MAXWELL & MAXWELL
[2015] FamCA 1171
•7 July 2015
FAMILY COURT OF AUSTRALIA
| MAXWELL & MAXWELL | [2015] FamCA 1171 |
| FAMILY LAW – PROPERTY – Interests in a rural family enterprise – Where the husband holds minority interests in corporate and partnership assets – Where there is an issue regarding the application of appropriate discounts to the value of the National Australia Bank husband’s minority interests – Whether a large liability which the husband owed to a family partnership business should be disregarded or discounted because the repayment of same was questionable – Where it was found that the husband’s liability to the family partnership business may result in a tax advantage – Where the husband will continue to occupy the former matrimonial home – Where the husband has not paid child support since separation – Where the contributions of the parties are assessed as equal – Where the wife receives approximately one third more of the net assets due to s 75(2) factors. |
| Family Law Act 1975 (Cth) ss 79, 81, 106A |
Family Law Rules 2004 (Cth) rule 17.03
Af Petersens and Af Petersens (1981) FLC 91-095
Bevan & Bevan (2013) FLC 93-545
Biltoft and Biltoft (1995) FLC 92-614
Chapman & Chapman (2014) FLC 93-592
Ferraro and Ferraro (1993) FLC 92-335
Georgeson (1995) FLC 92-618
Hickey and Hickey (2003) FLC 93-143
JS & GP (2006) 35 Fam LR 88
KD & PA Reynolds (1985) FLC 91-632
McLay and McLay (1996) FLC 92-667
Prince (1984) FLC 91-501
Stanford & Stanford (2012) FLC 93-518
| APPLICANT: | Ms Maxwell |
| RESPONDENT: | Mr Maxwell |
| INDEPENDENT CHILDREN’S LAWYER: | Legal Aid NSW Parramatta Family Law |
| FILE NUMBER: | PAC | 3271 | of | 2011 |
| DATE DELIVERED: | 7 July 2015 |
| PLACE DELIVERED: | Sydney |
| PLACE HEARD: | Sydney |
| JUDGMENT OF: | Le Poer Trench J |
| HEARING DATE: | 20 April 2015 – 22 April 2015, 29 April 2015 – 30 April 2015. |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr Kenny |
| SOLICITOR FOR THE APPLICANT: | Campbell Paton & J |
| COUNSEL FOR THE RESPONDENT: | Ms Kennedy |
| SOLICITOR FOR THE RESPONDENT: | Biddulph & Salenger |
Orders
The husband pay to the wife the sum of $404,905.00 by four (4) instalments as follows:
(a) $154,905.00 within three (3) months of these Orders; and
(b) Three (3) instalments of $83,334 annually thereafter.
That commencing from the due date of the first payment referred in Order 1(a), and annually thereafter, the husband pay to the wife interest on the unpaid amount of property settlement, calculated at the rate of 7 per cent per annum or the rate calculated pursuant to Rule 17.03 of the Family Law Rules 2004 (Cth), whichever be the lower. The husband may, at his option, pay any of the instalments payable under Order (1)(b) hereof at an earlier time than is required by that Order.
Until such time as the husband has paid to the wife all money owing to her pursuant to Orders (1) and (2) hereof he is not to sell, further charge or otherwise dispose of his interest in any of the following entities and assets without first giving the wife 21 days’ notice of his intention to do so and in such notice setting out how he proposes to deal with any funds raised by such action.
(a) B Pty Ltd;
(b) C Pty Ltd;
(c) D Partnership;
(d) E Trust;
(e)Property known as “B” and water licences jointly owned by the husband and his brothers, Mr F and Mr G Maxwell; and
(f) “H” Pty Ltd.
Upon payment of the sum required to be paid by Order 1(a) hereof the wife shall do all acts and things and sign all necessary documents to transfer to the husband all her right, title and interest in the partnership known as Mr & Ms Maxwell.
In the event that the Mr & Ms Maxwell Partnership has not yet been dissolved the parties are to cause it to be dissolved forthwith and the husband is to indemnify and keep indemnified the wife in respect of any and all liabilities, including her personal taxation liability, assessed to be paid in relation to the income which may be or has been ascribed to her although the stated distribution of profit not been paid to her, with respect to the partnership.
The wife be declared as the sole and absolute owner of the sale proceeds of a 4WD motor vehicle.
The husband is restrained, until completion of his obligation under Orders (1) and (2) hereof, from selling, encumbering or otherwise dealing with the John Deer Combine harvester owned by the Mr & Ms Maxwell Partnership (otherwise than in the normal course of operating the harvester for the purpose of earning income) except for the purpose of meeting any of the payments required by Orders (1) or (2), without the written consent of the wife first having been obtained.
Notwithstanding Order (3), the husband is permitted to deal with his interest in the entities/property referred to in Order (3) for the purpose of raising funds to make payment to the wife in accordance with Order (1).
The wife is to deliver to the husband, forthwith, his great grandmother’s ring and any other of his family’s heirlooms which are in her possession or control.
That unless otherwise specified in these Orders:
(a)Each party be solely entitled to the exclusion of the other to all other property and chattels of whatsoever nature and kind in the possession of such party as at the date of these Orders;
(b)Each party be solely liable for and indemnify the other against any liability encumbering any items of property to which that party is entitled pursuant to these Orders; and
(c)Each party shall be solely responsible for the payment of any debts or loans in their name as at the date of these Orders and shall indemnify the other and keep the other indemnified in relation thereto.
In the event that either party refuses or neglects to sign any Deeds and/or instruments in compliance with the preceding Orders, the Registrar of the Family Court of Australia at Sydney is hereby appointed to execute all Deeds and/or instruments in the name of the defaulting party and to do all acts and things necessary to give validity and operation to the said Orders pursuant to s 106A of the Family Law Act1975 (Cth).
Each party has liberty to apply for further orders to implement these Orders.
All outstanding applications are otherwise dismissed.
The Court notes all proceedings in the Court have now been finalised by the making of these Orders.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Maxwell& Maxwell has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
| FAMILY COURT OF AUSTRALIA AT SYDNEY |
FILE NUMBER: PAC 3271/2011
| Ms Maxwell |
Applicant
and
| Mr Maxwell |
Respondent
REASONS FOR JUDGMENT
Introduction
Mr Maxwell (“the husband”) and Ms Maxwell (“the wife”) cohabited for about ten years during which they were married. They have two children: N, born in 2003, and O, born in 2004.
At the commencement of their cohabitation the wife had a child from a former relationship living with her. That child, J, was born in 1995 and tragically died in 2012. There had been proceedings between the wife and J’s father during the cohabitation between the husband and wife. That proceeding was costly and was ultimately paid for by the wife’s parents. The loss created by the demise of J, I am sure, had and probably still has significant impact upon the subject family.
The family lived in a rural community during most of the cohabitation. They lived on a property outside the urban limits of the nearest town. Upon the separation of the parties, the wife moved to the township of K Town, an environment where both the husband and wife and their extended families were well known. That circumstance became problematic, particularly for the wife.
During the hearing which commenced on 20 April 2015 the parties were able to resolve the parenting dispute between them and final parenting orders were made. Those Orders permit the wife to relocate her residence to L Town, a nearby (but at a sufficient distance from K Town to provide comfort for the wife) urban centre.
This determination addresses the property dispute which remained unresolved.
Orders sought
The wife sought orders as contained in exhibit W1. I here set out the property orders which the wife sought.
MINUTE OF PROPOSED ORDERS
1.That by way of property settlement , the husband pay to the wife the sum of $600,000.00 by four (4) instalments as follows:
a) $300,000.00 within three (3) months of these Orders; and
b) Three (3) instalments of $100,000.00 annually thereafter;
2.That commencing from the due date of the first payment referred in order 1(a), and annually thereafter, the husband pay to the wife interest on the unpaid amount of property settlement, calculated at the rate of 7 per cent per annum.
3.That by way of security for payment to the wife the sum payable pursuant to Orders 1 and 2 ,the husband henceforth and until final payment in accordance with these Orders, hold his right, title and interest in the following in trust for the wife:
a)[B Pty Ltd];
b)[C Pty Ltd];
c)[D Partners];
d)[E Trust];
e)Property known as “[B]” and water licences jointly owned by the husband and his brother [Mr F] and [Mr G Maxwell]
f)“[H]” Pty Ltd;
4.That subject to Order 6, and upon payment of the sum of $300,000.00 pursuant to Order 1,the wife shall do all acts and things and sign all necessary documents to transfer to the husband all his right , title and interest in the partnership known as [Mr & Ms Maxwell] (the partnership)
5.That the partnership to be dissolved forthwith and the husband indemnifies and keep indemnified the wife in respect of any and all liabilities, including taxation with respect to the partnership.
6.That the wife be declared as the sole and absolute owner of the sale proceeds of [4WD] motor vehicle.
7.That the husband be restrained from selling, encumbering or otherwise dealing with the John Deer Combine harvester owned by the partnership until full payment of the property settlement pursuant to Order 1 except for the purpose of raising funds to make payment to the wife pursuant to these Orders.
8.In the event that the husband fails to comply with order 1, the wife is appointed as trustee for the sale of John Deer Combine Harvester and the sale proceeds shall be paid to the wife towards moneys due and payable to her pursuant to orders 1 and 2.
9.Notwithstanding Order 3, the husband is permitted to deal with his interest in the entities/property referred to in order 3 for the purpose of raising funds to make payment to the wife in accordance with Order 1.
10.That unless otherwise specified in these Orders:
a)Each party be solely entitled to the exclusion of the other to all other property and chattels of whatsoever nature and kind in the possession of such party as at the date of these Orders and that for this purpose bank accounts are deemed to be in the possession of the person whose name appears on the bank's record thereof, insurance policies Pending are deemed to be in the possession of the beneficiary thereof, superannuation entitlements and long service leave and other associated employment benefits are deemed to be in the possession of the person who is named as the worker whose wage or working future provides the conditions for payment out of such entitlements;
b)Each party be solely liable for and indemnify the other against any liability encumbering any items of property to which that party is entitled pursuant to these Orders;
c)That each party shall be solely responsible for the payment of any debts or loans in their name as at the date of these Orders and shall indemnify the other and keep the other indemnified in relation thereto.
11.In the event that either party refuses or neglects to sign any Deeds and/or instruments in compliance with the preceding Orders, the Registrar of the Family Court of Australia at Sydney is hereby appointed to execute all deeds and/or instruments in the name of the defaulting party and to do all acts and things necessary to give validity and operation to the said Orders pursuant to Section 106A of the Family Law Act.
The husband sought orders as contained in exhibit H1. I here set out the orders which the husband sought.
MINUTE OF PROPERTY ORDERS SOUGHT BY THE HUSBAND
1.By way of a final property adjustment that the [husband] pay to the [wife]the sum of $150,000 within 3 months together with two further payments of $50,000 each to be paid as follows:
December 2016 - $50,000
June 2018 - $50,000
2.That the [wife] return to the [husband] his great grandmother’s ring and any other family heirlooms in her possession.
3.That each party otherwise retain all assets and property in his or her possession and control.
4.That within 1 month, the wife do all acts and things to wind up, transfer or otherwise deal with as directed by the husband, her interest in the [Mr and Ms Maxwell] partnership.
Background Facts
Where in this judgment I make statements of fact they are, unless otherwise specified, my findings of fact.
The parties commenced cohabitation in 2000, when the husband moved in with the wife and her child from a previous relationship, J.
The parties lived in rental accommodation owned by the wife’s father and paid rent to him. The wife asserts that as the husband was not receiving an income from his work in his family’s farming business at this time, she was solely responsible for the payment of rent and joint living expenses. The husband denies this and says he was in receipt of a small income during this period, which he applied toward the parties’ living expenses. He says that he also drew approximately $150 per week from the family business for rent payments. He further asserts that from cohabitation, the accounts of his family business were utilised by the parties to pay for various living expenses. I will address this issue later in these Reasons.
At the commencement of cohabitation, the wife was engaged in full time employment. She did not have any significant assets, superannuation, savings or liabilities. The wife had been declared bankrupt in early 2000. There was no evidence to suggest the wife was required to pay any of her income to her trustee in bankruptcy. The parties do not say when the wife was discharged from her bankruptcy.
The husband worked full time as a farmer and grazier for his family’s farming business. The family business was conducted through a number of entities including a partnership known as the D Partnership (“the D Partnership”), B Pty Ltd (“B”), C Pty Ltd and, from 2003 onwards, H Pty Ltd (“H”). The husband was, and remains, responsible for dry land, cropping and finance within the family business.
The husband did not have an interest in the D Partnership at the commencement of cohabitation. The members of the D Partnership were the E Trust, the husband’s parents and the husband’s aunt, Ms M. The husband’s assets consisted primarily of his one-third share in B, which owned a property known as D Property. There is an issue as to the value of this asset at the date of commencement of cohabitation.
The parties married in 2002.
In late 2002, the husband, although not yet a partner, began receiving “drawings” from the D Partnership of $500 per week. Whether these payments were in reality a wage really seems immaterial to the dispute to be determined in this hearing. The “drawings” were paid into the husband’s National Australia Bank (“NAB”) account to which the wife had access. As will be seen later the husband did not become a partner in the D Partnership until November 2004 when he and his brothers acquired their aunt’s interest in the partnership and also the E Trust.
There is a dispute between the parties as to the characterisation of these funds as “drawings” by the husband. The wife asserts that the funds received by the husband constituted wages for his farming work and that these funds were treated as drawings in order to minimise the D Partnership’s tax liabilities. The husband contends that the moneys he received from the D Partnership are in the nature of excess drawings, with the exception of a total profit received by him of $2,209 relating to the 2011 and 2012 financial years. The husband says that with the exception of the small profits made in those years, the D Partnership did not make any profit from 2004 to 2014. Accordingly, on the husband’s case, each drawing made by him increased his debt to the D Partnership.
It is agreed by the experts (each engaged as adversarial experts) that the husband’s current liability to the D Partnership is in excess of $1,300,000. The wife takes issue with whether the large portion of the liability relating to the husband’s excess drawings is repayable. It is not disputed that there has been no request made of the husband to date for the funds to be repaid.
In April 2003, the wife, who was pregnant with the parties’ first child, ceased her employment.
The first child of the marriage, N, was born in 2003.
The wife resumed working through her own business when N was approximately six months old. The wife asserts that her income was applied toward joint living expenses. The husband says that the wife’s income was deposited into her own accounts with Orana Credit Union and not into the D Partnership accounts. In the circumstances of this case I consider the issue for determination in this case is the extent of contribution the wife made with her income. It does not require her to establish she deposited her income to the D Partnership (she was not a partner in that entity in any event). Rather, she merely needs to establish she contributed that income to the support of the family or in some other joint family endeavour. There is no suggestion in this case that the wife wasted any of her income or that she has failed to disclose relevant assets.
In October 2003, the husband and his two brothers incorporated a company, H, for the purpose of purchasing, leasing and developing a property (“H property”). The H property is located approximately 35 kilometres from K Town and consists of 1,413 hectares. The husband and his brothers are equal shareholders and directors of H. H signed a five year lease on the H property with an option to purchase.
In October 2003, the parties commenced living in the homestead situated on the H property (“the former matrimonial home”). The parties lived at the former matrimonial home rent free for the duration of their cohabitation.
In November 2004, the husband and his two brothers purchased their aunt’s interests in the following:
a)C Pty Ltd (husband received 19,204 shares);
b)E Trust (husband received 12 units);
c)Property known as “B” at K Town (husband received a one third interest); and
d)The D Partnership (husband received a 0.12 per cent interest).
The purchase price of $1,400,000 for the acquisition of their aunt’s interests was funded through the D Partnership. The entire purchase price was borrowed from the NAB. Following that transaction, the members of the D Partnership were, and remain to the present day, the husband, the E Trust, the husband’s parents and the husband’s two brothers.
On 5 November 2004, the wife’s parents gifted the parties $20,000. $5,000 of this amount was used by the wife to purchase a new camera. The wife asserts that the remaining $15,000 was provided by her parents to assist with renovations of the H property, however, it was transferred out of the parties’ joint account by the husband so they were unable it to apply it toward the renovations. In any event there is no allegation of waste, made against the husband, in respect of those funds or otherwise.
In 2004 the parties’ second child, O, was born. The parties agree that the wife was the primary (but not exclusive) caregiver for both children during the marriage.
From about February 2007, the husband received a drought subsidy which was paid into his NAB account in an initial lump sum of $5,721 followed by fortnightly payments of $760.
In September 2007, the drawings received by the husband from the D Partnership were increased to $700 per week.
In 2009, H purchased the H property for $4,814,759 (including incidental costs). The purchase was funded through a loan in the name of the D Partnership which was secured against the assets of the partnership. The H property has decreased in value since the date of the purchase to approximately $4,200,000. As set out in the Joint Statement of the experts acting for the husband and the wife (Mr P and Mr Q), as at April 2015 the H Loan amounted to $4,802,406, which exceeds the company’s assets of $4,217,000. While Mr P attributed a notional negative value for the husband’s share in H, the parties agree that the value of the husband’s interest in H is $Nil.
In May 2009, the wife’s parents gifted the wife $13,000 toward the purchase of a 4WD motor vehicle. The remainder of the purchase moneys were obtained from the parties’ joint funds and by “trading-in” the parties’ older motor vehicle. The wife asserts that the registration of the 4WD motor vehicle in the husband’s sole name, at the date of purchase, was done by the husband without her knowledge or consent. I note that notwithstanding that assertion the wife had possession of the vehicle at the date of separation and subsequently sold the vehicle (and presumably passed good title) to her brother.
In October 2009, the parties purchased a Combine Harvester (“the Header”) for $532,950. The parties intended to use the Header for contract harvesting in order to generate income. The Header was purchased through a partnership known as the Mr and Ms Maxwell Partnership, in which each party held, and continues to hold, a 50 per cent share. The purchase was partly funded through an equipment credit facility known as “John Deere Credit”. The husband asserts that the parties also received a loan of $30,000 from the D Partnership for the purchase. The husband contributed further moneys toward the purchase from his personal credit card, although the wife asserts that these amounts were later repaid from the parties’ joint account. A GST tax refund of $48,445 obtained by Mr and Ms Maxwell Partnership was also applied toward the purchase.
Since the date of purchase, the Header has been primarily used by the D Partnership for harvesting work. The wife asserts that the income from the Header was deposited into the D Partnership account and that she has not received the benefit of the income. The husband deposes that all repayments due on the Header have been paid by the D Partnership and that the Header has been maintained by the D Partnership since separation without any financial assistance by the wife. The husband’s accountant, Mr P, asserts that the wife owes $18,591 to the Mr and Ms Maxwell Partnership, which is unlikely to be repaid by her.
On 9 April 2010, the husband, his brothers and his parents met with their accountants, Mr P and Mr R, and discussed succession planning. Meeting notes from that day outline, under the heading “Facts”, that the husband’s parents were ready to transfer their interest in the farming business to the husband and his two brothers on an equal basis. The notes also record that Mr G would like to operate “a stand-alone farming business” separate from the current structure, however, the husband and his brother Mr F “seem comfortable with the current structure”. There have been no further steps taken since that time to affect a transfer of the family business from the husband’s parents to the husband and his brother. The husband’s mother deposes that the division of the H property has not been effected because it would be impossible for the husband and each of his brothers to individually manage the debt with all the stamp duty and capital gains tax applicable. All the properties owned by the family business are cross-guaranteed.
The drought subsidy payments that were received by the husband ceased in about April 2011.
The parties separated on 14 April 2011.
The wife left the former matrimonial home at separation and moved to rental accommodation in K Town. The 4WD motor vehicle remained in the wife’s possession. The husband remained in the former matrimonial home with the children. The conflict between the parties regarding parenting arrangements following separation will not be canvassed in these Reasons unless there be some financial consequence to be relevantly considered. The parties settled those issues during the hearing days dedicated to this case.
The wife commenced proceedings for parenting and property orders in July 2011.
On 8 August 2011, interim parenting orders provided that the parties would have equal time with N and O.
On 21 October 2012 the wife’s child, J, passed away aged 17 from lymphoma.
The wife asserts that the Header was registered in the husband’s sole name without her knowledge in 2013.
On 2 September 2013, the husband received an insurance payout of $54,545.45 from an insurance claim in relation to damage caused to the Header. The funds were deposited into the account of the D Partnership.
In September 2014, the children commenced living with each parent in a week‑about arrangement.
In the period from mid to late 2004, the wife was variously employed on a temporary basis. In December 2014, she was offered a position in S Town and commenced working every second week when the children were not in her care.
The wife says that she sold the 4WD motor vehicle to her brother for $20,000 in October 2014.
In January 2015, the husband paid out the remaining amount of $56,000 owing by the parties in relation to the Header. The husband asserts that he borrowed this amount from his parents.
The final hearing of the parties’ parenting and property applications commenced on 20 April 2015. At that time, the wife was living with her mother and remained employed with T Pty Ltd, in addition to operating her own business.
The husband remained living at the former matrimonial home. He continued to work as a farmer and, according to his Financial Statement, received $1,090 per week in drawings from the D Partnership. The husband also continues to hold the same interests in the Maxwell family enterprise which he held at the date of separation.
On the fourth day of the hearing, the parties reached terms of settlement with regard to the parenting proceedings. The Consent Orders provide that O would live with each party on each alternate week during school terms and for half of each of the school holidays. N is to live with the husband from Wednesday after school to Monday morning each alternate week and for half of the school holidays, and with the wife at all other times. The wife was also permitted to change the children’s residence from K Town to a location in or near L Town. Notations to the Consent Orders provide that it is the intention of the parties that the husband shall be responsible for payment of private tuition fees for the children and all costs associated with the children’s attendance at Sydney boarding schools, should this occur.
The Issues
The following issues emerged as the hearing progressed:
There is an issue about the husband’s financial contribution made on a weekly basis when the parties first commenced to cohabit. Did the husband contribute to the rental and other outgoings for the rented property the parties occupied?
There is an issue as to the value of the husband’s interest in B at the date of commencement of cohabitation.
There is an issue about the nature of money drawn by the husband from the D Partnership. This issue spans a number of areas. The wife says the husband drew nothing more than the equivalent of a “Farmhand wage” for the work he did on the properties farmed by the partnership over the period of the cohabitation.
Another issue is the amount of the debt owed by the husband to the D Partnership. The wife submits the Court would conclude that none of the debt will be repaid. There is a dispute about that. The wife submits that, as a matter of fairness, only that part of the debt which was generated in the D Partnership during the cohabitation should be included in the balance sheet as a liability.
It is agreed by the experts acting for both the husband and the wife that the husband’s current liability to the D Partnership is in excess of $1,300,000. The wife takes issue with whether the large portion of the liability relating to the husband’s excess drawings is repayable. It is not disputed that there has been no request made of the husband to date for the funds to be repaid.
Credit
The wife
The wife gave her evidence in an apparently honest and straightforward manner. I find that the wife did not have the same understanding of the financial workings of the Maxwell Family enterprise as the husband. To that extent, unless I find to the contrary during these Reasons, I accept the husband’s evidence on such matters in preference to that of the wife.
The husband
The husband gave his evidence in a straightforward and apparently honest manner. He was serious in his presentation in the witness box and appeared to me to properly consider the questions addressed to him.
Relevant Law
Property: general principles
Section 79 of the Family Law Act 1975 (“the Act”) enables the Court to make orders with respect to the property of the parties to the marriage. In considering what order, if any, should be made the Court is required to take into account the matters under s 79(4).
Prior to the decision of the High Court in Stanford & Stanford (2012) FLC 93-518 (“Stanford”), s 79 applications were determined through the application of a four step process (Ferraro and Ferraro (1993) FLC 92-335 (“Ferraro”); McLay and McLay (1996) FLC 92-667 (“McLay”); Hickey and Hickey (2003) FLC 93-143) (“Hickey”)). That process required the Court to:
a)firstly, identify and value the net property, liabilities and financial resources of the parties at the date of the hearing;
b)assess the contributions of the parties pursuant to s 79(4);
c)consider the relevant s 75(2) factors; and
d)lastly, consider whether such an order, in all the circumstances, is just and equitable.
The four step approach has now been the subject of comment by the Full Court in Bevan & Bevan (2013) FLC 93-545 (“Bevan”). Their Honours Bryant CJ and Thackray J outlined that the High Court in Stanford did not disapprove or approve of the four step process set out in authorities such as Ferraro, McLay and Hickey. In the majority judgment, Bryant CJ and Thackray J said at [65]:
65. Although the High Court did not disapprove the four step process, we accept it was not approved either. Given the way the matter was resolved, there was no requirement for a pronouncement either way. However, the High Court’s decision serves to refocus attention on the obligation not to make an order adjusting property interests unless it is just and equitable to do so.
Stanford: is it appropriate to make any property order?
Section 79(2) of the Act is as follows:
(2) The court shall not make an order under this section unless it is satisfied that, in all the circumstances, it is just and equitable to make the order.
In Stanford the High Court warned against "conflating" the requirements of s 79(4) and s 79(2):
The operation of s 79
35. It will be recalled that s 79(2) provides that "[t]he court shall not make an order under this section unless it is satisfied that, in all the circumstances, it is just and equitable to make the order". Section 79(4) prescribes matters that must be taken into account in considering what order (if any) should be made under the section. The requirements of the two sub‑sections are not to be conflated. In every case in which a property settlement order under s 79 is sought, it is necessary to satisfy the court that, in all the circumstances, it is just and equitable to make the order.
36. The expression "just and equitable" is a qualitative description of a conclusion reached after examination of a range of potentially competing considerations. It does not admit of exhaustive definition. It is not possible to chart its metes and bounds. And while the power given by s 79 is not "to be exercised in accordance with fixed rules", nevertheless, three fundamental propositions must not be obscured.
37. First, 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. So much follows from the text of s 79(1)(a) itself, which refers to "altering the interests of the parties to the marriage in the property" (emphasis added). The question posed by s 79(2) is thus whether, having regard to those existing interests, the court is satisfied that it is just and equitable to make a property settlement order.
38. Second, although s 79 confers a broad power on a court exercising jurisdiction under the Act to make a property settlement order, it is not a power that is to be exercised according to an unguided judicial discretion. In Wirth v Wirth, Dixon CJ observed that a power to make such order with respect to property and costs "as [the judge] thinks fit", in any question between father and mother as to the title to or possession of property, is a power which "rests upon the law and not upon judicial discretion". And as four members of this Court observed about proceedings for maintenance and property settlement orders in R v Watson; Ex parte Armstrong:
"The judge called upon to decide proceedings of that kind is not entitled to do what has been described as 'palm tree justice'. No doubt he is given a wide discretion, but he must exercise it in accordance with legal principles, including the principles which the Act itself lays down".
39 Because the power to make a property settlement order is not to be exercised in an unprincipled fashion, whether it is "just and equitable" to make the order is not to be answered by assuming that the parties' rights to or interests in marital property are or should be different from those that then exist. All the more is that so when it is recognised that s 79 of the Act must be applied keeping in mind that "[c]ommunity of ownership arising from marriage has no place in the common law". Questions between father and mother about the ownership of property that may be then, or may have been in the past, enjoyed in common are to be "decided according to the same scheme of legal titles and equitable principles as govern the rights of any two persons who are not spouses". The question presented by s 79 is whether those rights and interests should be altered.
40. Third, whether making a property settlement order is "just and equitable" is not to be answered by beginning from the assumption that one or other party has the right to have the property of the parties divided between them or has the right to an interest in marital property which is fixed by reference to the various matters (including financial and other contributions) set out in s 79(4). The power to make a property settlement order must be exercised "in accordance with legal principles, including the principles which the Act itself lays down". To conclude that making an order is "just and equitable" only because of and by reference to various matters in s 79(4), without a separate consideration of s 79(2), would be to conflate the statutory requirements and ignore the principles laid down by the Act. (references removed)
Decisions of the Full Court following Stanford have made particular reference to [42] of the High Court judgment which gives a practical guide to the circumstances in which the Court may determine it is not appropriate to make a property order.
42. In many cases where an application is made for a property settlement order, the just and equitable requirement is readily satisfied by observing that, as the result of a choice made by one or both of the parties, the husband and wife are no longer living in a marital relationship. It will be just and equitable to make a property settlement order in such a case because there is not and will not thereafter be the common use of property by the husband and wife. No less importantly, the express and implicit assumptions that underpinned the existing property arrangements have been brought to an end by the voluntary severance of the mutuality of the marital relationship. That is, any express or implicit assumption that the parties may have made to the effect that existing arrangements of marital property interests were sufficient or appropriate during the continuance of their marital relationship is brought to an end with the ending of the marital relationship. And the assumption that any adjustment to those interests could be effected consensually as needed or desired is also brought to an end. Hence it will be just and equitable that the court make a property settlement order. What order, if any, should then be made is determined by applying s 79(4).
In Bevan the Full Court, after citing [42] of Stanford, warned, at [70] – [74], against the rigid application of the four step process in s 79 applications and outlined that the “ultimate requirement” of any order made is that it must be just and equitable to do so:
70. In our experience, the circumstances described in the paragraph above encapsulate the vast majority of cases. Hence, the reminder in Stanford of the pivotal role of s 79(2) is unlikely to have any impact in most cases, although it will serve as a reminder to trial judges that the precondition to making any order is a finding that it is just and equitable to do so.
71. Stanford will also serve as a reminder that the four step process ‘merely illuminates the path to the ultimate result’. Any future restatement of that process should incorporate acceptance of the fact that the power to make any order adjusting property interests is conditioned upon the court finding that it is just and equitable to make an order.
72. It follows that judges would be well advised to avoid what we consider to be arid discussion of the ‘stage in the process’ at which ‘adjustments’ are permissible. Such discussion tends to elevate the four step process to the status of a statutory edict, when in fact it is no more than a shorthand distillation of the words of a statute which has but one ultimate requirement, namely not to make an order unless it is just and equitable to do so.
73. The High Court in Stanford has laid down three ‘fundamental propositions’ which will provide useful guidance to trial judges in approaching the task under s 79. These were recited above, and could be summarised thus:
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.
With regard to the third “fundamental proposition” laid down by the High Court in Stanford, Bryant CJ and Thackray J in Bevan outlined (bold emphasis added):
81. The third “fundamental proposition” demands separate consideration of the preliminary question of whether it is just and equitable to make any order altering property interests before the need arises to consider the extent to which existing interests are to be altered and the manner in which that is to be done.
…
84. Just as the expression “just and equitable” does not admit of exhaustive definition, it is not possible to catalogue the “range of potentially competing considerations” that may be taken into account in determining whether it is just and equitable to make an order altering property interests. However, in our view, it would be a fundamental misunderstanding to read Stanford as suggesting that the matters referred to in s 79(4) should be ignored in coming to that decision. Indeed, such a reading would ignore the plain words of s 79(4), which make clear that in considering “what order (if any)” to make, the court must take into account the matters referred to in that subsection (emphasis added).
85. This requirement to consider the s 79(4) matters in determining whether it is just and equitable to make any order provides fertile ground for potential conflation of the two different issues, which the High Court has warned against. However, this potential will not be realised in many cases because of what the plurality said at [42] about the “just and equitable” requirement being “readily satisfied”. But there will be a range of cases, of which arguably the present is a good example, where determining whether it is just and equitable to make any order altering property interests will not be so clear cut and will therefore require not only separate but very careful deliberation.
86. We do not consider it helpful, and indeed it is misleading, to describe this separate enquiry as a “threshold” issue. We say this for two reasons. First, as was emphasised in Stanford, the initial enquiry is to determine the existing legal and equitable interests of the parties. Secondly, although s 79(2) is cast in the negative and amounts to a prohibition against making any order unless it is just and equitable to do so, the corollary is that if the court does make an order, such order itself must be just and equitable: Woollams & Woollams (2004) FLC ¶93-195 per Thackray J at [53] and Teal v Teal [2010] FamCAFC 120 per Finn, Boland and Dawe JJ at [70]. The just and equitable requirement is therefore not a threshold issue, but rather one permeating the entire process.
87. It will be seen from this discussion that while the s 79(2) and s 79(4) issues must not be conflated, they are intertwined because the text of the Act links them….
89. In our view, it will be less likely that the separate issues arising under s 79(2) and s 79(4) will be conflated if judges refrain from evaluating contributions and other relevant factors in percentage or monetary terms until they have first determined that it would be just and equitable to make an order. Ultimately, however, appellate error will not be demonstrated if it is possible to ascertain, either by reference to an express finding or by necessary inference, that the trial judge has given separate consideration to the two issues.
In the subsequent decision of Chapman & Chapman (2014) FLC 93-592 (“Chapman”), their Honours Strickland and Murphy J stated, with regard to Bryant CJ and Thackray J’s interpretation of the High Court’s decision of Stanford in Bevan, that:
25. If the plurality intended that a consideration of the s 79(4) matters is mandatory in answering the s79(2) question, we respectfully disagree.
26. The judgment in Stanford points, in our view, to the opposite conclusion. In particular:
• The “…range of potentially competing considerations” and the consequent impossibility of charting the “metes and bounds” of what is just and equitable (at [36]);
• The ready satisfaction of the s 79(2) requirement in “many cases” by the fact of separation (at [42]);
• The statement that “it will be just and equitable” to make an order in “many cases” by reason of the “…choice made by one or both of the parties…” to end the marriage (at [42]);
• Equally, the statement that “it will be just and equitable” to make an order “in many cases” because “…there is not and will not thereafter be the common use of property by the husband and wife” (at [42], emphasis in original);
• The reiteration that: “…nothing in these reasons should be understood as attempting to chart the metes and bounds of what is ‘just and equitable’ (at [46]); and,
• The further reiteration that nothing in their Honours’ reasons is “…intended to deny the importance of considering any countervailing factors which may bear upon what, in all the circumstances of the particular case, is just and equitable” (at [46]).
27. Further, and crucially, in “applying s 79 in this case” the Justices of the High Court did not themselves take into account the matters in s 79(4). Indeed [51] of the judgment suggests they eschewed those s 79(4) matters relating to contribution. If, as the plurality held in Bevan, it is a “…requirement to consider the s 79(4) matters…” (emphasis added) in determining if, pursuant to s 79(2), it is just and equitable to make any order it is, respectfully, inconceivable that their Honours in Stanford would not have done so.
In Chapman, her Honour Bryant CJ agreed with Strickland and Murphy JJ’s interpretation of Stanford and posited at [4] that the reasons of the plurality in Bevan, despite some “infelicity of expression” at [84] and [85] of that judgement, did not lead to a conclusion that it is a mandatory requirement for the Court to consider s 79(4) matters when determining the s 79(2) question. Her Honour outlined, at [5] – [6], in relation to the intention of the plurality’s reasons in Bevan (bold emphasis in original) that:
5. The point being made by the plurality at [84] is that it would be inappropriate to limit the wide discretion conferred by s 79(2) by requiring the Court to ignore the matters referred to in s 79(4). This is so because the matters referred to in subparagraphs (a) to (c) of s 79(4) in particular, would be likely to embrace much of the factual substratum on which any exercise of discretion would be based.
6. The infelicity of expression to which I have referred appears in the opening words of [85], which I accept can be read as requiring the Court to consider, in every case, the matters in s 79(4) when determining whether the requirements of s X have been met. This was not the intention. Rather, the paragraph was designed to highlight the potential for conflation of the two separate issues as a result of the appearance of the words “(if any)” in the opening sentence of s 79(4).
Her Honour continued, at [9], that she agreed with the position of the majority that s 79(4) matters were not required to be considered when determining the s 79(2) question, although they may serve to inform the decision:
9. Whatever differences may exist as to the meaning of [84] and [85] of Bevan, I am in agreement with Strickland and Murphy JJ that it is not a requirement to take account of the matters in s 79(4) when considering the question of whether it is just and equitable to make any order under s 79(2). But as long as they are seen as separate and not conflated, the factors in s 79(4) have the potential to inform the decision under s 79(2), along with all other relevant considerations, as Murphy J held in Watson & Ling [2013] FamCA 57 at [12], citing Stanford at [40].
With respect to the Court’s consideration of s 75(2) matters, her Honour outlined:
39. The consideration of the relevant matters referred to in s 75(2) of the Act, pursuant to s 79(4), like the assessment of contributions, is holistic. Also, like the assessment of contributions, it is not an accounting exercise.
40. In addition, and important to the arguments in this appeal, a trial judge is obliged to “…consider the effect of the findings as to contribution on the respective positions of the parties, before proceeding to determine whether any adjustment was warranted pursuant to section 75(2)” (Willis & Willis [2007] FamCA 819, at [50]). In that respect, the nature and form of the property or superannuation interests comprising a party’s entitlement, and not just the dollar value of that entitlement are clearly central to achieving justice and equity as s 79 requires.
Assessment of the s 79(4) contributions
In considering the alteration of property interests I am required to consider the contributions made by the parties in accordance with the matters outlined under s 79(4). Section 79(4) provides:
(4) In considering what order (if any) should be made under this section in property settlement proceedings, the court shall take into account:
(a) the financial contribution made directly or indirectly by or on behalf of a party to the marriage or a child of the marriage to the acquisition, conservation or improvement of any of the property of the parties to the marriage or either of them, or otherwise in relation to any of that last‑mentioned property, whether or not that last‑mentioned property has, since the making of the contribution, ceased to be the property of the parties to the marriage or either of them; and
(b) the contribution (other than a financial contribution) made directly or indirectly by or on behalf of a party to the marriage or a child of the marriage to the acquisition, conservation or improvement of any of the property of the parties to the marriage or either of them, or otherwise in relation to any of that last‑mentioned property, whether or not that last‑mentioned property has, since the making of the contribution, ceased to be the property of the parties to the marriage or either of them; and
(c) the contribution made by a party to the marriage to the welfare of the family constituted by the parties to the marriage and any children of the marriage, including any contribution made in the capacity of homemaker or parent; and
(d) the effect of any proposed order upon the earning capacity of either party to the marriage; and
(e) the matters referred to in subsection 75(2) so far as they are relevant; and
(f) any other order made under this Act affecting a party to the marriage or a child of the marriage; and
(g) any child support under the Child Support (Assessment) Act 1989 that a party to the marriage has provided, is to provide, or might be liable to provide in the future, for a child of the marriage.
Section 75(2)
In making a decision in relation to property, s 79(4)(e) requires a consideration of relevant s 75(2) matters. I here incorporate the provisions of s 75(2).
The first step I must undertake is to identify the property of the parties or either of them available for division between them.
The Court at the commencement of the hearing was provided with the balance sheet set out hereunder for its consideration.
The Balance Sheet
At the conclusion of the hearing, the parties handed up the following joint balance sheet:
| ASSETS | ||||||
| Item No | Ownership | Description | Wife’s Value | Husband’s Value | Agreed/Found | |
| 1 | H | Interest in [H Pty Ltd] | NIL | Nil | ||
| 2 | H | Interest in [B Pty Limited] | 381,765 | 371,161 | ||
| 3 | H | Loan to [B Pty Limited] | 56,785.00 | 56,785.00 | ||
| 4 | H | [C Pty Ltd] | 845,383 | 751,452 | ||
| 5 | H | [Mr A, Mr J & Mr Maxwell] ([B land]) | 707,134.00 | 707,134.00 | ||
| 6 | H | [D partnership] - ($1,376,083.00) | (551,000) | (1,376,083.00) | ||
| 7 | H | IAG shares ( 274) | 1,641.00 | 1,641.00 | ||
| 8 | H | Telstra shares ( 600) | 7,835.00 | 7,835.00 | ||
| 9 | H | 1/3 Loan owed by [D partnership] to [Mr A, Mr J & Mr Maxwell] ([B land]) | 7,135.00 | 7,135.00 | ||
| 10 | Joint | [Mr A, Mr J & Mr Maxwell] | 68,956.00 | 59,660.00 | ||
| 11 | Joint | Outstanding invoice payable to [Mr A, Mr J & Mr Maxwell] | 8,500.00 | 8,500.00 | ||
| 12 | H | Household contents | 2,000.00 | 2,000.00 | ||
| 13 | W | ANZ -… | Nil | 82 | ||
| 14 | W | ANZ-… | Nil | 34 | ||
| 15 | W | ANZ… | Nil | 352 | ||
| 16 | W | Household contents | Nil | 5000 | ||
| 17 | W | Camera Equipment and Computer | Nil | 5000 | ||
| Total | $857,870.00 | |||||
| ADDBACKS | ||||||
| Item No | Ownership | Description | Wife’s Value | Husband’s Value | Agreed/Found | |
| 18 | H | Insurance claim | $54,545.45 | 54,545 | ||
| 19 | W | Sale proceeds of 4WD | $20,000.00 | 20,000 | ||
| 20 | H | Profit of [Mr A, Mr J & Mr Maxwell 2012] | $34,115.00 | Nil | ||
| 21 | W | Cheque | Nil | 15,000 | ||
| Total | $108,660.45 | |||||
| LIABILITIES | ||||||
| Item No | Ownership | Description | Wife’s Value | Husband’s Value | Agreed/Found | |
| 22 | H | Loan from [D partnership] | 49,307.00 | 49,307.00 | ||
| 23 | H | 1/3 loan from [Mr A, Mr J & Mr Maxwell] | 7,135.00 | 7,135.00 | ||
| 24 | H | Visa NAB | NIL | nil | ||
| 25 | H | MasterCard NAB | NIL | nil | ||
| 26 | H | [Mr & Ms U] | NIL | nil | ||
| 27 | W | [Mr V and Ms W Maxwell] (321,513.00) | NIL | |||
| Total | 56,442.00 | |||||
| SUPERANNUATION | ||||||
| Item No | Member | Name of Fund | Wife’s Value | Husband’s Value | Agreed/Found | |
| 28 | W | LUCRF | 16,272.00 | 16,272 | ||
| 29 | H | NIL | NIL | |||
| 30 | ||||||
| 31 | ||||||
| Total | 16,272.00 | |||||
| FINANCIAL RESOURCES | ||||||
| Item No | Ownership | Description | Wife’s Value | Husband’s Value | Agreed/Found | |
| 32 | ||||||
| 33 | ||||||
| 34 | ||||||
| Total | ||||||
NOTES
In relation to any disputed items and all disputed values for items a party should state, using the item number as a heading:
Why an item should not be on the balance sheet.
Whether expert evidence is required to resolve a dispute as to value and what steps have been taken to agree upon and appoint a single expert.
Whether documents in the possession of the other party need to be provided before the value of an item can be agreed.
Any other comment a party wishes to make in relation to the disputed item.
| Item No | |
| 1-5 | The wife relies on opinion of [Mr Q] sets (sic) out in joint statement filed 1 April 2015 and financial statements as at 28/2/2015 of these entities. |
| 6 | The wife says that based on 28 February 2015 financial statement of the [D partnership], the wife’s accountant [Mr Q] is of the opinion that the husband’s equity in that partnership is in negative in the sum of $1,376,083.00. However, the wife says that it includes excess drawings of $994,069.23 by the husband as at 28/2/2015. The wife takes issue as to whether such liabilities are repayable. |
| 7-9 | The wife relies on the husband’s updated financial statement filed 2 April 2015. |
| 10 | The wife relies on opinion of [Mr Q] sets (sic) out in joint statement filed 1 April 2015 |
| 11-12 | The wife relies on the husband’s updated financial statement filed 2 April 2015. |
| 13-17 | The wife relies on her updated financial statement filed 2 April 2015. |
| 18 | The wife relies on her affidavit filed 2 April 2015 and says the husband received the insurance claim from damaged caused to jointly owned header and deposited the money to [D partnership] bank account |
| 19-20 | The wife relies on her affidavit filed 2 April 2015 and partnership return 30/6/2014. |
| 21-22 | The wife relies on opinion of [Mr Q] sets (sic) out in joint statement filed 1 April 2015 |
| 23-25 | The wife says these liabilities are the husband’s post separation liabilities and shall not be included as matrimonial debts for the purpose of these proceedings. |
| 26 | The wife borrowed money from her parents to pay legal costs and school fees of [J] (deceased). The wife concedes that these liabilities are post separation liabilities and shall not be included as matrimonial debts for the purpose of these proceedings but relevant to S 75(2) consideration . |
| 27 | The wife relies on her updated financial statement and financial statement filed 2 April 2015. |
Submissions On the Balance Sheet
At my request each of the parties commenced their oral submissions by addressing the difference in values or sums sought to be included in the balance sheet, the draft of which had been prepared by the parties jointly and marked as exhibit X1. The version of exhibit X1 which was addressed was the latest version provided to the Court on 30 April 2015. As I consider each parties submissions in relation to disputed items on the balance sheet I propose to make determinations.
One matter which needs to be understood by the reader of these Reasons is that there was a very unusual approach to the valuation of items contended for in the balance sheet in this case.
Historically the parties had agreed that Mr X, a well-known expert in the area of valuing corporate, trust and business enterprises, was to be appointed as a single expert engaged to carry out a valuation of the somewhat complex Maxwell family business structures so far as they affected the husband and possibly the wife. The engaging of that expert did not proceed. As an alternative the wife chose to engage Mr Q to carry out a valuation on her behalf and the husband chose his (and the wife’s) accountant, Mr P. It seems that the parties agreed to this course of action, possibly driven by affordable options.
When the trial began I permitted the parties to rely on those adversarial experts. There really appeared to be no other viable alternative if the matter was to be concluded.
Such circumstances being faced by the Court and the parties at the commencement of the property trial, there was an apparent lacuna in the necessary evidence; namely, what discount should be applied to the value of the husband’s interest in various entities because he held a minority interest in same. To solve that problem the parties agreed to appoint Mr Q as a single expert to determine that one matter. Thus Mr Q was the parties’ expert in relation to the discount which should properly be applied to the calculation of the value of his interest in the various relevant entities and he was the wife’s expert on all other matters. Mr Q’s single expert report was admitted to evidence and marked as exhibit X5.
Mr Q and Mr P met before the hearing and provided a statement of their positions in relation to the items which they had been engaged to value. That statement (titled “Joint Statement”) was not marked as an exhibit because it was before the Court as part of the affidavit sworn by Mr Q on 17 April 2015 and relied upon by the wife. The document shows that there were only a few differences between the experts on the value of the parties’ interests in the relevant entities.
Item 2 in exhibit X1: the wife’s submissions
This is the husband’s interest in the entity B. The difference is explained by adopting a different discount figure by each of the parties. The wife argues for a ten per cent discount figure whilst the husband adopts the figure recommended by the single expert of fifteen per cent.
Item 2: the husband’s submissions
The husband’s counsel confirmed that the difference on the balance sheet between the husband’s and wife’s value was represented by the different percentage discount figures used by each of them. The husband has adopted the single expert’s recommendation of a mid-way figure for discount at
12.5 per cent.
In exhibit X5, the single expert’s report by Mr Q he was of the opinion that an appropriate discount range for the husband’s interest in B was between ten and 15 per cent and he adopted 12.5 per cent. No cross-examination took place in relation to that opinion. No submission was made as to why one end of the range should be preferred to the mid-range figure opined by the single expert as appropriate.
Determination of Item 2
I propose to accept the opinion of the single expert Mr Q as to an appropriate discount figure. The experts jointly agreed the value of the husband’s equity in B was $424,184. After the application of a discount of 12.5 per cent that value is reduced to $371,161. That is the figure I accept for the value to be included in the balance sheet.
Item 4 in exhibit X1
This is the value of the husband’s interest in the C Pty Limited and the difference in the two figures proposed by each of the parties is again created by each adopting a different discount rate in respect of the husband’s interest because of the minority interest held by him in that entity. The husband had adopted the recommendation of the single expert with a discount rate of twenty per cent and the wife adopted a discount rate of ten per cent.
Determination of Item 4
No cross-examination took place in relation to the opinion expressed by the single expert. No submission was made as to why one end of the range should be preferred to the mid-range figure opined by the single expert as appropriate. I propose to accept the opinion of the single expert for this item at $751,452.
Item 6 in exhibit X1
This is the area of greatest contention between the parties in respect of the balance sheet. At issue is the husband’s interest in the D Partnership. The husband contends for a negative value of $1,376,083. The wife contends for a negative value of $551,000 but concedes that a value as attributed to the husband’s interest at the date of separation, namely $779,478 would be available as a determination.
The Court was taken to exhibit W6 and attention was drawn to the last page of that document which is titled “Notes to the Financial Statements for the period ending 28 February 2015”. Thereafter columns representing the relevant figures between 2005 and 2015 appear, details of each of the partner’s accounts during that period are also provided. Attention was drawn to the entry for the husband as at 2005 when he entered into the partnership. It is common ground that the husband entered into the partnership by acquiring the interest of his aunt, Ms M, for $511,584. Thus it can be seen where the source of the figure, promoted by the wife as relevant value for the husband’s interest in the D Partnership, is founded.
The document also shows that as at 30 June 2011 (two months after the separation) the husband’s position in the partnership was a liability of $779,478. As at 28 February 2015 the husband’s position in the partnership was a deficit of $994,069.
It is ultimately the position of the wife that the Court would conclude, whatever it ascribes as a value to the husband’s deficit in the partnership, that such debt will probably never be called upon to be repaid. The wife submits there is no evidence to suggest any of the other partners have made reductions in their liability to the partnership account or have ever been requested by the other partners to do so.
The evidence of Mr P, the accountant for the husband and the Maxwell entities, is that no call has been made by any of the partners to repay the debt and the debt has been funded predominantly from the borrowings from the NAB. Mr P also gave evidence that should the partners determine to write off the liability which they each owe to this partnership then there would be no tax consequence to them, i.e. they would not be required to pay taxation arising from such an action.
Just and equitable
The above determination will see the wife receive approximately one third more of the available net assets than the husband. In dollars that is $200,000 which is not a large sum of money however proportionally it is significant.
In the circumstances of this case I determine that result to be just and equitable.
Orders which should be made
As set out earlier the wife seeks orders for the payment of a sum of money. She seeks other orders as well.
In relation to the minute of order which states the orders the wife seeks (exhibit W1 as amended). The wife’s counsel told the Court that whatever the outcome in terms of dollar figure to be made by the Court she would consent to a timed payment. She would, however, seek interest on the sum. A figure of seven per cent was sought by the wife.
It needs to be acknowledged that the wife has made a generous, sensitive and practical decision to allow the husband to pay her entitlement over a period of four years. It is generous because it is rare for a party to a property proceeding in this Court to be allowed to “pay off”, out of income or capital, the other party’s determined right to marital capital. It is sensitive because it recognises that her children have a heritage connected with the husband’s family and that O or N may well choose to take the same pathway as their father and live a rural life. It is practical because the process of seeking to enforce an immediate payment of the whole of her entitlement would probably mean bankruptcy for the husband, the possible winding up of corporate and business assets and the possibility that the costs involved in achieving those results will outweigh the benefit to be gained.
The wife’s counsel also informed the Court that the wife would consent to the Header being sold in order to meet any order made by this Court for payment by the husband to the wife. Further, the Court was informed by the wife’s counsel that she would not oppose the security for the payment by the husband to herself of property settlement in a form where the husband was injuncted from selling, dealing with, disposing of any of his interests in any of the entities otherwise than for the purpose of ordinary business or to meet the payment required by the court order to the wife.
The wife seeks an indemnity from the husband in respect of tax liability that might accrue to her as a result of income ascribed to her from the partnership post-separation and which has so far not been assessed or payable by her. Additionally, Mr P, the husband’s accountant, was of the view the wife was indebted to the partnership which operated in relation to the Header business.
The wife seeks an indemnity in relation to the incurring of a tax liability referable to the income earned by this subject partnership.
The husband seeks the wife return to him his great grandmother’s ring and any other of his family heirlooms in her possession. There is no specific evidence about the ring or heirlooms which was the subject of any submission. These items cannot be of significant value as each party has attributed a small value to their personal chattels. The husband sought the order for the return of those items not only in the orders he pursued in this hearing but also the orders he gave notice of in his Amended Response to Initiating Application filed on 11 May 2012. I propose to make that order as it was not specifically opposed by the wife.
The interest rate sought by the wife is 7 per cent on the unpaid portion of the liability the husband will have to the wife by the court orders. That interest rate sounds high in the current economic climate yet it is less than the rate payable under the Family Law Rules 2004 (Cth) (“the Rules”) (17.03).
No evidence was provided about an interest rate which was sought by the wife. Where the Court does require interest to be paid an order is usually made for the rate to be as specified in the Rules.
No submission was made by the husband in relation to the requirement to pay interest. However, the framing of the order sought by the husband does not speak of any interest being paid.
I determine it is appropriate for the husband to pay interest on any unpaid portion of the funds payable under the orders after an initial opportunity being given to meet the payments required to be made and I will so order. The rate should be 7 per cent or the rate prescribed by the Rules, whichever be the lower.
The reasons such payment should be required are as follows:
·In the absence of any order to the contrary, s 117B of the Act would impose an interest rate on any unpaid portion of an order for payment of a property order such as is envisaged by both parties in this case.
·The payment of interest will normally be seen to offset the eroding buying power of the capital sum which time taken to pay may create.
The wife seeks an order that the husband be restrained from dealing with his assets in a way which alienates them from him either through commercial reward or otherwise. She effectively seeks that whatever the husband does with his assets until the court orders have been satisfied (she receives her funds) should be encumbered with the primary obligation to pay her first. Such an order is appropriate particularly in circumstances where there are few assets which the husband can command without reference to co-owners or where the husband is a minority shareholder or partner. However such security should be no more restrictive on the ability of the husband to generate the funds necessary to meet his obligations under the Court’s order than is absolutely necessary. For that reason I propose to require the husband to give the wife reasonable notice of his intention to deal with, encumber or alienate any asset in which he may have an interest together with the reason for such action.
Both parties seek that apart from the specific property dealt with in the orders made for payment of money and security for such payment, all other assets should remain where they lie in respect of ownership.
Section 81 consideration
Section 81 of the Act imposes a duty on the Court to end the financial relations between parties to a concluded marriage. The section is as follows:
In proceedings under this Part, other than proceedings under section 78 or proceedings with respect to maintenance payable during the subsistence of a marriage, the court shall, as far as practicable, make such orders as will finally determine the financial relationships between the parties to the marriage and avoid further proceedings between them.
Although the orders each party seeks will extend the period during which the parties will continue to have some “financial relationship” the orders will “finally determine the financial relationships”.
Costs
Should there be any application for an order for costs then any applicant party must file and serve within 28 days of the orders herein made any such application that they might wish to make. Any application is to be accompanied by any affidavit material setting forth any evidence in chief on which they wish to rely together with any written submission in support of that application. Any respondent party must file within a further 14 days a response, together with a written submission in support of that response, and any affidavit material, setting forth any evidence in chief on which they wish to rely. Any applicant will have a further seven days in which to file any submission or evidence in reply.
In the event that no application is filed within the time limit there will be no order as to costs.
I certify that the preceding two hundred and thirty seven (237) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Le Poer Trench delivered on 7 July 2015.
Associate:
Date: 07 July 2015
0
3
1