered during the course of the hearing.
Counsel for the wife opened the wife’s case on the third and final day of the hearing. That day counsel for the wife confirmed that she relied upon the following material:-
· Case outline filed 16 July 2020;
· Affidavit of the wife filed 13 May 2020;
· Financial statement of the wife filed 13 May 2020; and
· Exhibits W-1 – W-4, being documents tendered during the course of the hearing.
Both parties tendered a minute of proposed orders sought by them during the course of the hearing (Exhibit H-1 and Exhibit W-3). The orders sought by the parties were largely agreed upon, and they provide as follows:-
…
2. For the purposes of these orders:
a. X Street means the real property at X Street, Suburb Y
b. F Pty Ltd means F Pty Ltd, the Second Respondent.
c. The G Street Properties means F Pty Ltd’s real properties at the Unit at G Street, Suburb P and the shop at G Street Suburb P (Certificates of title Volume … Folio … and …respectively.
d. The Indemnity means the Indemnity described in paragraph 17 below.
e. The Former Matrimonial Home means the real property at AA Street, Suburb P.
3. The Husband shall retain the following assets:
a. The Former Matrimonial Home;
b. His 50% interest in Suburb CC Street, Suburb CC (held jointly with B Pty Ltd, A.C.N. ...).
4.The Husband shall retain the proceeds of sale of his interest in C Pty Ltd (A.C.N. ...) and D Pty Ltd (A.C.N. ...).
5.The Wife shall retain the following real properties:
a. Her 30% interest in DD Building, 2 Z Street, R Town (held jointly with Ms FF);
b. Her 50% interest in CC Building, 1 Z Street R Town (held jointly with Ms T and F Pty Ltd);
6.…
7.As soon as practicable, the parties shall do all things and sign all documents necessary to cause F Pty Ltd to pay the outstanding land tax payable in respect of the property at X Street.
8.The Wife shall retain her shares in F Pty Ltd and her interest in the Marcone Family Trust.
9.Upon completion of proceeding BP…/2019 presently pending in the Victorian Civil and Administrative Tribunal (including any appeals) the G Street Properties shall be sold and the proceeds of sale applied as follows:
a. First, all costs and expenses of the sales;
b. Second, any debt secured over either of the properties;
c. Third, any capital gains tax payable upon the sale of the properties; and thereafter
d. The balance to F Pty Ltd, subject to these orders
10.Prior to the sales of either of the G Street Properties, the parties may by agreement undertake any rectification works as they may be advised.
11.The parties have liberty to apply for further orders concerning the rectification and/or sale of the G Street Properties.
12.Upon settlement of the sale of the G Street Properties, and subject to order 9 above, all liquid funds held by F Pty Ltd shall be divided between the parties in equal shares subject to the following:
a. The Husband may take his share over a period of up to two financial years, as he may be advised.
b. The Wife may take her share at such intervals as she may be advised.
c. Each party will be separately liable for any tax payable upon his/her share.
13.By no later than 30 June in the tax year in which the Husband receives his final payment referred to in paragraph 12 above, the Husband shall transfer to the Wife, all of his shares in F Pty Ltd and sign all documents necessary to relinquish his interest in the Marcone Family Trust.
14.Save as otherwise provided expressly in these orders, the parties shall each be responsible for half of all expenses relating to the G Street Properties pending compliance by the Husband with paragraph 13 above.
15.Save as expressly provided in these orders, each party shall hereafter be personally responsible for payment of all expenses relating to any real properties which he/she is to retain pursuant to these orders, and for the purposes of this order any real properties to be retained by F Pty Ltd are deemed to be properties which the Wife is to retain.
…
16.…
17.…
18.…
19.…
20.The Wife may, at her election, require F Pty Ltd to transfer to her its 25% interest in the property at CC Building, 1 Z Street R Town, with the Wife to be responsible for all associated costs and any taxes arising as a consequence.
21.In the event that any party fails to sign any document reasonably required to give effect to these orders then, pursuant to section 106A, the document may be signed by a Registrar on behalf of any party.
22.Unless otherwise agreed, the parties shall instruct the Practice of V Street, Suburb W, Victoria to prepare and lodge any income tax returns, company financial statements or other such documents as may be necessary to effect the orderly payment of any taxes for which the parties are presently liable, or become liable to pay as a consequence of these orders.
23.That unless otherwise specified in these orders and except for the purposes of enforcing the payment of any money due under these or any subsequent orders:
a. each party be solely entitled to the exclusion of the other to all property (including choses-in-action) in the possession of such party as at the date of these orders;
b. all insurance policies to become the sole property of the owner named;
c. each party to be solely liable for and indemnify the other against any liability encumbering any item of property to which that party is entitled pursuant to these orders (F Pty Ltd being taken, for the purposes of this order, to be an item of property retained by the Wife);
d. any joint tenancy of the parties in any real or personal estate is hereby expressly severed.
24.Pursuant to section 78(1) of the Family Law Act, the Court declares that F Pty Ltd holds on Trust all real property interests presently registered in its name.
AND THE COURT NOTES:
A.The Wife holds her half share of the property at CC Building, R Town (Lot … in Strata Plan …) as tenant in common with F Pty Ltd and Ms T (each of whom hold a one quarter share).
B.The Wife holds her 30% share of the property at DD Building, 2 Z Street, R Town (Lot … in Strata Plan …) as tenant in common with Ms FF (who holds a 70% share).
C.Since the proceeding commenced the parties have sold the following real properties, the proceeds of which now form part of F Pty Ltd’s cash reserves:
(a)M Street, Suburb N;
(b)K Street, Suburb P; and
(c)L Street, Suburb Q.
D.The effect of these orders is that the Wife shall become the sole shareholder in F Pty Ltd, which entity will remain the registered proprietor of the following real properties:
(a)X Street, Suburb Y (such property being the principal place of residence of the Wife) ; and
(b)CC Building, 1 Z Street R Town (F Pty Ltd’s 25% interest being held jointly with the Wife and Ms T).
E.Since the proceeding commenced the Applicant Husband sold his (25% share the C Pty Ltd), the proceeds in the sum of $95,000 now form part of the Applicant Husband’s Westpac Bank Account.
The Hearing
The final hearing commenced on 21 July 2020 and proceeded over three days. Each party was represented by counsel throughout the hearing.
As a result of the lockdown imposed on the community due to the COVID-19 pandemic, the trial was conducted virtually via Microsoft Teams.
On the first day, the matter was stood down for nearly the entire day as both counsel had requested Court time to engage in discussions, with a view to resolve the matter on a final basis. The matter did not settle albeit that many contentious issues were resolved. Counsel for the husband opened his client’s case on the second day of the hearing.
The husband was cross-examined on the second day of the hearing. The wife was not required for cross-examination. Otherwise, the matter proceeded by way of oral submissions made by counsel representing each of the parties.
The Evidence
In determining the matter, the relevant standard of proof is the balance of probabilities. Section 140 of the Evidence Act 1995 (Cth) provides that, without limiting the matters the Court may take into account in applying that standard of proof, the Court must take into account:-
(a) The nature of the cause of action or defence;
(b) The nature of the subject matter of the proceedings; and
(c) The gravity of the matters alleged.
I have read all documents upon which the parties have relied and the exhibits tendered during the hearing. I have also had the benefit of observing the appearance and demeanour of the parties in Court via Microsoft Teams.
In making my findings, I have given careful consideration to all of the evidence, the nature of the proceedings, the seriousness of the allegations made and the consequences that flow from those findings.
The husband and the wife each carry the burden of proving different aspects of the case.
The Husband
The husband was cross-examined by counsel for the wife on the second day of the hearing. The cross-examination was largely confined to the above identified issues in dispute.
During the course of the husband’s cross-examination it was clear that he had failed to make disclosure in relation to income received by him by way of rents received from the G Street properties. The husband conceded that the rents received by him were not included in his financial statement. His explanation for that omission was that he had given his bank statements to his solicitor and he thought that that was sufficient.
Further, the husband sought to justify his non-disclosure of the rents received by him on the basis that the wife retained rental monies received in relation to the Queensland investment properties. The husband also conceded during his oral evidence that he receives income of approximately $150 per week from a boarder living in his principal place of residence. That income is not disclosed in his financial statement. Further, the husband conceded during cross-examination that he had sold a caravan and purchased another in about April 2020. Again, neither the caravan purchased by him nor the caravan disposed of is disclosed in his financial statement.
Having regard to the husband’s evidence I am satisfied that he has been less than frank with the Court in relation to his income and his dealings with the matrimonial assets. My impression of the husband was that he did not take seriously his obligations in respect of disclosure and when confronted with the omissions in his financial statement he sought to attribute responsibility for those omissions to his lawyer.
The Wife
The wife was not cross-examined. As a result, her evidence-in-chief is unchallenged.
Mr H
Mr H is a finance professional. Mr H affirmed an affidavit on 15 July 2020 which was filed on behalf of the husband the same day.
Mr H is the parties’ personal accountant. He was also engaged by the parties as a single expert witness in this matter to provide a report as to the potential CGT consequences arising as a result of the division of the parties’ assets. Most relevant to the issues in dispute is the portion of his report which relates to the potential CGT consequences of transferring the X Street property from F Pty Ltd to the wife.
It was agreed by both parties that the affidavit of Mr H would be accepted as unchallenged evidence. As a result Mr H was not required for cross-examination.
Ms J
Ms J swore an affidavit on 13 May 2020 which was filed on behalf of the wife the same day. Counsel for the husband objected to the wife relying on Ms J’s affidavit on the basis that it is an unqualified opinion, contains submissions of law and is replete with hearsay. However, the husband did not take objection to the wife tendering the exhibits to Ms J’s affidavit.
Those exhibits include copies of land tax assessment notices for F Pty Ltd. The land tax notices disclose that land tax was assessed on the basis that the properties in the name of F Pty Ltd were held by it on behalf of the Marcone Family Trust. That evidence is consistent with the evidence of both parties as to the basis upon which F Pty Ltd held the investment properties.
After discussions between counsel and the bench, the parties agreed the annexures to Ms J’s affidavit should be tendered as an exhibit. Those annexures were tendered and marked as Exhibit W-4. Counsel for the wife conceded that save for those exhibits, the wife did not rely upon Ms J’s affidavit.
The Issues
Following extensive discussion between the parties on the first day of the final hearing, there remained three discrete issues in dispute for the Court to determine.
The first issue related to the wife’s contention that there should be an addback to take into account what she alleges was the husband’s premature distribution of matrimonial assets. As a result of that contention the wife sought the husband be paid the sum of $69,925 from the proceeds of sale of M Street whilst the husband sought a payment of $79,426.
The second issue in dispute between the parties related to a potential CGT liability that would arise in the event that the wife sells the X Street property which is to be retained by her and is currently her principal residence. The parties agreed as to the form of the indemnity, save as to its duration, it being the wife’s contention that it should be for a period of eight years whilst the husband sought that it continue for two years. The terms of the proposed indemnity are as follows:-
16.The Wife may, at her election, require F Pty Ltd to sell the property at X Street anytime up to [X] years from the date of these orders, subject to the following:
a. The election shall be made by notice in writing to the Husband.
b.The Husband and the Wife shall have the joint conduct of the sale.
c. The property shall be sold by an agent agreed between the parties and, in default of agreement, by an agent appointed by the President of the Real Estate Institute of Victoria.
d. The terms of sale shall require a deposit of not less than 10% with the balance payable by the purchaser within not more than 120 days, unless otherwise agreed.
e. Subject to the parties having liberty to apply, the reserve price, advertising and mode of sale shall be in the discretion of the agent.
f. The proceeds of sale shall be applied as follows:
i. First, all costs and expenses of the sale, including estate agents costs and disbursements.
ii. Second, all capital gains tax payable.
iii. Third, the balance to F Pty Ltd, and thereafter
iv. To be distributed by F Pty Ltd to the Wife in such manner as the Wife may be advised.
g. The parties have liberty to apply for further orders concerning any aspect of the sale.
17.In the event that X Street is sold strictly in accordance with paragraph 16 of these orders and the transfer is completed within [X] years of the date of these orders the Husband shall indemnify the Wife for 50% of the capital gains tax payable upon the sale up to a maximum amount of $142,000.
18.As soon as practicable, the Husband shall by deed in writing charge the Former Matrimonial Home with payment of the Indemnity in accordance with these orders and the Wife may register a caveat over that property in support.
19.Upon the [X] anniversary of these orders, the Husband is released from the Indemnity and the Wife must withdraw any caveat she has lodged in respect of it.
The third issue relates to the disbursement of the rents received on the G Street properties pending their sale. The wife proposed that until the settlement of the sale of the G Street properties, the rents received from those properties be paid to F Pty Ltd and applied by it to expenses relating to those properties. The husband sought that the wife receive the rent from the downstairs shop and that he receive rent from the upstairs unit, and that they then each contribute to one half of the properties’ expenses.
In addition to those matters, the husband and the wife joined in seeking a declaration as to the existence of the Marcone Family Trust.
Legal Principles
The parties’ competing property applications are to be determined in accordance with the provisions of Part VIII of the Act. The High Court considered the approach to be adopted in the determination of proceedings pursuant to s 79 of the Act in the decision of Stanford v Stanford (2012) 247 CLR 108. At page 121 the High Court stated that “[t]he power to make a property settlement order must be exercised “in accordance with legal principles, including the principles which the Act itself lays down””. Section 79(2) of the Act provides that a Court should not make an order for property settlement unless it is satisfied that it is just and equitable to do so.
That decision has been considered in detail by the Full Court in Bevan & Bevan (2013) FLC 93-545 (“Bevan”) and more recently in Chapman & Chapman (2014) FLC 93-592.
In Bevan at [73] the Full Court referred to the three “fundamental propositions” laid down by the High Court which should guide trial judges in approaching the task under s 79. They were summarised as follows:-
1.Determination of a just and equitable outcome of an application for property settlement begins with the identification of existing property interests (as determined by common law and equity);
2.The discretion conferred by the statute must be exercised in accordance with legal principles and must not proceed on an assumption that the parties’ interests in the property are or should be different from those determined by common law and equity;
3.A determination that a party has a right to a division of property fixed by reference only to the matters in s 79(4), and without separate consideration of s 79(2), would erroneously conflate what are distinct statutory requirements.
(Emphasis in original)
Accordingly, in determining competing applications pursuant to s 79 of the Act, the Court is required to:-
·Identify the parties’ respective legal and equitable interests in property;
·Determine whether, in accordance with s 79(2), it is just and equitable to make a property settlement order having regard to the parties’ existing interests;
·Determine all relevant contributions of each of the parties;
·Identify and weigh against each other the matters set out in s 79(4)(a) to (c) inclusive of the Act; and
·Consider the matters contained in s 79(4)(d) to (g) inclusive of the Act and make a determination as to what, if any, alteration should be made to the entitlements of the parties earlier assessed on account of their contributions, particularly having regard to the provisions of s 75(2) of the Act.
The Act does not prescribe the order in which the matters in s 79(4) of the Act are to be considered. The circumstances of individual marriages as to their nature and form differ; how parties have organised and lived within the marriage are factors which may be relevant in the exercise of the discretion pursuant to s 79(2) of the Act.
The Court’s approach may be less compartmentalised than was previously the case and a more “holistic” approach adopted, as was described by Murphy J in Watson & Ling (2013) FLC 93-527 at [13].
The Asset Pool
At the commencement of the husband’s case, counsel for the husband tendered a minute of proposed orders containing a balance sheet which was largely agreed by both parties (Exhibit H-1, Annexure A). Counsel for the wife also tendered a minute of proposed orders containing a balance sheet which highlighted the parties’ areas of disagreement (Exhibit W-3, Annexure A). The parties’ respective balance sheets provide the net assets of the parties to be as follows:-
Assets
Registered Proprietor
Husband’s Value
Wife’s Value
AA Street, Suburb P
Husband
$1,100,000
Agreed
BB Street, Suburb CC
Husband (50%)
$550,000
Agreed
DD Building, 2 Z Street, R Town
Wife (30%)
$225,000
Agreed
CC Building, 1 Z Street, R Town
Wife (50%)
$238,750
Agreed
CC Building, 1 Z Street, R Town
F Pty Ltd (25%)
$119,375
Agreed
X Street, Suburb Y
F Pty Ltd
$1,100,000
Agreed
the Unit at G Street, Suburb P
F Pty Ltd
$500,000
Agreed
Shop, G Street, Suburb P
F Pty Ltd
$400,000
Agreed
Liquid Funds – Sale proceeds L Street Suburb Q
F Pty Ltd
E$369,000
Agreed
Liquid Funds – Sale proceeds M Street, Suburb N
Wife
$224,226.66
Agreed
Motor Vehicle
Wife
$4,000
Agreed
Motor Vehicle
Husband
$25,000
Agreed
Liquid Funds
Wife
$3,500
Agreed
Liquid Funds
Husband
$81,000
$100,000
Total Assets
$4,939,851.66
$4,958,851.66
Liabilities
Registered Proprietor
Husband’s Value
Wife’s Value
Land Tax
F Pty Ltd
$6,855
Agreed
Contingent CGT Liability
F Pty Ltd
Total Liabilities
$6,855
$6,855
Net Asset Pool
$4,932,996.66
$4,951,996.66
Notwithstanding the fact that both parties’ balance sheets record the funds held on trust by the wife’s solicitor from the proceeds of sale of L Street, Suburb Q to be $437,328.63, during the course of closing submissions it was conceded that in fact the current balance held by those solicitors is approximately $369,000. Accordingly, based on the husband’s pool, the parties have net assets valued at approximately $4,932,996. The wife, who seeks a $19,000 add-back to the pool, asserts that the parties’ net asset pool is valued at approximately $4,951,996.
What follows are my findings with respect to the issues in dispute.
Add Backs
Throughout the course of the hearing the wife pressed the argument that the husband had prematurely disposed of matrimonial assets without her consent. As a result, the wife contended that the sum of approximately $19,000 should be added back to the pool. The husband opposed that position.
The Full Court considered the question of whether it may be appropriate to notionally “add-back” property no longer in existence into the parties’ asset pool, thereafter adjusting the existing property interests having regard to those “add-backs” in Vass & Vass (2015) 53 Fam LR 373. At paragraphs 138 to 139 the Full Court said as follows:-
There is no error committed per se in adjusting the parties’ actual property interests by a calculation involving notionally adding back into the pool sums which have been dissipated by the parties. We reject any suggestion that the decision of Bevan v Bevan (2013) 49 Fam LR 387; [2013] FamCAFC 116 — or, more particularly, the decision of the High Court in Stanford v Stanford (2012) 247 CLR 108 ; 293 ALR 70 ; 47 Fam LR 481 ; [2012] HCA 52 — is authority for any necessary contrary solution. Some statements made by the High Court may lead to the conclusion that references to “notional property” as have been referred to in decisions of this court and at first instance may need to be reconsidered (emphasis in original).
The decisions referred to seek to remind the Court that, however the exercise of discretion might seek to deal with property that is said to be the subject of “add back”, proper consideration must be given to existing interests in property, and the question posed by s 79(2) as a separate inquiry from any adjustment to property interests by reference to s 79(4) if a consideration of s 79(2) reveals that it is just and equitable to alter existing interests in property.
There are three categories of cases in which the Court has considered it appropriate to add back assets which no longer exist into the asset pool. In Omacini & Omacini (2005) FLC 93-218 (“Omacini”) they were identified in paragraph 30 and are summarised as follows:-
(a)where one or both of the parties have expended money on legal fees that might otherwise have been available;
(b)where there has been a premature distribution of matrimonial property; and
(c)where one of the parties has embarked on a course of conduct designed to reduce or minimise the value of the property or has acted recklessly or negligently having the same effect (as was described by Baker J in Kowaliw and Kowaliw (1981) FLC 91-092).
Counsel for the wife submitted that the unaccounted for disbursement of assets by the husband squarely falls into category (b) above, that is, that the husband had prematurely distributed matrimonial property.
It is common ground between the parties that the husband has retained the following matrimonial assets:-
· The proceeds of sale of the business know as C Pty Ltd, situated in Suburb GG. The parties agree that the proceeds of sale, being the sum of approximately $95,000 were paid in instalments to the husband up until the end of January 2020.
· Rental income payable to F Pty Ltd from the G Street properties. The husband deposited the rents received into his personal account, amounting to approximately $20,000.
· A caravan sold by the husband post separation for $16,000.
Counsel for the wife submits that whilst the funds received by the husband from those matrimonial assets total $131,000, the husband has only $81,000 remaining in his bank account and has failed to disclose how the funds received by him were applied. Notwithstanding that the wife contends that the husband has dissipated approximately $50,000 of the parties’ joint assets, she seeks that only $19,000 be added back to the net asset pool through the notional rounding up of the husband’s liquid funds to $100,000.
Counsel for the husband denies that the expenditure by the husband falls into any of the three categories as outlined in Omacini. It is submitted on behalf of the husband that he was carrying on his daily life and that the amounts expended were nominal and should not be considered as an “add back”. As a result, the husband seeks that his liquid funds remain valued at $81,000 in the parties’ balance sheet.
The husband gave evidence that he had applied some of his savings towards the renovation and improvement of the parties’ properties and the homes of their adult children. It was submitted by his counsel that the husband is a simple man who has done his best to care for the parties’ children, attending to work on their homes for them at no cost. Given the nature of that expenditure it was submitted on his behalf that the disposal of assets does not fall within the principles enunciated in Omacini.
The difficulty with that submission is that the husband has adduced little evidence to support his contention as to how he has applied the parties’ assets. As I have already noted there are significant omissions in the husband’s financial statement. Similarly, the husband has adduced no evidence that would support his contentions as to how the proceeds of sale of the gym and the rents received were disbursed, other than to state that they have been applied towards living expenses and renovations. He provided no particulars as to his expenditure.
Given that the sale proceeds from C Pty Ltd were paid to the husband by instalment up to January 2020 and the rents received from the G Street properties were monies received in 2020, in my view the husband should have been able to easily account for those sums. Both the sale proceeds and the rents received were funds that would otherwise have been included in the matrimonial asset pool for division between the parties had they not been disbursed. Having regard to those matters, I am satisfied that there has been a premature distribution of matrimonial property as contended for by the wife.
Accordingly, I will include the additional sum of $19,000 into the pool of assets available for division as has been sought by the wife.
Contingent CGT Liability
Following separation, the husband remained in the former matrimonial home at AA Street, Suburb P (“AA Street property”). The husband is registered as the sole proprietor of the AA Street property. Accordingly, there is no CGT liability arising from the disposal of that property.
In contrast, the wife’s principal place of residence is the X Street property; this property is owned by F Pty Ltd. As a result, the wife will incur a CGT liability in the event that the parties transfer the property from F Pty Ltd to the wife, or the property is sold to a third party.
Initially the wife sought orders transferring the X Street property from F Pty Ltd to her, the effect of which would be to crystallise the CGT liability. The husband opposed those orders, it being his contention that there was no reason to effect that transfer and thereby crystallise the liability in circumstances where it was common ground that the wife will retain F Pty Ltd.
On the second day of the hearing, counsel for both parties informed the Court that the dispute had been narrowed on the basis that the husband would indemnify the wife for 50% of any CGT liability incurred by F Pty Ltd as a result of the sale of the X Street property up to a maximum amount of $142,000 (being the estimate of one half of the CGT liability calculated by Mr H), that indemnity to last for up to two years from the date of the final orders. The wife contended that the indemnity should continue for eight years from the date of the final orders.
Counsel for the wife submitted to the Court that the issue in this case fell within the circumstances contemplated by the Full Court in Rosati v Rosati (1998) FLC 92-804 (“Rosati”). He submitted that there were special circumstances that justified the inclusion of the CGT liability in respect of the wife’s principal place of residence. In particular, the wife’s counsel submitted that justice and equity required that the CGT liability be taken into account in circumstances where the husband was to retain assets (including the former matrimonial home) that did not attract CGT whilst the assets to be retained by the wife did.
Counsel for the husband rejected the wife’s argument, and submitted that in circumstance where there was no evidence of the wife intending to sell X Street there was no basis upon which a potential CGT liability in respect of that property could be taken into account. It was further submitted that the indemnity offered by the husband was a generous concession by him and one made in an attempt to end the litigation.
Counsel for the husband submitted and I accept that the wife adduced no evidence of an intention to sell the property, noting that the wife has resided at the X Street property since the parties’ separation approximately 10 years ago and lives in the property with the parties’ adult daughter and her family.
In Rosati, the Full Court considered the question of how the Court is to deal with CGT liabilities that are likely to flow from the dispossession of an asset of the parties that forms part of the net asset pool, and stated:-
6.36 It appears to us that although there is a degree of confusion, and possibly conflict, in the reported cases as to the proper approach to be adopted by a court in proceedings under s 79 of the Act in relation to the effect of potential capital gains tax, which would be payable upon the sale of an asset, the following general principles may be said to emerge from those cases:—
(1)Whether the incidence of capital gains tax should be taken into account in valuing a particular asset varies according to the circumstances of the case, including the method of valuation applied to the particular asset, the likelihood or otherwise of that asset being realised in the foreseeable future, the circumstances of its acquisition and the evidence of the parties as to their intentions in relation to that asset.
(2) If the Court orders the sale of an asset, or is satisfied that a sale of it is inevitable, or would probably occur in the near future, or if the asset is one which was acquired solely as an investment and with a view to its ultimate sale for profit, then, generally, allowance should be made for any capital gains tax payable upon such a sale in determining the value of that asset for the purpose of the proceedings.
(3)If none of the circumstances referred to in (2) applies to a particular asset, but the Court is satisfied that there is a significant risk that the asset will have to be sold in the short to mid term, then the Court, whilst not making allowance for the capital gains tax payable on such a sale in determining the value of the asset, may take that risk into account as a relevant s 75(2) factor, the weight to be attributed to that factor varying according to the degree of the risk and the length of the period within which the sale may occur.
(4)There may be special circumstances in a particular case which, despite the absence of any certainty or even likelihood of a sale of an asset in the foreseeable future, make it appropriate to take the incidence of capital gains tax into account in valuing that asset. In such a case, it may be appropriate to take the capital gains tax into account at its full rate, or at some discounted rate, having regard to the degree of risk of a sale occurring and/or the length of time which is likely to elapse before that occurs.
The matter of Blake & Blake [2007] FamCA 10 considered the question of whether CGT liability in relation to an investment property should be taken into account in circumstances where the husband, who was retaining that property gave evidence that it was his desire to retain the property in the “longer term future”. The trial judge concluded that the CGT liability in relation to that property should be taken into account although it was unlikely that the property would be disposed of in the foreseeable future, as it was inevitable given the husband’s involvement in property development that a sale will take place.
The Full Court rejected that approach. At paragraph 24 Finn J stated that:-
It must be borne in mind that the statement by the Full Court in Rosati (supra) does no more than provide guidelines for the exercise of the property settlement jurisdiction under s 79 of the Act, and must be applied as the justice and equity of the case in question requires.
Her Honour concluded that it would not be just and equitable for the wife to have to share the burden of a potential future CGT liability in respect of that property in circumstances where the husband’s evidence confirmed his intention to retain it in the longer term with the hope of developing it in the future.
In the matter of Jarrott & Jarrott [2012] FamCAFC 29 (“Jarrott”), the Full Court found that in order to pay the wife her settlement pursuant to the trial judge’s orders, there was no evidence to conclude that the husband could make this payment without incurring some kind of tax or CGT liability. Whilst the Full Court indicated that the trial judge had correctly recognised the potential for the husband to incur a CGT liability, by taking it into account under s 75(2), that course “….had the potential to visit an injustice upon one of the parties”, particularly if the CGT liability was not realised. As a result the Full Court held that the appropriate course would be to make a contingent order, which would adjust any CGT liability actually incurred.
Similar circumstances to this matter arose in the Federal Magistrates’ Court decision of Murphy & Murphy [2008] FMCAfam 935. In that case, the husband was to retain the parties’ investment property as his principal place of residence and the wife the former matrimonial home. The husband sought that the Court make an adjustment pursuant to s 75(2) due to the fact his principal place of residence would be subject to CGT, whereas the wife’s would not. After consideration of Rosati, Federal Magistrate Coates indicated that the potential CGT was never part of the husband’s case and that there was no indication of his intention to sell the property. The Federal Magistrate also found that there were no special circumstances to consider. As a result, any potential CGT liability tied to the investment property the husband was to retain was not taken into account in the assessment of the parties’ net asset pool.
On appeal, the husband submitted that the CGT should have been taken into account (Monroe & Monroe [2009] FamCAFC 173). In response, at paragraph [50] the Full Court stated:-
Instead, it was submitted that in some way the Federal Magistrate should have factored in this potential expense during a consideration of s 75(2)… The difficulty we see with this argument, apart from the absence of evidence including that the husband intended to sell the property as he is currently living in it, is uncertainty. There are so many possibilities, including that no capital gains tax will be payable. In this case we see no merit in this ground of appeal although we would observe that in certain circumstances it may be possible to take an unquantified capital gains tax liability into account as a factor pursuant to s 75(2)(o). In the absence of evidence, as in this case, it would not be possible to place any weight on such a consideration.
Whilst the Full Court saw no merit in the husband’s ground of appeal, their Honours did not explicitly address the Federal Magistrate’s assessment of a “special circumstance” as contemplated in Rosati.
The ambit of “special circumstances” was considered by the Full Court in TWN & PAQ [2005] FamCA 677. There the trial judge did not make an adjustment to the parties’ balance sheet or under s 75(2)(o) for any potential CGT liability, having found that whilst some of the properties to be retained by them would attract CGT when sold, there was no evidence of a significant risk that properties may have to be sold in the short to mid-term and that it was likely to be of lesser effect in the case of the wife. In considering his Honour’s decision, at paragraph [118] the Full Court stated:-
…Paragraph 4 leaves open the wide discretion necessary for a trial Judge to adjust for CGT in special circumstances. We discern that it is to this aspect of Rosati that counsel for the husband’s criticisms of his Honour’s summary of the relevant principles are directed. We accept that the trial Judge in his summary in paragraph 51 did not specifically refer to special circumstances where an estimate or allowance for CGT may be appropriate. We do not find the trial Judge’s summary to be incorrect, but accept it is not a complete summary of the principles espoused in Rosati. We are satisfied the trial Judge, albeit in a summary form, set out the principles apposite to the case before him. There was no evidence of any special circumstance which warranted the trial Judge, on the facts of this case, to take CGT into account in its full amount, or at some discounted rate.
In my view the indemnity offered by the husband is recognition that special circumstance arise in this case as a result of the wife retaining assets which will attract CGT in the event of their sale, whilst the husband has the advantage of retaining those assets which will not incur such liability.
The indemnity offered by the husband is a contingent order as was contemplated by the Full Court in Jarrott and in my view is appropriate in the circumstances of this case. Such order ensures that if the X Street property is sold any CGT liability arising therefrom will be shared between the parties. In the context of a long marriage where investment properties were acquired for the parties’ mutual benefit and the wife will be in the position of retaining the majority of the assets that will attract CGT in the event of sale, in my view it is just and equitable that such liability be shared given that the husband is to retain assets free of CGT.
However the question remains as to what is the appropriate duration of the indemnity. The husband contends that it should expire after two years whilst the wife seeks the indemnity for a period of eight years.
In determining a sufficient amount of time for the CGT liability to exist as a contingent liability on the parties’ balance sheet, the case law has generally permitted its existence until the execution of the final orders. This was demonstrated in the matter of Rilak & Tsocas (No 8) [2015] FamCA 1235, where Loughnan J was asked to make final orders for the division of property. His Honour recognised that the husband may be required to sell an item of real property to effect final payment to the wife. As a result, his Honour reduced the amount the husband was to pay to the wife in the final property settlement by her portion of the CGT contingent liability and indicated the husband was to retain this amount if he sold the property within 12 months, thus incurring the CGT liability. If the husband did not sell the property within 12 months after the date of the orders, the husband was required to repay the amount withheld to the wife. His Honour did not advance his reasoning as to why 12 months would be sufficient for the husband to sell the property.
The difficulty with the wife’s position is that she adduces no evidence of any intention to sell the property nor any basis for the indemnity offered by the husband to continue for a period of eight years. In my view the time proposed by the wife is unreasonable. Both parties are entitled to an end to these proceedings and a separation of their financial affairs, particularly in circumstances where they separated some ten years ago.
The husband offers the indemnity for a period of two years. It is submitted that that is sufficient time for the wife to determine whether or not she wishes to sell the property. It was submitted that that period of time also takes into account the impact of COVID-19 on the wife’s ability to effect a sale of the property.
In my view two years is a sufficient period of time for the indemnity, that period providing the wife with a reasonable period of time in which to determine whether or not she wishes to sell the property and if she so determines to sell, provides a sufficient period of time in which to market and effect its sale. Further, such a period ensures that there is a finite and limited period of time in which the husband would be bound by that obligation.
The G Street Properties
The G Street properties are to be sold after the conclusion of the VCAT proceedings and any subsequent rectification works. This is to be funded from the proceeds of sale of the property at L Street, Suburb Q, which are currently being held on trust for the parties by the solicitors for the wife.
What remains in issue is where the rental income from the G Street properties will be paid, up until settlement of their sale. The wife initially proposed that the rent from the G Street properties be combined and then equally divided between the parties. In closing submissions, counsel for the wife supported a position that the rental income be paid into the F Pty Ltd company account, from which expenses attributable to those properties would be paid until they are sold.
The husband opposed that course. Counsel for the husband submitted there has been no issue between the parties in jointly meeting the expenses concerning the G Street properties. The husband seeks that he receive the rental income from the upstairs unit and the wife receive the income from the downstairs shop premises. He seeks that the parties then each pay half of the expenses relating to the G Street properties from their respective accounts.
The only entity entitled to the rents in respect of the G Street properties is the registered proprietor of those properties, that is, F Pty Ltd. Accordingly, in my view, the rents should be paid to the account maintained by F Pty Ltd and any expenses incurred by F Pty Ltd, whether in relation to the rectification works on the G Street properties or other expenses should be met therefrom.
Declaration
It was common ground between the parties that the trust deed for the Marcone Family Trust could not be located. The wife deposes in her affidavit filed 13 May 2020 that in May 1991 her cousin, Mr S, assisted the parties in establishing the Marcone Family Trust. She deposes that Mr S prepared the trust deed for the Marcone Family Trust and that she and the husband sighted and signed that document. Further, the wife deposes that F Pty Ltd was appointed trustee for the Trust.
The wife deposes that the trust deed remained at Mr S’s accountancy practice, until the firm became insolvent. The wife deposes that she has made inquiries of Mr S as to the location of the trust deed but that it cannot be located.
The wife’s evidence as to the establishment and existence of the Marcone Family Trust and as to the missing trust deed was not challenged.
The husband deposes that he too understands that F Pty Ltd was appointed trustee for the Marcone Family Trust and that the income tax returns and financial statements for the Trust have been prepared on the premise that the Trust exists. The husband deposes he does not have the trust deed, and having made enquiries, cannot locate the document. The husband deposes he cannot remember when he last saw the trust deed, or if he has ever seen it. Again, there was no challenge to that evidence.
As a result of the evidence of both parties, the wife seeks that the Court make a declaration that F Pty Ltd holds its interest in the real properties upon trust for the Marcone Family Trust. Counsel for the husband does not oppose that course.
I am satisfied that it is appropriate that the Court makes a declaration that F Pty Ltd holds its real property upon trust for the Marcone Family Trust having regard to the unchallenged evidence that:-
·The parties engaged Mr S to establish the Marcone Family Trust in about 1991;
·F Pty Ltd was appointed trustee for the Marcone Family Trust at that time;
·The taxation returns and financial statements for the Marcone Family Trust have been prepared on the basis that its trustee is F Pty Ltd; and
·The land tax assessments for the properties held by F Pty Ltd have been assessed on the basis that it holds those properties upon trust for the Marcone Family Trust.
Section 79(2)
Both parties submitted that it was just and equitable to make orders for final property settlement. The parties have shared a long marriage and have acquired property both in their own names and in the names of their entities. Having regard to those circumstances I am satisfied that it is just and equitable to make orders to end their financial relationship.
Contributions
Although this was a long marriage of some 38 years, that fact alone does not absolve the Court from an assessment of the contributions made by each party. It is well established that there is no starting point of equality (Mallet v Mallet (1984) 156 CLR 605).
It was contended that each party contributed to the best of their respective abilities in their roles within the marriage. The husband was the principal breadwinner and worked hard in his business throughout the marriage. The wife for her part made greater contributions as a homemaker and parent after the birth of the parties’ five children.
Neither party had any assets of significance at the commencement of their relationship.
Having regard to the myriad of contributions made by both the husband and the wife over the course of their long marriage, I am satisfied that their contributions during the marriage should be assessed as equal.
Section 75(2)
The husband is aged 71 years and is self-employed. He is currently not working due to the restrictions imposed as a result of the COVID-19 pandemic.
The wife is aged 68 years and is unemployed.
Each party will retain their principal residence as well as have the benefit of retaining investment properties from which they will derive an income.
The parties’ assets are valued at approximately $4,951,997. They propose an equal division of their assets, each submitting that there should be no adjustment for s 75(2) of the Act. Each will retain assets valued at approximately $2.457 million dollars. On any view, both parties will be in a strong financial position at the conclusion of these proceedings. Having regard to those matters I am satisfied that there is no basis for any adjustment in favour of either of them pursuant to s 75(2).
Conclusion
Having regard to the above matters I am satisfied that justice and equity requires that there be an equal division of the parties’ interests.
As a result of that adjustment, the wife will retain her interests in the two Z Street Properties, as well as her interest in F Pty Ltd (which holds the properties at Z Street Properties and at X Street upon trust for the Trust). The wife will also retain her motor vehicle and savings. Those interests are valued at approximately $1,844,926.
The husband will retain the properties at AA Street, Suburb P and Suburb CC Street, Suburb CC. In addition he will retain his savings of approximately $100,000 and his motor vehicle. Those interests are valued at approximately $1,844,925.
The parties have agreed to a process by which the two properties at G Street will be sold and the sale proceeds divided equally between them.
Accordingly the orders that I make are as follows:-
DECLARATION
Pursuant to section 78(1) of the Family Law Act 1975 (Cth), the Court declares that F Pty Ltd holds on Trust for the Marcone Family Trust all real property interests presently registered in its name.
BY CONSENT IT IS ORDERED
The Husband shall retain the following assets:-
(a)The real property at AA Street, Suburb P in the State of Victoria (“AA Street”);
(b)His 50% interest in BB Street, Suburb CC in the State of Victoria (held jointly with B Pty Ltd, A.C.N. ...).
The Husband shall retain the proceeds of sale of his interest in C Pty Ltd (A.C.N. ...) and D Pty Ltd (A.C.N. ...).
The Wife shall retain the following real properties:-
(a)Her 30% interest in DD Building, 2 Z Street, R Town in the State of New South Wales (held jointly with Ms FF);
(b)Her 50% interest in CC Building, 1 Z Street R Town in the State of New South Wales (held jointly with Ms T and F Pty Ltd);
Within 7 days, the proceeds of sale of the property at M Street, Suburb N presently held on trust by the Wife’s solicitors (approximately $224,266) shall be divided between the parties as follows:-
(a)First, $69,925 to the Husband; and thereafter
(b)The balance to the wife.
As soon as practicable, the parties shall do all things and sign all documents necessary to cause F Pty Ltd to pay the outstanding land tax payable in respect of the property at X Street, Suburb Y in the State of Victoria (“X Street”).
The Wife shall retain her shares in F Pty Ltd and her interest in the Marcone Family Trust.
Upon completion of proceeding …/2019 presently pending in the Victorian Civil and Administrative Tribunal (including any appeals) the husband and the wife do all such acts and things as may be required to effect a sale of the real properties at the Unit at G Street, Suburb P in the State of Victoria (Certificate of title Volume … Folio …) and the shop at G Street Suburb P (Certificate of title Volume … Folio …) (“G Street Properties”) and the proceeds of sale applied as follows:-
(a)First, to pay all costs and expenses of the sales;
(b)Second, to discharge any debt secured over either of the properties;
(c)Third, to pay any capital gains tax payable upon the sale of the properties; and thereafter
(d)The balance to F Pty Ltd, subject to these orders.
Prior to the sales of either of the G Street Properties, the parties may by agreement undertake any rectification works as they may be advised.
The parties have liberty to apply for further orders concerning the rectification and/or sale of the G Street Properties.
Upon settlement of the sale of the G Street Properties, and subject to order 10 above, all funds held by F Pty Ltd shall be divided between the parties in equal shares subject to the following:-
(a)The Husband may take his share over a period of up to two financial years, as he may be advised.
(b)The Wife may take her share at such intervals as she may be advised.
(c)Each party will be separately liable for any tax payable upon his or her share.
BY THE COURT
Until the settlement of the sale of the G Street Properties, any rental received in relation to the G Street properties or either of them be paid into the bank account maintained by F Pty Ltd, with any expenses relating to those properties to be paid from the said account.
BY CONSENT IT IS ORDERED
By no later than 30 June in the tax year in which the Husband receives his final payment referred to in paragraph 11 above, the Husband shall transfer to the Wife, all of his shares in F Pty Ltd and sign all documents necessary to relinquish his interest in the Marcone Family Trust.
Save as otherwise provided expressly in these orders, the parties shall each be responsible for half of all expenses relating to the G Street properties pending compliance by the Husband with paragraph 13 above.
Save as expressly provided in these orders, each party shall hereafter be personally responsible for payment of all expenses relating to any real properties which he or she is to retain pursuant to these orders, and for the purposes of this order any real properties to be retained by F Pty Ltd are deemed to be properties to be retained by the Wife or her nominee.
The Wife may, at her election, require F Pty Ltd to sell the property at X Street anytime up to two years from the date of these orders, subject to the following:-
(a)The election shall be made by notice in writing to the Husband.
(b)The Husband and the Wife shall have the joint conduct of the sale.
(c)The property shall be sold by an agent agreed between the parties and, in default of agreement, by an agent appointed by the President of the Real Estate Institute of Victoria.
(d)The terms of sale shall require a deposit of not less than 10% with the balance payable by the purchaser within not more than 120 days, unless otherwise agreed.
(e)Subject to the parties having liberty to apply, the reserve price, advertising and mode of sale shall be in the discretion of the agent.
(f)The proceeds of sale shall be applied as follows:
(i)First, all costs and expenses of the sale, including estate agents costs and disbursements;
(ii)Second, all capital gains tax payable;
(iii)Third, the balance to F Pty Ltd; and
(iv)The balance to be distributed by F Pty Ltd to the Wife in such manner as the Wife may elect.
(g)The parties have liberty to apply for further orders concerning any aspect of the sale.
BY THE COURT
In the event that X Street is sold strictly in accordance with paragraph 16 of these orders and the transfer is completed within two years of the date of these orders the Husband shall indemnify the Wife for 50% of the capital gains tax payable upon the sale up to a maximum amount of $142,000 (“the Indemnity”).
As soon as practicable, the Husband shall by deed in writing charge the AA Street property with payment of the Indemnity in accordance with these orders and the Wife may register a caveat over that property in support.
Upon the second anniversary of these orders, the Husband is released from the Indemnity and the Wife must withdraw any caveat she has lodged in respect of it.
BY CONSENT IT IS ORDERED
The Wife may, at her election, require F Pty Ltd to transfer to her its 25% interest in the property at CC Building, 1 Z Street R Town, with the Wife to be responsible for all associated costs and any taxes arising as a consequence.
In the event that any party fails to sign any document reasonably required to give effect to these orders then, pursuant to section 106A, the document may be signed by a Registrar on behalf of any party.
Unless otherwise agreed, the parties shall instruct the Practice of V Street, Suburb W, Victoria to prepare and lodge any income tax returns, company financial statements or other such documents as may be necessary to effect the orderly payment of any taxes for which the parties are presently liable, or become liable to pay as a consequence of these orders.
That unless otherwise specified in these orders and except for the purposes of enforcing the payment of any money due under these or any subsequent orders:-
(a)each party be solely entitled to the exclusion of the other to all property (including choses-in-action) in the possession of such party as at the date of these orders;
(b)all insurance policies to become the sole property of the owner named;
(c)each party to be solely liable for and indemnify the other against any liability encumbering any item of property to which that party is entitled pursuant to these orders (F Pty Ltd being taken, for the purposes of this order, to be an item of property retained by the Wife);
(d)any joint tenancy of the parties in any real or personal estate is hereby expressly severed.
That all extant applications be otherwise dismissed.
AND THE COURT NOTES:
AThe Wife holds her half share of the property at CC Building, R Town (Lot … in Strata Plan …) as tenant in common with F Pty Ltd and Ms T (each of whom hold a one quarter share).
BThe Wife holds her 30% share of the property at DD Building, 2 Z Street, R Town (Lot … in Strata Plan …) as tenant in common with Ms FF (who holds a 70% share).
CSince the proceeding commenced the parties have sold the following real properties, the proceeds of which now form part of F Pty Ltd’s cash reserves:-
(a)M Street, Suburb N;
(b)K Street, Suburb P; and
(c)L Street, Suburb Q.
D.The effect of these orders is that the Wife shall become the sole shareholder in F Pty Ltd, which entity will remain the registered proprietor of the following real properties:-
(a)The X Street property (such property being the principal place of residence of the Wife) ; and
(b)CC Building, 1 Z Street R Town (F Pty Ltd’s 25% interest being held jointly with the Wife and Ms T).
E.Since the proceeding commenced the Applicant Husband sold his (25% share the C Pty Ltd), the proceeds in the sum of $95,000 now form part of the Applicant Husband’s Westpac Bank Account.
I certify that the preceding one hundred and thirteen (113) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Johns delivered on 9 October 2020.
Associate:
Date: 9 October 2020
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